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Global financial system ripe for change

Published Mon, Aug 4, 2014 · 10:00 PM
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IT is being bravely predicted that Argentina's sovereign debt default last week will not matter to the global financial system. After all, it is argued, the South American country has been locked out of capital markets for the past 13 years. So the latest dispute with two US hedge funds whose refusal to accept a write-down on debt Argentina defaulted on in 2001 would have consequences only for its own economy.

Certainly, the country may have to devalue its currency to preserve its foreign currency reserves and that could trigger a rise in inflation that is already projected to hit 40 per cent. Even so, few expect that there will be anything like the riots and civil unrest that gripped the country in 2001, when it first defaulted on US$95 billion debt. Since then, the country has been paying its restructured debt instalments to 93 per cent of its bondholders. Its debt-to-GDP (gross domestic produ…

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