4 ms·

I think the key is that most politicians (and honestly, just about everyone still of working age) haven't been in an economic environment like this one- not sin

I think the key is that most politicians (and honestly, just about everyone still of working age) haven't been in an economic environment like this one- not since the early 1980's four decades ago. Everyone today grew up in a low-to-zero interest rate environment with low inflation. Argentina- the international borrower most famous for defaulting- has, over the past 21 years alone, defaulted 4 times (2020, 2014, 2005, and 2001)- a total of 9 times since they got independence in 1816. And yet, after the 2014 and 2020 defaults they were issuing debt on the global market at reasonable, normal, non-penalty rates within a short period of time. That was because the overall bond market was so low that investors were desperate for yield, hence Argentina's bond issuance got over-subscribed and so they didn't have to pay much of a penalty. If the current high-inflation, high interest rate environment sticks around, a whole lot of things are going to end up very different, because the bond investors won't be so desperate for yield and so there will be a penalty for disrespecting the bond market. If it doesn't stick around (which seems to be the current aggregated guess of the bond market) then this will be a brief blip. Trillions of dollars rest on the answer to that question.

JamisonM 4y ago
Everything you are saying here is orthogonal to the developments described in the story. A provincial government refused to honour bonds in a tiny development in their region and it caused a contagion across the country.. none of this has anything to do with the current rate of interest or the orderly federal default of Argentina and its re-issuance of bonds at generous rates.
- mandevil 4y ago
  For two decades defaulting on your bonds was not be a big deal- witness Argentina. So a rando local politician thought it wouldn't be a big deal, because that's been most of his political career. And the way the bond market is now, it is not nearly as forgiving, so it became an enormous deal.
  - JamisonM 4y ago
    It is not a big deal if Argentina defaults on its bonds because they were already paying a huge premium because everyone expects them to default on their bonds, South Korean governments municipal to federal do not pay that premium because they are considered reliable - if there are doubts no one knows how to price their bonds - so they don't get bought. It has nothing to do with now vs then! If you want an example of now vs then go try to buy some cybersecurity insurance for data breaches or flood insurance.. in those circumstances things have legitimately changed!

JamisonM 4y ago

Everything you are saying here is orthogonal to the developments described in the story. A provincial government refused to honour bonds in a tiny development in their region and it caused a contagion across the country.. none of this has anything to do with the current rate of interest or the orderly federal default of Argentina and its re-issuance of bonds at generous rates.

mandevil 4y ago
For two decades defaulting on your bonds was not be a big deal- witness Argentina. So a rando local politician thought it wouldn't be a big deal, because that's been most of his political career. And the way the bond market is now, it is not nearly as forgiving, so it became an enormous deal.
- JamisonM 4y ago
  It is not a big deal if Argentina defaults on its bonds because they were already paying a huge premium because everyone expects them to default on their bonds, South Korean governments municipal to federal do not pay that premium because they are considered reliable - if there are doubts no one knows how to price their bonds - so they don't get bought. It has nothing to do with now vs then! If you want an example of now vs then go try to buy some cybersecurity insurance for data breaches or flood insurance.. in those circumstances things have legitimately changed!