Managing Chaos: The World of Distressed Sovereign Debt

Featuring Hans Humes

Hans Humes, the chairman & CEO of Greylock Capital Management, has been involved in as many sovereign debt negotiations as any other individual in the history of finance. In this interview with attorney and former hedge fund manager Jay Newman, the two veteran investors span the globe by discussing the one common thread that brought Venezuela, Greece, Argentina and Puerto Rico into crisis. Filmed on May 10, 2018 in New York.

Published on
18 May, 2018
Topic
Monetary policy, Geopolitics, Debt
Duration
62 minutes
Asset class
Bonds/Rates/Credit
Rating
38

Comments

  • AF

    Andrew F.

    29 5 2018 14:20

    0       0

    This is like the play book of how countries/governments dodge there responsibilities and debts to its own people and try to hide there ill gotten gains. Absolute power corrupts and then Hans and Jay come to figure this our for the people on the ground. Just hope Venezuela gets turned around sooner than later. Thanks Hans/Jay/RV

  • BL

    Bryn L.

    23 5 2018 23:54

    1       0

    Excellent interview.
    Poor sound volume on Hans mic.

  • KS

    Kathleen S.

    22 5 2018 22:51

    2       3

    You know the only reason Real Vision exists is because we are lied to by the CNBC's of the world --- Thus, what makes anyone think that someone whose career is debt restructuring for banks and hedge funds would not leave out critical bits of information that expose their fraud? At one point odious debt comes up in the interview -- What is odious debt exactly????? According to wikipedia --- international law says odious debt, also known as illegitimate debt, is a legal theory that says that the national debt incurred by a despotic regime should not be enforceable ---- This is was the reason why, when the US illegally invaded Iraq -- Iraq debt was dismissed. Problem is who decides what and what is not a despotic regime -- In today's world it seems it is the US military or the CIA or an NGO and not the actual people of the country that decides who is their legitimate leader. Like I said, REal Vision exists because we are lied to by the financial media; thus we all need to open our eyes and see through the lies of DEBT and see exactly how it is used by (in some cases military force) to enslave people and steal a country's natural resources. And make no mistake this will happen in US too --- was just talking to my husband about how much it will cost to go throught the Holland Tunnel after this bit of infrastructure is sold off for pennies on the dollar to private equity when NJ or NY go bankrupt. And FYI - this was the plan all along.

    • AE

      Alex E.

      17 6 2018 00:33

      0       0

      Kathleen,
      Relying on an on-line encyclopedia that can be edited by anyone is your first mistake. The question you pose has no answer. How do you collect debt from crooks who hide their money or launder it then get killed or disappear when the sheriffs come to town? Those caught, i.e. Marcos, et al are the exception, not the rule. There are more ways to hide money than France has cheese! Ask the Russian Oligarchs...

  • ST

    SAHIL T.

    22 5 2018 20:04

    0       0

    Great discussion. Would be great to see Lee Buchheit in the room as well!

  • F

    Floyd .

    21 5 2018 23:39

    1       0

    Outstanding interview! Intimate knowledge of the practical aspects of dealing with a financial crisis which outlined the issues,problems and solutions. Far superior than the Nomi Prinns interview which Has might say is the view of an academic which ignores the practical realities. Having Jay Newman part of the mix was perfect!

  • JG

    Jory G.

    21 5 2018 20:43

    0       0

    The U. S. congress with the aid of the Federal Reserve have created many trillions in debt and has been buying that debt with capital created from thin air. That seems corrupt to me and a bit hypocritical. Congress and the Fed need to be sanctioned.

  • DP

    David P.

    21 5 2018 11:36

    0       0

    That corruption thing is very interesting. Because it ultimately depends on the moral code that underpins what is or isn't deemed acceptable. Even between Europe and the US, there is a different definition of what is corruption and what isn't.

    • DV

      David V.

      21 5 2018 15:00

      0       0

      Yes...bribery is legal in the US when you are a K Street Lobbyist

  • EL

    Emanuel L.

    21 5 2018 10:43

    0       0

    Thanks RVTV for this great interview and equally to the contributors in this thread. It has really helped me discerning the mechanisms of sovreign defaults.

    My understanding now starts from the premise that lender and borrower are equally responsible for the outcome. Wheras one has to question, why a country takes on so much debt although it won't be able to service it, one should also ask, why the borrower agrees to lend to such a country. The answer is: because there is mutual interest. The borrower actually is not the country, but a privileged group within that country that is allowed get the money and steal some. By giving his consent, the lender accepts the misappropriation of his money, because he, the lender, will be able to project his power over the lending country without the need to fire a single shot while seizing assets and taking advantage of cheap valuations and cheap labour in the debt crisis and thereafter. This is all to the advantage of the borrower, the lending elites and to the detriment of the population. This mechanism takes advantage of the natural inclination of humans of putting themselves before others, so there is no need for large scale conspiracy or collusion. You just need to leave the system how it is.

  • WM

    William M.

    20 5 2018 19:23

    1       0

    Good conversation, terribly depressing and clearly the tentacles reach deep into our governments to a greater or lessor extent.

  • WM

    William M.

    20 5 2018 18:49

    0       0

    What astounds me is that the western banks continue to lend money to semi permanent bankrupt socialist states like Argentina. How many times have they defaulted? Why don't Argentinians learn to live within some form of means? The IMF have been approached again by Argentina, why not just say no for a historical change......

    • FM

      Faris M.

      20 5 2018 22:26

      1       0

      It was the IFM/World Bank 'modernisation' programs (SAP, HIPC) that led to where to Argentina is today. Admittedly It benefitted the despots at the top in Argentina but also private and already wealthy Americans/Europeans that robbed the country of its national services.

    • ao

      alex o.

      21 5 2018 04:34

      1       0

      William check out the book "Confessions of an Economic Hitman." It describes this scary scenario and how USA saddles these countries with debt they can't pay back.

    • BM

      Bryan M.

      8 6 2018 04:51

      0       0

      Read Emmanuel above. That's your answer...

  • AC

    Adrian C.

    20 5 2018 11:16

    3       0

    I love how can the biggest movers of sovereign debt have the most budget shoes and socks? These are real people and not the glitzy crap that's out there.

  • SP

    Steve P.

    20 5 2018 04:28

    2       0

    Absolutely brilliant coup to have conversation of this caliber on RV - and extremely thought provoking when discussion turns to how global co operation could potentially be used to deter off shore bunkering of illegal gains. Likely very difficult to achieve but if there is a high risk regime in place that enables the threat of confiscation by creditors of pilfered sovereign funds/assets, it may act as a deterrent. As to how to stop those in power from slowly garnering the majority of sovereign wealth and sequestering it among the 'top 10%' (family, friends etc that is such a common denominator in many countries throughout time) is another thing all together. As pointed out, some aspects of human nature tend to be ever present. Sad but true !

  • JH

    Joel H.

    20 5 2018 01:20

    9       0

    Content is great, thank you. Audio mix on most of these videos really needs to be fixed.

  • ML

    M L.

    19 5 2018 21:01

    2       0

    Great interview.

    On the point about corruption, ill-gotten gains and clampdowns (e.g. the UK's unexplained wealth order): the UK, with its offshore territories and former colonies combined, has the single highest share of the global tax haven market - about 25%. Add the US to the equation, and the figure jumps to 40%. This is the single, largest issue that needs to be tackled when dealing with ill-gotten gains from EM nations. As long as places exist for wealth to be hidden 'legally', then capital will continue to be siphoned off from corrupt EM nations and denying the opportunity for their people to transition into more advanced economies because they are burdened by mounting debt. So, on that basis, I take any 'high-horse' professions of anti-corruption clampdowns and lectures of the same as complete hypocrisy and add a healthy dose of salt. The US assault on Swiss banking secrecy just shifted capital towards the UK offshore trust system and also to US tax havens.

    • DS

      David S.

      19 5 2018 21:30

      0       1

      Making tax havens transparent should be a high priority everywhere. DLS

  • KS

    Kathleen S.

    19 5 2018 18:08

    7       3

    Perfect example of how debt is used as a weapon to steal resources and implement neo-liberal global elite agenda. Remember when a debt crisis happens infrastructure is sold off for pennies on the dollar and the people pay the price-- do you all really think that will not happen here in the US??? Sovereign debt buyers are nothing but vultures -- if you really were interested in fixing a system when countries default on debt, bond holders (the creditors) pay the price, not the debtors. The whole reason bond holders are paid higher interest rates on some of the debt is because there is a higher chance of default (this was the case in Argentina)-- right? Well, if countries are not allowed to default on debt (they are all forced into restructuring) then these are really all guaranteed loans, thus they should not be paying high interest rates. This was Cristina Fernández de Kirchner point to the bond holders on Argentina. And I could really care less what the World Bank or IMF or any of these other global organizations have to say about debt, they all collude together to advance their agendas. You want to stop debt crises --- STOP BAILING OUT CREDITORS, make them pay the price for making these predatory loans, there will be pain - but system will be flushed out and lessons will be learned.

    • DS

      David S.

      19 5 2018 21:43

      0       0

      I agree with most of your comments, but I do believe that the neo-conservative global elites are just as bad - greed is greed. Sovereigns cannot go bankrupt is just another pitch like house prices can never go down. Risk takers must be able to handle the risk. Otherwise the system just does not work. It would have been better for each country to bail out its banks with foreign sovereign debt that having Greece to refinance even more debt than it can afford. DLS

    • KS

      Kathleen S.

      20 5 2018 04:55

      7       0

      David S -- neoliberalism and neo conservatism is like comparing apples to oranges. Neoconservatism is an American political philosophy which advocates military intervention, whereas neoliberalism is about financial deregulation, privitization and opening markets to globalization. I also think you do not understand that the loans that caused EM countries to go bankrupt where predatory loans, an inconveinant truth that is completely left out of the entire interview. The entire goal of this type of loan is to have the country default this way their resources can be stolen and their infrastructure privitized. These loans are made by economic hitmen who cheat countries around the globe out of trillions of dollars. Real Vision should do an interview with John Perkins (who was a real life economic hitman) he could explain the other side of how people like Hans Humes make their livings or maybe have Yanis Varoufakis (former Greek Minister of Finance) on to explain what it is like to be from a country that has been victimized by the IMF and the World Bank. If people are ever going to understand finance and economic chaos they have to know the whole story and context from which it all comes.

    • DS

      David S.

      20 5 2018 20:10

      1       0

      Kathleen S. I do agree that many of the loans to EM countries are predatory. My point is that neo-conservatives are just as interested in domination in the financial market as in military conquests. You may be correct in an academic sense about apples and oranges, but predatory greed is a behavior and can be practiced by anyone from a paleo-conservative to an ultra-gauche. It is the power and the greed within the sovereign and within the lenders that needs to be controlled. Unfortunately, it is always the citizens that end up with the short stick. Mr. Humes is stepping in after the damage is done. In the US, credit card issuers encourage predatory loans by giving too much credit. The bet is that many will not be able to pay off all the loans, and the issuer can charge very high interest rates. Greed is not restricted to the EM. loans. (I like to use lower case and hyphenate neo- to show it is fuzzy subgroup within a larger population.) DLS

    • KK

      Kevin K.

      20 5 2018 20:32

      2       0

      The Chinese are doing this now too with small island countries in the Pacific as well as more recently in the Maldives and not to mention parts of Africa.

    • KS

      Kathleen S.

      20 5 2018 21:12

      1       0

      I wish people that would give me a down vote would please give a reason why they think vulture capitalism is somehow good??? Do you think the people that swim in this pond are going to help you??? LOL!!!! Are you not worried or have you not noticed what happens to countries that have been given "debt restructuring"; which is a nice way of saying they are forced to give up many of their sovereign rights to banking and corporate bureaucrates. FYI Ireland did not take on sovereign debt like many of the Latin American countries did -- Yet, for some strange reason the Irish politicians voted that the Irish people should pay the debts of private corrupt German and French bankers, hmmm? Is that crazy or what? Irish pensions were cut in half so that bankers in foreign countries would not have to go broke on the bad loans they made. Just goes to show who owns and runs countries and it certainly aint the voters.

    • DS

      David S.

      20 5 2018 22:45

      1       0

      Kathleen S. - It is easy for someone to vote NO without commenting on why. Often I think it is just goes against their current beliefs which they do not wish to question. DLS

    • DS

      David S.

      20 5 2018 23:14

      0       0

      Kathleen S. - In Ireland the government made Irish pensioners pay the price. In the US the government makes future generations pay the price by borrowing trillions of dollars to save Wall Street and fund their reelection. Ultimately the citizens must make their elected officials pay the price, so it does not happen again. Proper laws and enforcement of those laws are the only way to improve the future. It is irrational to me that Americans cannot better control our guns. Society has changed and we need to change with it. We need reasonable gun laws and reasonable enforcement of those laws. The school shootings are only the tip of the iceberg, and yet the school shootings continue. If I would have posted this earlier in the discussion I would get many down votes as citizens are very bipolar on this issue. If you limit each comment to one topic, you can better tell what they are upset about even if they do not comment. DLS

    • KS

      Kathleen S.

      21 5 2018 00:14

      1       0

      David S - the future is NOW -- those future generations are going to pay crap, the US is bankrupt and it has been since Nixon took us off the gold standard. And now with fiat the entire west is bankrupt to bankers that print money out of thin air -- screw the bankers. Make no mistake they are predators and they always have been. And as far as gun control goes -- I have done a 180 degree flip on this -- disarming citizens is the beginning of fascism -- the only people that will have guns will be the corrupt US government and actual criminals, the average guy will be left defenseless. People need to understand that the western empire is ruled by a loose transnational alliance of plutocrats and secretive government agencies. That loose alliance is your real government, and that government has the largest state media network in the history of civilization that spews propaganda and knows every human weak spot. Facebook should clue you into how the world really works.

    • DS

      David S.

      21 5 2018 07:21

      1       0

      Kathleen S, The future generations will pay regardless of how this plays out. Good luck to you and yours. DLS

    • HH

      Hans H.

      21 5 2018 21:19

      1       1

      Kathleen S. : I think you raise some very valid points I would love to have a conversation in a forum like this with John Perkins or Yanis Varoufakis.

      Yanis and I have had a number of chats and I think his insights are very on target on a number of fronts. I am not sure I agree on the practicalities of remedies suggested but isolating and discussing structural issues and shortcomings is always constructive.

      I read John Perkins' book and found it fascinating. I would love to discuss it with him.

  • KC

    Kenneth C.

    19 5 2018 16:11

    3       0

    Watching this at my office on my computer this fine Saturday morning. The sound comments below most likely come from attempting to watch this on a cell phone (mine a Samsung S8 Plus). It is almost impossible to hear Mr. Humes speak. Here in the office on the computer it is not nearly as bad.

  • KJ

    Kulbir J.

    19 5 2018 08:26

    1       0

    I wonder which country will be next to default.

  • IM

    Istvan M.

    19 5 2018 07:48

    0       0

    brilliant

  • TH

    Timo H.

    19 5 2018 04:47

    1       0

    Maybe it is just me, but I see similar development happening in the western countries, that has taken e.g. Venezuela into a chaos. Too much money sloshing around is ending up in wrong hands. Scary.

  • OC

    OTTO C.

    19 5 2018 03:28

    14       0

    I'm surprised by their comments about "holding people accountable" as if it's an issue that doesn't happen in the US. Did we hold anyone accountable for the credit crisis in the US? It's clear that the banks caused the crisis and yet they got rewarded, not held accountable.

    • KS

      Kathleen S.

      19 5 2018 18:15

      7       0

      I picked up on that too -- socialism for the banks and capitalism for everyone else. This is all a racket and bankers have rigged a system with tails I win, heads you lose.

    • RS

      Ryan S.

      20 5 2018 15:46

      0       0

      I agree

  • GF

    Gordon F.

    19 5 2018 03:27

    16       0

    As someone who currently lives in Ecuador, and has for nearly 8 years, I was pleasantly surprised to hear that his opinion of Correa (the previous president) was very similar to mine. That is, he started out well, and did a lot of good, but then allowed himself to be surrounded by the foxes, and ultimately joined them.
    His successor, Lenin Moreno, has also started out very well, in part by holding a referendum that reversed seven prominent acts of Correa that favored Correa's buddies, and negated a provision that would have allowed Correa to run again for president, now with unlimited terms. He also encouraged a bribery case against his vice president, Jorge Glas, such that Glas is now in prison, which absolutely infuriated Correa.
    I realize that my comments may not be of great interest to most RV patrons, but it is one of those rare situations where I have a personal vantage point into a small part of what was discussed, and for that part, Humes and Newman were right on the money, as far as I can tell. This adds even more credibility and authority to the rest of their discussion, IMHO.

    • KS

      Kim S.

      19 5 2018 20:36

      1       1

      thanks for sharing your insight

    • HH

      Hans H.

      21 5 2018 21:10

      0       0

      Thanks for this compliment. I could talk on and on about Ecuador. It's an amazing country and I hope they are able to take the positive changes Correa made and build upon them. They are at a stage where there needs to be a bit of a fiscal balancing act but I think Moreno is managing the process well.

  • OC

    OTTO C.

    19 5 2018 03:12

    0       0

    Great insight into sovereign debt !!!

  • MS

    Mark S.

    19 5 2018 02:32

    6       4

    Unfortunately many of the descriptions of corruption, self dealing and money laundering are now echoing through the current administration in the US.

    • CC

      Chris C.

      19 5 2018 07:50

      4       2

      Mark please! Have some critical thinking skills! To single out the current Admin displays your total ignorance or your complete lefty lunacy! Pick and administration that hasn't taken care of their own? Solyndra with the previous admin, Haliburton with the GWB Admin, the entire Clinton 8 years and on and on. I make these comments not to start a political war but out of frustration you think blaming a specific admin somehow adds to the discussion and scores you a touchdown! Humans will be humans if put in a position to take advantage of other humans whether there's an R or a D in front of their title.

    • CC

      Chris C.

      19 5 2018 07:50

      0       2

      Mark please! Have some critical thinking skills! To single out the current Admin displays your total ignorance or your complete lefty lunacy! Pick and administration that hasn't taken care of their own? Solyndra with the previous admin, Haliburton with the GWB Admin, the entire Clinton 8 years and on and on. I make these comments not to start a political war but out of frustration you think blaming a specific admin somehow adds to the discussion and scores you a touchdown! Humans will be humans if put in a position to take advantage of other humans whether there's an R or a D in front of their title.

    • MS

      Mark S.

      19 5 2018 15:51

      5       2

      Thanks for your input Chris. Lack of critical thinking skills? From someone who seems to suggest that since "x" happened in the past, it is perfectly reasonable to accept "10x" from here forward. I'm not even in America (so I don't have either an "R" or "D" by my name) and I can see that the Trump administration is for sale to the highest bidder. You are correct that politicians of all stripes "take care of their own". But you have put someone in office that sees it as carte blanche to enrich himself and his family through his office. If you want to "add to the discussion", why don't you offer a suggestion as to how to mitigate corruption instead of excusing it? America could start by reducing the dependence on corporate cash to fund your political system. The "Citizens United" ruling is one of the most detrimental decisions to ever come out of your Supreme Court. I may be a lefty by your standards (many here in Denmark are proud of that fact), but at least I don't try to defend corrupt practices. No system is perfect, but yours is heading in the wrong direction and you seem to be willing to accept that.

    • CC

      Chris C.

      20 5 2018 08:09

      1       0

      Kathleen S has some comments above that could discourage the theft. She's spot on "STOP BAILING OUT CREDITORS".

  • KL

    Kathlyn L.

    19 5 2018 00:23

    13       9

    Damn it! Stop having the cinematographers record the sound! Spend the damn money and hire a location sound mixer. The sound is unacceptable

  • DS

    David S.

    18 5 2018 22:31

    3       0

    Mr. Newman said that governments realize they have borrowed too much to repay. It is just as true that the lenders have loaned too much to be repaid - and probably at a much lower interest rate and debt position than they should have. Lenders are the driving factor! The interest rate required, and the covenants demanded can put a check on the sovereign from excess borrowing. When this does not happen, it is easy for non-lenders to start with the idea of a haircut right out of the box. DLS

  • DS

    David S.

    18 5 2018 21:51

    5       0

    Excellent dialog. I do not have any higher risk sovereign debt. After watching this interview, there will be none in my future. I give Mr. Humes great credit for working so hard to figure out how to get a settlement from such diverse interest. I do not trust the rating agencies after the 2008 mortgage fiasco. I do not trust many sovereigns, including state and local governments in many parts of the USA. The citizens are the ones that have to pay for the sins of their current and past governments. This is going to be much worse when the next recession hits. DLS

  • JM

    Johann M.

    18 5 2018 21:42

    2       0

    Deeply insightful think piece, RVTV at its best!!

  • RP

    Raoul P.

    18 5 2018 19:41

    14       2

    This is a privilege to listen into this conversation...it lifts the curtain on the opaque world of sovereign debt restructuring. Wonderful stuff and eye opening.

  • TJ

    Terry J.

    18 5 2018 18:10

    4       0

    This is another example of RVTV at its best. Where else could I eavesdrop on such an extraordinary exchange of views, and a discussion on dsitressed sovereign debt from two seasoned professionals. So insighful!

  • WP

    William P.

    18 5 2018 16:37

    4       0

    Would appreciate a deeper dive into sovereign debt. Many interesting issues. Any chance John Perkins would be willing to participate in an RVTV segment?

  • WH

    W H.

    18 5 2018 15:55

    3       0

    Fantastic segment.

  • RM

    Richard M.

    18 5 2018 15:24

    4       0

    Truly fascinating discussion - really great stuff. This is quality TV!

  • Nv

    Nick v.

    18 5 2018 12:58

    13       0

    Excellent. Nothing better than listening to people with deep expertise

  • KS

    Karen S.

    18 5 2018 10:41

    3       0

    Great interview.