25 comments on “Goldman Sachs and the Venezuela bonds

  1. Chuckle.

    I suspect it would get a similarly muted practical response as the suggestion that those who “would be happy to pay more tax” voluntarily send cheques to HMRC.

    As you once went to the trouble of researching and publishing how to do.

    Perhaps a less muted leftie excuse-a-thon response, though. As SJWs do love to make noise but do nowt (see comments below):

    https://www.adamsmith.org/blog/healthcare/actually-people-arent-willing-to-pay-more-tax-for-the-nhs

  2. Goldman Sachs snapped up $2.8 billion worth of PDVSA bonds maturing in 2022, at 30 cents on the dollar. The bonds also provide a double-digit yield. Even if a future government defaults, the yield alone would be enough to overcome any loss.

    PDVSA brings in about 95 percent of the economy’s dollars, so foreign investors believe that the government, even in a worst case, will do all it can to keep the company functioning.

    Even as Venezuela’s economic situation has deteriorated sharply, the government has continued to pay out billions of dollars to foreign investors holding the oil company bonds.

    It sounds like a cracking deal, as long as the oil price doesn’t collapse any further.

    At some point though, they have to get their debt under control. Are they meeting their current debt obligations through revenues, or are they just issuing new bonds to pay the yield on existing ones?

  3. “Even as Venezuela’s economic situation has deteriorated sharply, the government has continued to pay out billions of dollars to foreign investors holding the oil company bonds.”

    So if you lend someone cash and he turns out to be a waster who destroys his chance of paying you back then the poor state that same wasting leaves him in is also what absolves him of any moral obligation to repay you ?

    A nice system if you can make it work.

  4. Cynic, Tim,

    I’d have to agree with the pay-more-tax comments. A lone soldier would be mad to try to fight an opposing force, but will be happier to fight in an army of thousands.

    It’s standard game theory stuff. If the whole village gets together to clear up the fly-tipped waste, the job gets done. But if I’m faced with undertaking the task alone, I won’t bother because I resent the free-riders.

  5. One gets a feeling that GS are merely acting with this in mind. Surprised they beat those guys to the draw.

    PDVSA are to a certain extent the “real” government of Venezuela … – that’s if you regard building + running schools and fixing roads as government…. The “Red Shirts” have their fingers in most pies down there.

  6. This is going to end up like the other year when apparently Argentina were the victims because they didn’t want to pay their debts and their debtors didn’t like that.

  7. @AM

    Though as collectivists rather than individualists, there’s no barrier to lefties organising themselves and paying more together. Oddly, they choose not to.

    We know that what they really mean is not “I’d be happy to pay more tax” but rather “I’d be happy FOR YOU to pay more tax”.

  8. @AM

    Just thought of this.

    Not only do lefties not voluntarily pay more (as individuals or as a club), there also seems to be a tendency for going out of their way to pay less:

    http://www.telegraph.co.uk/news/general-election-2015/politics-blog/11570966/The-breathtaking-hypocrisy-of-Russell-Brand-Ed-Miliband-and-Labours-front-bench.html

    https://www.forbes.com/sites/timworstall/2013/06/28/the-insufferable-hypocrisy-of-the-guardian-on-corporation-tax/#7a87e2185969

    I think Tim had them bang to rights, myself. Hence the spluttering comments following his article.

  9. I suspect that GS are going to instruct the USA to “intervene” in Venezuela so that they get a good profit out of it. Will Trump oblige? Ah then; will Trump still be in office? Still alive?

    We do live in interesting times.

  10. I sneeze x3,

    > He was joined by more than 1,000 volunteers
    Hardly a lone soldier.

    Cynic,

    > there’s no barrier to lefties organising themselves and paying more together

    Even if you could get a couple of million donors, on a national scale that’s still lone soldier level. Over 90% of taxpayers would be free riders. As we can see from those southern European countries where tax evasion is a national sport, people are very relucant to pay even the legally mandated amount of tax when there are significant numbers of free riders.

  11. dearieme

    Hmm… ‘Merkans obviously have previous – tinkering in banana republics is something of a specialty.

    The Venezuelan regime hasn’t (beyond the widespread larceny) been exactly helping itself – that old gambit of threatening its neighbours isn’t playing that well… – they might yet go full Argie and invade Guyana…. just to take the population’s minds off other things.

  12. Sounds like a fun project for a twitter bot: auto-reply to “I’d be happy to pay more tax” tweets with details of how to send a cheque to HMRC.
    😀

  13. Respectfully, I can’t agree with you there, AM.

    “Proposals by the Liberal Democrats would see spending per pupil maintained in real terms over the course of the parliament, which the IFS said would require an extra £2.2bn compared with current spending.”

    That’s only £1,100 per lefty out of that group of 2 million.

    It strikes me that their sole justification is “why should I do it if other people don’t”, which is unprincipled to say the least. But then, lefties, principles.

    I notice something similar when the public sector throws a wobby about cuts. It’s always about the private sector folks having to pay more tax, never the public sector folks taking a pay cut, to make the numbers work.

  14. @PeteC

    Bit like the “#RefugeesWelcome” folks getting asked “so how many have you taken in?”.

    Splutter, deflect.

  15. If GS were doing it for their own account this might be of interest. As it is they are merely buying it for their asset management clients – an expectation that Venezuela will eventually redeem the bonds earning an above market return, for which GS get nominal performance and management fees. If they buy and hold to maturity, then clearly the investors want/expect the Venezuelan economy to improve so the bonds get repaid. They are making money out of the situation, but making it off the previous holders, not the Venezuelan government who presumably issued the bonds at near par value.

  16. Cynic,

    I just don’t see how we can blame people, even lefties, for behaving the way game theory tells us they’ll behave. In fact, ignoring the reality of human behaviour is normally the province of the left.

    Of course, we’re still free to tell them to eff off with their demands for more tax. I just don’t see the hypocrisy.

    With spending, your money is just a drop in the ocean – the lone soldier problem. With refugees though, taking in a refugee has a direct impact on that individual. The hypocrisy is thus more clear-cut.

    On taking in refugees: https://www.thetimes.co.uk/article/lynn-barber-i-took-an-asylum-seeker-into-my-home-it-didn-t-end-well-xtzn7gw99

  17. “I suspect that GS are going to instruct the USA to “intervene” in Venezuela so that they get a good profit out of it. Will Trump oblige?”
    GS was with Hillary all the way. Trump owes them nothing.

  18. AM

    I see the hypocrisy clear as day. But it is subjective: I buy MP3s and rent/buy films, for example, even though I could easily torrent them for free. My purchases are a drop in the ocean, making no real difference to the record labels, bands, film studios, movie stars. But regardless, I believe you should pay for what you use, so I do. Would go against my principles not to.

    That going against human nature is a preserve of the Left makes it quite delicious: they justify not sticking to their expressed principles (“I would happily pay more tax”) on the basis of human nature (“but why should I if other people don’t?”).

  19. “I suspect that GS are going to instruct the USA to “intervene” in Venezuela so that they get a good profit out of it.”

    Why now? Distressed debt has been available in Latin America and elsewhere since the 1970s. There are plenty of other basket countries where the price of the debt could be moved more easily.

  20. AM: I think cognitive dissonance may play a role here (and indeed, lack of).

    I think stealing is wrong. I once accidentally walked out of a major store chain with a magazine. Just totally forgot that I was carrying it. Having gotten away with it, the rational thing to do would be to carry on with my day. But I didn’t want to steal, even inadvertently, so I walked back in and paid for it. Mind settled.

    Same with the MP3s. Could just torrent. No real risk of being caught. But principles and actions have to gel. Good job I don’t have too many principles.

    Most lefties, it strikes me, seem to be largely immune to cognitive dissonance. So yeah, it’s rational for me to do things on principle to resolve my CD, but I guess for them it wouldn’t be, as there’s no CD to resolve.

  21. @Cynic
    Exactly. I reckon there would be plenty of material for our host to spin a Forbes article from!

  22. “I suspect that GS are going to instruct the USA to “intervene” in Venezuela so that they get a good profit out of it. Will Trump oblige?”
    “GS was with Hillary all the way. Trump owes them nothing.”

    Maybe the ongoing slow-motion putsch against Trump is designed to make him do things that are not his natural inclination.

    “Why now? There are plenty of other basket countries”: but do the others have large oil reserves? Will the others be as easily explained to the hicks?

  23. Cynic,

    “We know that what they really mean is not “I’d be happy to pay more tax” but rather “I’d be happy FOR YOU to pay more tax”.”

    That may be what comes out of their mouths but anyone who doesn’t interpret it as “I want the power to make you pay more taxes, under threat of violence” is a fool and deserves all they get.

    I’m with you on the honesty thing. I was paying for something and the girl made a real hash of adding it up and was going to charge me a considerable amount less than it should have been. Having toted it up in my head I pointed out the mistake and she Couldnt get over my honesty. That’s the world I want to live in and so I don’t compromise my values.

  24. Hmm… ‘Merkans obviously have previous – tinkering in banana republics is something of a specialty.

    Not much recently though.

    Reagan did Grenada. George H W did Panama in 1989.

    If it’s a “speciality”, it is one they rarely practice any longer.

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