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Comment by bhouston | Hacker News Reader

Goldman bought a lot of Greece debt that it knew wasn't great and made tons:

https://www.thenation.com/article/goldmans-greek-gambit/

Goldman Sachs was also very involved in selling subprime mortages to unwitting investors. Goldman Sach has had to deal with lawsuits that it wasn't acting in its clients' best interests:

http://articles.latimes.com/2010/may/16/business/la-fi-hiltz...

If Goldman Sachs is involved, you are likely getting fleeced in some fashion, you probably just do not realise it yet.

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If they go long these bonds they are nasty speculators who are betting on the fact that Venezuelans will bleed themselves to repay. If they go short the bonds they are nasty speculators who are trying to make money on a country going bust. At this game it doesn't matter what they do, they will get this sort of reaction.

It's true that any involvement with Venezuela will make someone angry, but I don't think it's the same someone.

Would shorting them really have angered the opposition? It seems like a move that would mostly have outraged the Venezuelan government, and having them angry at you is hardly a moral failing.

Yes, because heavy action on the sell side means Venezuelan debt prices would go down, which would raise the yield. Which means that future bonds issued by their gov would have to pay a higher coupon. This would definitely anger them.

Also realize that the biggest factor in buying bonds at a discount is having the ability to force the borrower to pay you back in full (the reason people are selling at discount is because people don't think they will be paid back). Goldman Sachs is one of the few organizations with the political clout to make sure that happens with Venezuela.

Been going on for a while - this is from 2007:

Vulture funds buy up sovereign debt issued by poor countries at a fraction of its face value, then sue the countries in courts - usually in London, New York or Paris - for their full face value plus interest.

https://www.theguardian.com/business/2007/oct/17/debt.law

As they have every right to do. Taking out a loan is making a legally enforceable promise to pay back the money, and enforcement actions like that are the only reason that people make the loans in the first place. I sure as hell wouldn't buy a Venezuelan bond.

I think the issue is that the enforcement happens in the West, and not so much that it happens. There are big law firms that stand to make a lot of money from the litigation. Furthermore there is likely a contractual obligation that this be litigated in the West. All of which incentivises buying up dubious debt that needs to be run through the legal system, basically it pays twice... see (mjfl's comment above)

Furthermore, in the context of western exploitation/interference with these countries' economies, many of whom have not had recourse to a judicial process for reparations - your notion of what is rightful or fair is perhaps too narrow.

> I think the issue is that the enforcement happens in the West, and not so much that it happens.

Well face it, it either happens in the West or is not happening at all. And it's not like some obscure footnote, the arbitrage conditions are fully disclosed beforehand.

>> and enforcement actions like that are the only reason that people make the loans in the first place.

And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.

Only a part of the interest comes from risk.

One important part is that if I were to give you 10$ in 10 years, it has less value to you than me giving you 10$ now (which is the difference between lending you lending to me and you not lending to me if you were 100% sure I would pay back).

The part that comes from risk in this case is the biggest chunk of the interest though. If we assume that AAA-rated have "no risk".

Interest is because of the time value of money and risk, not just risk.

Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.

Mostly on need, though. If I'm hungry, I'm hungry now, not 10 days from now.

Isn't it shocking that people dare ask for their money back? Surely, this is some kind of scam. /s

The interesting bit is that the debt buyers are making money from some advantage they seem to have in enforcing repayment relative to the original lenders.

Under proper rule of law, the original lenders would have exactly the same chance of getting money back as Goldman, eliminating all need to sell the debt at a massive discount.

There is nothing illegal in this, if that's what you are suggesting.

There are different reasons why somebody might decide to sell debt at a discount. One reason, for example, is that bankruptcy proceedings, especially international ones are super messy and expensive. If you are not dealing with these things on a regular basis, it might be better to book a small loss now and get and immediate cash flow instead of waiting for decades.

I don't think our poor sons and daughters should be involved in a military that will be used to enforce things like this

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