Friday, January 08, 2010
Things are really heating up in Argentina as President Cristina Kirchner’s plan to fire central bank chief Martin Redrado for his refusal to release almost $7 billion in foreign bank reserves to help service the nation's debt ran into a little obstacle known as the legal system.
Minutes after the court ordered Redrado reinstated, he reportedly walked right back to his office, waving at television cameras along the way, as a bewildered TV audience and bond market looked on, some of the details provided in this report at Bloomberg.
Fernandez ousted Redrado by decree yesterday, saying he refused to support her plan to tap $6.6 billion of reserves to make debt payments this year. Federal Judge Maria Jose Sarmiento today blocked the president’s use of the reserves and then ordered Redrado’s reinstatement.As conditioned as we've all become over the last year or so to large numbers, the $6.6 billion in question here seems like a rather small amount for a central banker to lose his job over.
The yield on Argentina’s 7 percent dollar bonds due in 2015 climbed three basis points, or 0.03 percentage point, to 11.55 percent, the highest since Dec. 11, at 4 p.m. New York time, according to Bloomberg composite prices.
“There is a growing sense of chaos in Argentina,” Win Thin, an analyst at Brown Brothers Harriman & Co., wrote in a report today. “The battle over Redrado is probably not over yet.”
After all, that's about one day's worth of borrowing for the U.S. Treasury Department or about one day's worth of money printing by our central bank. Can't they just print up some money or borrow a few billion from the Chinese to pay their debts like we do?