Argentina, Fascism after Default

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.