Gyroscopic Investing

President Cristina Fernandez de Kirchner wants tax evaders hiding about $160 billion in dollars to help finance Argentina’s oil-producing ambitions. Her offer: Buy a 4 percent bond or face the prospect of jail time.

The tax authority announced the plan May 7, highlighting its information-sharing agreements with 40 nations and warning Argentines who don’t use the three-month amnesty window that they risk fines or arrest. Evaders have two options for their cash and the only one paying interest will be a dollar bond due in 2016 to finance YPF SA (YPF), the state oil company. The 4 percent rate is a third the average 13.85 yield on Argentine debt and less than the 4.6 percent in emerging markets.

A year after seizing YPF, Fernandez is funneling more money into the nation’s energy industry as the government struggles to boost production from the world’s third-biggest shale oil reserves. With Argentina already committed to pumping $2 billion of central bank reserves into a fund for energy investments and the highest borrowing costs in emerging markets keeping it from issuing debt abroad, the government is eyeing the billions of undeclared dollars that Argentines hold to help shore up reserves that have dwindled to a six-year low.

“The authorities need to take steps to open up external resources in the energy sector and to finance the Treasury and local governments,”? said Sebastian Vargas, a New York-based analyst at Barclays Plc. “The amnesty is not negative for markets but it’s disappointing because they do little to solve balance-of-payment difficulties.”?
Hidden Assets

A press official from the federal tax agency declined to comment in an e-mail on how much the government expects to collect through the amnesty.

Economy Ministry press officer Norma Madeo didn’t respond to an e-mail and a telephone message from Bloomberg seeking a similar comment, and YPF spokesman Alejandro Di Lazzaro declined to comment on how the plan will affect the company.

Argentines have at least $160 billion of undeclared funds, equal to about 36 percent of the nation’s gross domestic product, and $40 billion are hidden inside the country, Vice Economy Minister Axel Kicillof said at the May 7 press conference where he and other senior officials presented the amnesty.

Many Argentines hide assets to avoid a 35 percent income tax and a levy of as much as 1.25 percent on their personal wealth. Undeclared assets are also beyond the reach of the government, which in 1989 seized bank certificates of deposit in exchange for bonds and in 2002 converted dollar deposits into pesos.

goodasgold wrote: In the early 20th century Argentina was one of the wealthiest countries in the world. What a disaster.
Who knows what will happen when payments for unfunded liabilities and out-of-control spending hikes come due in the U.S. and other major economies. Argentina, here we come?

escafandro wrote:

goodasgold wrote: In the early 20th century Argentina was one of the wealthiest countries in the world. What a disaster.
Who knows what will happen when payments for unfunded liabilities and out-of-control spending hikes come due in the U.S. and other major economies. Argentina, here we come?

Man, you're going to need many years of populism to fall so low, our biggest problem is not economic, is moral.

clacy wrote:

escafandro wrote:

goodasgold wrote: In the early 20th century Argentina was one of the wealthiest countries in the world. What a disaster.
Who knows what will happen when payments for unfunded liabilities and out-of-control spending hikes come due in the U.S. and other major economies. Argentina, here we come?

Man, you're going to need many years of populism to fall so low, our biggest problem is not economic, is moral.

We're well on our way, I can assure you.

MediumTex wrote:

clacy wrote:

escafandro wrote: Man, you're going to need many years of populism to fall so low, our biggest problem is not economic, is moral.

We're well on our way, I can assure you.

I am actually impressed with the quality of the average American.  Most people I meet are more or less honest, hardworking, believe in the U.S. as a political arrangement and want the best for themselves and their families.

I would say that if you gathered 1,500 members of the U.S. middle class and working class in a large room you would find a collection of pretty good quality people who have a strong sense of right and wrong, want to improve themselves, and don't mind working hard to accomplish their goals.

It's the very rich and the very poor who seem to give the U.S. a bad name.  These are the people who seem to engage in most of the anti-social behavior and commit most of the criminal acts (with very uneven law enforcement between the two groups).