Fifty Shades of Default

maduro china kids
Que bonito…que bello…

Until a few weeks ago, I thought default was like pregnancy: you either are or you aren’t. Instead, 2014 is turning into an education on the grey area between default and defaaaaault.

Take China. Under previous, hard-haggled-over financing agreements, Venezuela was supposed to send 330,000 b/d per day for the next three years to China as repayment for loans already received. Now we find out that China has “accepted” to lift both requirements.

In effect, it looks like Venezuela has negotiated a debt restructuring agreement with one of its biggest foreign creditors. Voluntarily? What does that even mean when you’re dealing with a penniless debtor?

Restructuring a debt agreement with the Chinese isn’t default in the classic sense, but it’s definitely on the Default Spectrum. Where precisely on that spectrum is up for grabs.

Or perhaps Venezuela is neither in default nor in non-default, but rather in a kind of quantum indeterminacy that both is and isn’t default.

This stuff makes my head spin.

Think of it like this: some time ago, the gringos pioneered “truthiness“. Now, Venezuela is exploring the infinite possibilities of defaultiness.