I reviewed Fernando Ferfal Aguirre’s book last post and he has a lot of follow-up posts on his blog. Also timely are some articles from Paul Krugman and Megan McArdle regarding Argentina’s default and how great it was for the Argentine economy. First Paul Krugman:
I feel Dean Baker’s pain. Dean is exercised over an NPR report which says that Argentina is suffering from its 2001 default — a claim that is totally at odds with the evidence. Argentina actually did very well by thumbing its nose at creditors.
As evidence, they all point to this graph:
And this one:
Even the original NPR report concludes this:
Robert Smith: It has been a tough decade for Argentina, but a lot of people think that the default was the best thing to happen to them.
Zoe Chace: After the money was devalued, banks opened up again. Pesos weren’t worth as much, sure, but Argentinian products suddenly looked cheap on the world market. And that’s been really good for Argentina’s economy. Exports of staple products like soybeans and wheat went up. And eventually, some investors started to lend Argentina money again…
Robert Smith: This whole thing is something of a happy ending, after a long nightmare of a story
Lastly Megan comments:
Which is not surprising, because when it comes to Argentina, as far as I know, the “status quo” view is that default and devaluation were pretty much inevitable. I haven’t spoken to anyone who thinks that with the economy stuck in a four-year recession, riots in the streets, and the government changing leaders every few days, Argentina could have held onto the peg much longer. And once it left the peg, default was inevitable, because there was no way they could pay that much dollar-denominated debt while collecting taxes in radically devalued pesos. The only question is whether the transition could have been handled better…
Argentina was fatally wounded almost ten years ago and Argentina as I knew it died yesterday, October 23, 2011, when Ms. Kirchner was re-elected with over 50% of the votes, gaining complete control of the country. She now controls the executive of course, but also the congress, unions and even the media through the Kirchner Media Law…One can only wonder how can such an authoritarian leader earn so much public support? Wasn’t it bad enough when they controlled the media through an unconstitutional law, or what about our retirement funds begin stolen (nationalized) right in our faces?
Last Friday the vice president announced that to buy US dollars people will have to show their IDs, their wage bill to determine income, and then go through a background check with the Argentine tax collection office, the AFIP.The AFIP can either authorize or not the purchase. According to what? Wellll… according to anything they want. They check your bank account, your salary, loans, if they even “feel” you shouldn’t be buying US dollars for whatever reason, and that nearly always the case, they just deny it.
So, Mr. Nobel Prize (Krugman) thought it a good idea to default and “thumb its nose at creditors.” The reality on the ground is that the policies that led up to the default and the post-default landscape were bad for the people.
And it is sad to say that this will be the future for the American people. We cannot escape. We cannot pay, so we will end up paying, just like the Argentinean people. Your only defense is to get ready. It is coming and there is nothing that can be done to stop it. Your only choice is to endure.
You have been warned. Learn from Ferfal. Prepare and endure.
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