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[P]
What's happening to Argentina

By willwillwill in News
Fri Dec 21, 2001 at 03:40:25 PM EST
Tags: Politics (all tags)
Politics

How currency reform led a semi-rich country into bread riots. And how the US deserves some of the blame.


brief account

Argentina, like most countries in the world, struggled with inflation since the 1970s. Most people including the military dictators who ran Argentina, didn't know the cause or how to deal with it.

Argentina tied their currency, the peso, strictly to the dollar in 1991, with an instrument called the currency board. This pretty much choked off their inflation, because the dollar was a stable currency. There was a little inflation but not much.

Where they began to have trouble was in 1997, when the US dollar went into a sharp deflation. This happened because of some mistakes at the Fed, mistakes by Alan Greenspan that are not widely known and not really crucial to go into here.

http://futures.tradingcharts.com/chart/GD/M

So as the dollar became more valuable, by 30%, so did the Argentine Peso.

This hurt their exports, but worse, a deflation will rip your economy to shreds. All of the debtors start to find that they have to pay back $1.33 more than they expected, over and above interest. Many go into bankruptcy. Then the banks have all these bad loans.

The USA is going through a deflation right now, basically it's going to rip our economy to shreds too.

The difference is, in the USA, at least we had a tax cut in '97, and another tax cut in '01. In Argentina, under the direction of the IMF, they actually had to RAISE TAXES in order to balance their budget and get another IMF loan. So they're economy is getting kicked twice, once by deflation, and another time by depression.

The only solution
The only solution is for Argentina to get off the currency board and devalue. This will wreck a lot of the savings of the people in the country but they can't keep going like they are. Deflation is still only part of the way through destroying their economy. They'll be in for 20 years of misery if they stick with this situation.

Why people resent the IMF and basically the USA in a nutshell.

1. The US has the most important currency in the world, but doesn't take care of it that way. The US instituted the floating currency regime in 1973 as a way to correct what they saw as flaws in the gold standard. It was an immediate disaster and it is very hard to argue that the last 30 years have seen better monetary policy than the previous 170 on the gold standard.

The lesson we got from the 70s was that inflation was bad. But really the Fed can just as easily make a deflationary mistake as an inflationary one.

So when the US alters course on the dollar for domestic reasons, the rest of the world, especially the small economies, get swung around like they're on the tail of a dog.

2. The IMF, which is in large part directed from Washington, and gets its money from big banks in the US and Europe, consistently offers lousy advice to developing nations and ends up making them poorer. IMF reports are full of suggestions to "Rationalize the tax structure and broaden the tax base", basically demands to raise taxes on people who are poor to begin with.

Another consistent IMF recommendation is to devalue the currency, to make exports cheaper. But what this ends up doing is devaluing even the meager savings of the people in the country, and the devaluation doesn't work for very long anyway.

How it comes back at the US
So people in poor countries see their savings wrecked so they can make cheap goods to export to the rich countries. It's not the IMF's intention but that's what ends up happening.

When the politicians implement the IMF's demands, their economies get wrecked and the voters pitch out the politicians. Who gets the blame from the IMF and econ writers in big American newspapers? The dumb voters of course.

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What's happening to Argentina | 142 comments (133 topical, 9 editorial, 0 hidden)
The US is to blame? (3.92 / 13) (#1)
by joegee on Fri Dec 21, 2001 at 12:44:09 AM EST

"Argentina tied their currency, the peso, strictly to the dollar in 1991, with an instrument called the currency board."
You said it yourself, Argentina tied their currency to the American dollar. America did not tie the Argentinian peso to the dollar.

What the US does with its currency is the business of the US. The EU, and before the EU its individual nations set monetary policy to protect themselves. Canada does it. Japan does it. Argentina did it when they bought up a bunch of dollars. That's what nation states do. They have their first obligation to their own citizens.

Anyways, it stands to reason that if an outsider ties their currency to a foreign currency they can expect that foreign currency to be managed by the needs of the foreign country. That's the way its going to work.

Argentina fell into the trap of counting on a foreign currency for their monetary stability, but that is not the fault of the United States. To put it another way, when Europe starts shaping the Euro with concern to small foreign concerns then I am certain the US will exist in a deep(er) moral vaccuum, and things may (slowly) change.

Until then, I am sorry Argentina is having a hard time of it. I hope there's a way the world can make things better. I figured when I saw this headline in the queue someone somewhere would try to lay it at the foot of the US. Someone did.

<sig>I always learn something on K5, sometimes in spite of myself.</sig>
Why they hate the US (4.66 / 3) (#3)
by linca on Fri Dec 21, 2001 at 01:34:38 AM EST

The problem Argentinian have with the US, is that the people who loaned money to Argentina (not only from the US but from all the developed world ; but it is always funnier to bash the Yankees) are now behaving like loan sharks, not only rising hugely the interest rates, but also ordering the way money should be spent. Imagine Japanese had said to the US government in the 80's (when the it had a huge deficit) that for more money to be lent, the government should cut defense spendings by 30%, which is equivalent to what the IMF is ordering America to do. I bet the Americans wouldn't have liked it.

And Argentina isn't exactly "small and poor". It's per capita wealth was higher than the UK's in the 50's. It isn't even spending that much money - it's deficit is lower than that of most European countries. But for some reason the investors don't like Argentina.

[ Parent ]
heh.. (2.66 / 3) (#4)
by rebelcool on Fri Dec 21, 2001 at 01:42:09 AM EST

it probably has to do with the 'military dictator' thing...

COG. Build your own community. Free, easy, powerful. Demo site
[ Parent ]

military dictator (4.00 / 3) (#7)
by linca on Fri Dec 21, 2001 at 01:52:58 AM EST

Yeah... But somehow that doesn't come out as a reason not to hate the US... As all military dictators in Latin America, the Argentinian one was more or less supported by some Americans.

Indeed investors usually like dictators ; a good'ole dictatorship is stabler than any democracy. That's very good for investors.

And of course, why should that past (quite old already) still have an influence on the lives of the Argentinians? That's probably why they are angry.

[ Parent ]
because... (none / 0) (#103)
by Juan Rojo on Sat Dec 22, 2001 at 05:21:41 AM EST

yeah.. that's true.. why should still have an influence? Like.. 9/11.. i bet in 10 years people wont even know what that is.. actually, less people died in 9/11 than in south american dictatorships, so.. i guess in like 3 or 4 years no american will remember that they had some towers in manhattan and a building by the shape of a pentagon.. they'll have a new park, and the department of defense, the horseshoe. And they will all love afghans, will be adopting afghan kids, etc.

[ Parent ]
Horseshoe? (none / 0) (#119)
by bwulf on Sun Dec 23, 2001 at 10:57:12 AM EST

They're rebuilding the damaged parts of the Pentagon as close to the original as possible;
including limestone from the same quarry as when the building was originally constructed.


[ Parent ]
yes, because.... (3.50 / 6) (#22)
by jazzido on Fri Dec 21, 2001 at 10:06:29 AM EST

...the "military dictator thing" supported by your CIA and your West Point academies tortured and killed 30000 people.

isn't that enough?

--
"Patriotism is the last resource of scoundrels" (Samuel Johnson)

[ Parent ]

Military Dictators 'R Us (4.50 / 2) (#53)
by Bad Harmony on Fri Dec 21, 2001 at 07:39:29 PM EST

Of course, Argentine society and culture had nothing to do with it, it was all the fault of the Yanquis.

54º40' or Fight!
[ Parent ]

of course (none / 0) (#99)
by Juan Rojo on Sat Dec 22, 2001 at 03:22:53 AM EST

Dictatorship of argentinian countries was their fault, because they were about to become communists. is that what you mean?

[ Parent ]
Argentine US Bashing (4.66 / 6) (#43)
by Nyquist Theorem on Fri Dec 21, 2001 at 05:34:57 PM EST

Imagine Japanese had said to the US government in the 80's (when the it had a huge deficit) that for more money to be lent, the government should cut defense spendings by 30%, which is equivalent to what the IMF is ordering America to do. This is not a valid analogy. First, the US was using that loaned money for defense - including, noteably, the defence of Japan. Secondly, the trade deficit was directly between Japan and the US as a result of the US buying so much Japanese stuff. It would be quite a stretch to suggest that Japan propped up the US economy in the 1980s, but even if it did, when you look at how much the US (and the MacArthur plan) did to bring Japan back from the dead. What's Argentina done for the US? Well lets see, it killed a thousand people and burned through more than two billion dollars trying to take the Falklands back... it's sucked up ten billion dollars of other people's money drying to build the Yacyreta dam... You're darn right, Argentina is neither small nor poor. It's got more people than Canada or Australia, and it's ranked 20th in the world as far as GDP/capita - second best in South America, next only to Brazil. The idea that there is something wrong with loaning money with strings attached is simply silly. (Disclaimer - I live in a developing country, am not an American, and work for an interational organization). If you want the money, take the conditions, and if you don't want it, don't. If we'd at McDonald's, I've forgotten my wallet and you're the only person with money, and you want to say "I'll buy you lunch, but you have to stop calling me winkie for the rest of the week!" then so be it! Of course, charging developing nations unreasonable interest rates is morally wrong - its stealing from the poor to give to the rich. But that's only a part of the problem, and besides, why would *ANYONE* loan money to a bellicose nation like Argentina if there's no interest, a likelihood they'll never pay it back, and no chance of Argentina even saying "thanks"? Who do you think paid for the Exocet that sank the Sheffield? What's going on in Argentina is unfortunate - political unrest is rarely a good thing, especially where violence is involved. That being said, while there are plenty of things the US is reponsible for, I can't see the situation in Argentina being any fault of the US.

[ Parent ]
the dollar is the sun (3.50 / 2) (#5)
by willwillwill on Fri Dec 21, 2001 at 01:44:43 AM EST

You're right to conclude that the 1991 currency board was fundamentally flawed, in that Argentina made the connection with no insurance against the US dollar inflating or deflating.

But to suggest that a country like Argentina can go it alone is like sitting on the sun and saying "nobody's forcing those earthlings to stay in this solar system." The concept that the US dollar is the center for the world's currencies had formal backing through the last half of the 20th century, most explicitly in the Bretton Woods Agreement where all currencies in the world were strictly tied to the U.S. dollar.

[ Parent ]
Shame on the US for having an attractive economy! (3.66 / 6) (#25)
by joegee on Fri Dec 21, 2001 at 11:39:29 AM EST

We should be mismanaging our economic affairs so less fortunate countries won't feel as bad. We shouldn't be such an attractive investment. We're luring these unsuspecting naïve littel countries into the peril that is largest, most stable economy in the world.

Hey little country, want some candy?

Even the Argentinian who posted up above must be deluded. He doesn't blame the US for Argentina's problems. He must either be simple, or deluded, right?

<sig>I always learn something on K5, sometimes in spite of myself.</sig>
[ Parent ]
The dollar (4.00 / 1) (#27)
by skyrat on Fri Dec 21, 2001 at 11:57:43 AM EST

It's really not necessary to directly tie a currency to the US dollar, and is clearly inadvisable. It seems to me that if they really wanted to curb inflation, they should have used something more along the lines of a gold standard, although I'm no expert on the economic situation in Argentina. By the way, I don't think Bretton Woods is really a good example, considering that it was abandoned (for good reason) 30 years ago, only 25 years or so after its adoption.

[ Parent ]
Tying currencies (5.00 / 4) (#36)
by Nyquist Theorem on Fri Dec 21, 2001 at 02:31:16 PM EST

My work for the UN puts me in (for the moment) a country that has a regional currency tied to the US dollar - Antigua, in the Caribbean (the Eastern Caribbean Dollar, or EC, is tied to the USD at ~2.7EC/1US). Without delving too much into CARICOM fiscal and monetary policy, I would offer this opinion: Tying to the US dollar gives small or financially unstable nations the ability to stabilize their economy. It is a very useful tool - one need only look around the Caribbean at those who have tied their currencies and those who have not to see that there is a correlative, if not causal, relationship that suggests tying is not a bad idea. Jamaica comes to mind as a country that has had its dollar clobbered - twenty years ago a Jamaican dollar was worth fifty cents US, whereas its now worth two cents. Whoops. That being said, a government still has the responsibility to properly manage its economy regardless of how their currency value is determined. One cannot blame external forces (ie the US, EU, WTO, WB, IMF, AOLTimeWarner) exclusively for Argentina's economic meltdown. It seems American citizens no longer have a monopoly on the "blame someone else for all our problems" approach to explaining one's shortcomings.

[ Parent ]
WTF? (4.00 / 11) (#2)
by delmoi on Fri Dec 21, 2001 at 01:27:15 AM EST

Um, so the US is responsible for Arigentina unilateraly choosing to base their currency on our currency? I mean, what were we supposed to do? "Hrm, this is the best thing for our country, but all these other people in other contries use Dolars too. So lets not do that."

Yeh, whatever.
--
"'argumentation' is not a word, idiot." -- thelizman
why they link (4.00 / 3) (#10)
by willwillwill on Fri Dec 21, 2001 at 02:42:08 AM EST

The linking of currencies around the world with the dollar as the defacto pre-eminent currency has been going on for decades.

Dollarization of the world economy is often pointed to as a source of pride and national greatness in the USA. It comes from having the biggest economy in the world.

Perhaps you're right, and if we keep mismanaging the world economy, everyone else will switch to the Euro, and then we can find out what if feels like to be the tail instead of the dog.

[ Parent ]
Actually, yes, at least to some degree. (3.00 / 1) (#12)
by Apuleius on Fri Dec 21, 2001 at 02:57:26 AM EST

Dolarization of the Western hemisphere is a move with many American boosters.


There is a time and a place for everything, and it's called college. (The South Park chef)
[ Parent ]
Not officially (4.66 / 3) (#13)
by jasonab on Fri Dec 21, 2001 at 03:35:50 AM EST

Dolarization of the Western hemisphere is a move with many American boosters.
One of those supporters, though, is not the Federal Reserve. Greenspan has never been a big fan of it, precisely because he knows he can't win if it occurs.

Dollarization in Latin America

As this link says, Greenspan has repeatedly said that he runs the US economy for the US.

[ Parent ]

unilaterally (4.33 / 3) (#19)
by streetlawyer on Fri Dec 21, 2001 at 08:59:25 AM EST

This is a chronic oversimplification. Argentina did not "unilaterally" choose anything. Nothing that anybody does is "unilateral" in a world as complicated as ours.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]
Ok, what? (4.18 / 16) (#6)
by rusty on Fri Dec 21, 2001 at 01:46:13 AM EST

The only solution is for Argentina to get off the currency board and devalue...

The IMF... consistently offers lousy advice to developing nations and ends up making them poorer... [A] consistent IMF recommendation is to devalue the currency

Well, which is it? The only solution, or a greedy IMF plot?

As an American, I'm sorry my government didn't make the Argentine economy more of a concern. No, wait. I mean I'm not sorry my government didn't make the Argentine economy more of a concern. Like many others, it amuses me that the US can be such a consistent target for both intervening and not intervening, and usually from the same people. I'm not saying that describes you, personally -- I don't know. Though this article does seem to call for the US to make economic decisions for the benefit of Argentina, while also calling for the IMF to leave that country alone.

Like the above quote, which is it?

____
Not the real rusty

IMF (4.50 / 2) (#8)
by Arkady on Fri Dec 21, 2001 at 02:23:56 AM EST

It's the "greedy IMF plot" one. ;-)

Aside from the obvious "Robin thinks _everything_ is a greedy capitalist plot" reason, you should read through the archives of the Economic Reporting Review on TomPaine.com (it runs weekly there; the archive is actually here, on the Center for Economic and Policy Research site). The economist who writes that review column has a _lot_ to say about what's up with Argentina and whose causing what.

-robin


Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere Anarchy is loosed upon the world.


[ Parent ]
try to get past it (3.40 / 5) (#9)
by willwillwill on Fri Dec 21, 2001 at 02:29:03 AM EST

The IMF promotes a program of continual steady devaluation of currencies in developing countries in order to gain some transitory price advantage for their exports.

I'm saying that Argentina's peso has appreciated in value unnaturally because of its link to the dollar, and so must be cut off and returned to it's 1997 level. The fact that the deflation has gone on for five years will make this painful, but doing nothing would be worse.

If I wounded your national pride by pointing out the damage caused by American monetary policy, try to get past it and understand that I was not accusing you personally. Maybe you will realize that Argentina is just a canary in a coalmine for our economy.

Argentina is in the middle of a deflation caused not by deliberate action of the United states but by mistakes from our monetary authorities.

The deflation that is ruining them will ruin us; everything in the United States will have to fall in value by 1/3, all the houses, all the jobs will have to pay 1/3 less. The downward adjustment in prices will be wrenching and destructive.

What you're seeing in Argentina is exacerbated because they are a small economy under the gun from an authority uninterested in their general welfare. Our president at least seems to be struggling to find the answer here, unfortunately it seems to be beyond his power to correct the Fed's mistakes.

[ Parent ]
why do you say this? (4.00 / 1) (#48)
by el_guapo on Fri Dec 21, 2001 at 06:08:47 PM EST

why do you keep saying that there will be massive deflation (1/3 or therebouts) in the US? i think i'm a pretty typical american white middle class worker with a real job and i don't see this coming. i'm a network engineer, not an economist, but from the following evidence i see the economy just kinda waffling right now. said evidence: first, what i see on automoton news stuff - i basically see mixed to sloghtly negative news here. unemployment went up oh wait it came back down a notch - unemployment claims jumped to their highest in years oh wait, this weeks are down more than we thought. now to the evidence i see with my own eyeballs: a while back we started an informal restaraunt luch capacity survey - at its worst, that survey looked very bad indeed. (a year ago the survey was pegged at 100% capacity with people lining up), 4-6 months ago or so it had dipped to look very grim indeed - literally 25% full! yes, %75 of the joints were empty. zoom to 2 months ago to now - they're pushing almost to %100 again. you don't have to wait, but you sire have to look to find a seat. add to this my recent "mall outing" evidence and i think the economy has turned the corner. i know its a beast, and if it has it'll take a while for that effect to make itself known throughout the system. so, my admittedly lame, ignorant and misinformed system has to have SOME validity, no? it pegged the peak - that's for sure, and i mean SPOT ON. could you elaborate on the deflation thing please - if you are correct i am in a unique position to mitigate it's affect on me and sidestep it...i just don't wanna do this if i'm right and stuff is starting to turn the corner and improve...
mas cerveza, por favor mirrors, manifestos, etc.
[ Parent ]
Please Elaborate on the Sidestep (none / 0) (#59)
by tzanger on Fri Dec 21, 2001 at 09:03:46 PM EST

could you elaborate on the deflation thing please - if you are correct i am in a unique position to mitigate it's affect on me and sidestep it...

Colour me stupid (IANAFB - Financial Brainiac), but what would you do to sidestep this? Sell your house near the peak, buy a new one for 33% off when the shit hits the fan? That type of thing?



[ Parent ]
not nearly that inventive :) (none / 0) (#66)
by el_guapo on Fri Dec 21, 2001 at 10:37:05 PM EST

i have money in 2 places - the house i just bought and my 401(k). i bought the house from a relative for WAY below current market value, and have already improved it enough that i could maybe 10-12k more than it originally appraised for when we moved in. so, with enough advance warning i can get out of it and still make money (even if it dropped 1/3 i would make money, not much, but a bit). as my 401(k), well, i got in on the bottom there as well - i started contributing right after the bust, and when you add the dollar for dollar match i get, well, that already very undervalued stock would have to drop more than the aforementioned 1/3 to make me lose money there as well. so both of my little nest eggs got started smack in the middle of the bust so they started at the low point. blind luck, but i'll take it :) so basically, i see the slide coming, check out (making a pretty penny if i do it fast enough) and then back in at the new bottom.
mas cerveza, por favor mirrors, manifestos, etc.
[ Parent ]
House (none / 0) (#105)
by Weezul on Sat Dec 22, 2001 at 06:25:29 AM EST

Do you even need to sell the house? Seems to me like you should be able to both partially sell & partially buy with refinancing, i.e. you get the money out after the stocks crash but before the real estate market crashes (like this last Oct.) then you put your stock profits back into the house when a second stock boom occures.

"Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini
[ Parent ]
I am still not understanding... (none / 0) (#125)
by tzanger on Sun Dec 23, 2001 at 09:20:33 PM EST

Do you even need to sell the house? Seems to me like you should be able to both partially sell & partially buy with refinancing, i.e. you get the money out after the stocks crash but before the real estate market crashes (like this last Oct.) then you put your stock profits back into the house when a second stock boom occures.

How do you partially sell a house? I am assuming you mean to try and predict the stock slide, cash out before the slide, stocks slide, dump the money into the house, housing slides next so you then refinance?

Yes I really am this dumb when it comes to the "higher-level" finances. I'm planning on hiring a good financial advisor and accountant in the very near future; I just have not gotten around to it yet. :-)



[ Parent ]
How to make out (none / 0) (#85)
by willwillwill on Sat Dec 22, 2001 at 12:36:17 AM EST

It can take a long time, as long as 20 years for an inflation or deflation to spread all the way through the economy.

For instance in the 70s, it was really bad to be a banker. The banker could loan out $25K in principal for somebody to buy a house in 1970, and by the time the house was paid off in 1990, the house cost $250K and the banker's original principal would only buy a car.

If you could, you might simply keep all your money under your mattress, and wait as all the things in the US economy fell in price to match the new purchasing power of the dollar.

Eventually, though, the beneficiaries of inflation got whacked, and you might too, because monetary events like this wreck an economy generally, over and above all the weirdness that happens when prices adjust for no reason.

[ Parent ]
not inconsistent (5.00 / 1) (#129)
by streetlawyer on Mon Dec 24, 2001 at 04:33:14 AM EST

As an American, I'm sorry my government didn't make the Argentine economy more of a concern. No, wait. I mean I'm not sorry my government didn't make the Argentine economy more of a concern. Like many others, it amuses me that the US can be such a consistent target for both intervening and not intervening, and usually from the same people.

Speaking as one of those "same people", I think there is nothing inconsistent in condeming the USA for intervening in other countries in search of some economic advantage (in the case of Argentina, promotion of the FTAA) and then doing nothing to help with the adverse consequences of the earlier intervention.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

Two things. (4.40 / 5) (#11)
by Apuleius on Fri Dec 21, 2001 at 02:50:37 AM EST

One the one hand, when the bank panic began, I was dismayed that having found out on BBC, I looked and noticed that CNN, ABC, and the Usual Gang of Idiots didn't think the issue worthy of front page mention, and that the first exception to this (that I found) was none other than Matt Drudge. For the last 10 years editors in the US ditched their duty to balance what the public needs to know with what the public wants to know, as this shows.

On the other, the US is hardly trying to continue the deflation. Greenspan decided to crack down in "irrational exuberance" in 1997, but for over a year he's been trying hard to do the exact opposite. Globalization on the one hand makes everyone catch a cold when the Fed sneezes, but it also makes the Fed's interest manipulations less effective every day, because the international markets circumvent everything the Fed tries.

As for the IMF, its organization structure isn't much more responsive to Joe Yankee than to anyone else. The IMF's chair isn't a ballot option in any election, and no shakeup in the American government will change the IMF's policies because both parties in the US drink the same flavor of kool-aid regarding the IMF, as do both major parties in Britain and other countries. The blame here goes far beyond the parochialism of the American public./p?


There is a time and a place for everything, and it's called college. (The South Park chef)

But wait, it's a free country (4.00 / 1) (#51)
by weirdling on Fri Dec 21, 2001 at 06:52:34 PM EST

Who the heck gets to decide what the public 'needs to know'? Frankly, Argentina's problems are an interesting aside, but make no odds for my daily life.

Sorry; the press in America is free to report exactly whatever they wish to report, and if that means the spend most of their lives reporting inconsequential minutiae of American life, that's their business. Find a press service that does not, such as the BBC, and bless them with your patronage.

I'm not doing this again; last time no one believed it.
[ Parent ]
Well, yeah. (3.83 / 6) (#14)
by ariux on Fri Dec 21, 2001 at 04:43:03 AM EST

You'll notice I normally defend the United States, because I live here and like it and because the criticism is usually smug name-calling lifted straight from some two-faced European politician's campaign speech.

But this one is right, and let me tell you why.

We spew out big talk all the time about being a "world leader," a "world policeman," a "superpower" with "global responsibilities." When something goes wrong on a real leader's watch, he takes responsibility for it and does his best to make it right.

We're big and rich and tough, and what we do inevitably causes earthquake-sized ripples for the little guys. Are we wrong to be big? Maybe not. But we are wrong not to care.

Make it right how? (4.50 / 2) (#15)
by Apuleius on Fri Dec 21, 2001 at 05:10:49 AM EST

Inflate the dollar? Greenspan is trying hard, but not having much luck. Debt relief? Debt forgiveness is impossible, and deferments, though called for, are not a full answer. The best we can hope for is enough US financial aid to prevent a revolution in Argentina; the last thing the world needs right now is backsliding in South America after the progress of the 90's.




There is a time and a place for everything, and it's called college. (The South Park chef)
[ Parent ]
Why (none / 0) (#35)
by Weezul on Fri Dec 21, 2001 at 02:17:08 PM EST

Revolution kills people and damages infrastruicture, but why would a short revolution lead to long term economic problems? Argentina is in this mess because they played ball with U.S. companies and the IMF. I would suggest that the only way they can get out is to cut ties with those orginisations. Other countries who have sent the IMF packing have done fine (they may not have been as bad off as Argentina).
"Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini
[ Parent ]
Who? (none / 0) (#39)
by mech9t8 on Fri Dec 21, 2001 at 04:06:15 PM EST

Other countries who have sent the IMF packing have done fine (they may not have been as bad off as Argentina).

Who? (Not a hostile 'Who?', I'm just curious...<g>)

--
IMHO
[ Parent ]

I forget.. (none / 0) (#63)
by Weezul on Fri Dec 21, 2001 at 09:44:32 PM EST

..but I think it was some African country that sent them packing a while back when it saw how bad the IMF screwed up t's neighbors. It seems pretty simple to me: Don't run up a big credit card bill if you can not pay it.. and once you do run up a big credit card bil it's time to start shopping around for a better deal. There is a problem here that countries can not go bankrupt and default on their loans, so there is no financial reasons for the loan holder to renegotiate with the country, but it seems like you could "defacto" go bankrupt and default on your loans.. as long as you did not depend on imports or exports too much.
You could for example close down the national government and run everything at the province level. The national gov. would just get into worse and worse debt but only the creditors would care.. if you collect no taxes and own no assets the creditors can not take anything. You could even fiat the national gov. into worse debt with the Argentinian banks so that you kept 50% of any assets which were taken from the fed. government. Heck, disolve the country into provinces and reform 10 years later.

"Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini
[ Parent ]
From the very trenches (4.76 / 17) (#17)
by jazzido on Fri Dec 21, 2001 at 08:36:12 AM EST

I'm an Argentinian, i live in Argentina. I saw the demos and riots. I was on those demos.
The IMF, WB and consequently the US Treasury sucked our blood out since the mid-70s when the CIA-backed (don't call me conspiracy nutter. Pinochet was backed by the CIA too) military junta was in power.
My english is not as good to write an article on our situation from the trenches, but knowing the avg k5 reader standards, an article with a few grammar/spelling errors won't be accepted
The people is starving. The IMF wants the FREE (both senses) education services not to remain that way (do a search on "Plan FOMEC" if you want see what I'm talking about).

I'm not an anti-american, i have friends there. I'm against the IMF, the WB and the WTO. I wasn't in Geneve, Seattle. I'm not some pseudo anarchist who wants to be a revolutionaire in a 1st world country. I do not return to my $30k/college class after the [A-Z][0-9][0-9] day.

Sorry. i can't think and police is still killing and taking people away

Manuel Aristarán Bahía Blanca, Argentina

--
"Patriotism is the last resource of scoundrels" (Samuel Johnson)

Write a story (5.00 / 7) (#21)
by MicroBerto on Fri Dec 21, 2001 at 09:52:23 AM EST

I think you should write a story.
My english is not as good to write an article on our situation from the trenches, but knowing the avg k5 reader standards, an article with a few grammar/spelling errors won't be accepted
Goddamnit this pisses me off so much, because you're partially right. I say that you head the body of your story off with a disclaimer, and if anyone has a problem with it, tell them to go fuck themselves. Either that or e-mail someone (like me) the story and I'll grammarsize it up for ya.

We definitely need more trench stories. If you haven't noticed, those are by far the best ones.

Berto
- GAIM: MicroBerto
Bertoline - My comic strip
[ Parent ]

Agreed -- plus a suggestion (5.00 / 6) (#23)
by theantix on Fri Dec 21, 2001 at 10:45:38 AM EST

From the K5 FAQ:
If you have a feature or article that you think needs editorial work before you want to put your name on it, send it to us at editors@kuro5hin.org and we will be glad to go over it with you. We are nice people, really!
I don't know how quick they will get back to you, but I would really like to read an article written by someone "from the trenches"

--
You sir, are worse than Hitler!
[ Parent ]
Ignorance is no excuse (5.00 / 2) (#28)
by quartz on Fri Dec 21, 2001 at 12:08:37 PM EST

and if anyone has a problem with it, tell them to go fuck themselves

As someone who doesn't like to read badly written articles, I would probably have to go fuck myself, but first I'd vote -1 on the offending story. And before you throw another fit, FWIW I'm not a native English speaker myself and if I ever wanted to have a story published on K5 I'd have it reviewed by a native speaker first.

However, I fail to realize how not being fluent in a language should somehow give you an all-purpose exemption from publishing standards. Would a newspaper or a magazine print a submission full of grammar and spelling errors? I don't think so. Then why should K5? Because it's "just a website" and not a regular print publication? Bullshit. I see language as a sort of standard communication protocol: if everyone observes the rules, we can communicate with each other; if people start making up their own rules, the standard deteriorates and the quality of communication goes down. Just because you're on the Internet doesn't mean that you're free to ignore grammar and spelling -- if you pretend to speak English, that is. Otherwise, you might as well submit stories in 31337 5p34k or Ebonics, because it's the content that really matters, right?



--
Fuck 'em if they can't take a joke, and fuck 'em even if they can.
[ Parent ]
Alternately (5.00 / 2) (#41)
by ghjm on Fri Dec 21, 2001 at 05:13:50 PM EST

Post it in Spanish. Is there a rule that says all k5 content has to be in English? Who knows, it might get voted up for the novelty value.

Just make it well-written, grammatical Spanish, or your excuse for your poor English goes out the window.

-Graham

[ Parent ]
Be careful ... (none / 0) (#31)
by joegee on Fri Dec 21, 2001 at 12:57:21 PM EST

... I have not seen coverage of fatalities among demonstrators, but if the police are rounding people up, just be careful (no more posts with your full name.)

It's one thing to have a bunch of armchair sociologists in here saying "up with the people, down with the MAN, let's MARCH!" I suspect most of the "activists" in here make up signs, walk around a building for a few hours, and go home to view the glossy prints of their three whole hours of action against the system.

It's another thing entirely to be facing the kind of situation you are facing. Take some basic precautions to protect yourself so you can live to help make the changes that will put your country back on track.

I'll be thinking of you, and of sad, lovely Argentina.

<sig>I always learn something on K5, sometimes in spite of myself.</sig>
[ Parent ]
Account of the casualties (5.00 / 1) (#57)
by Yanna on Fri Dec 21, 2001 at 07:49:10 PM EST

If you speak Spanish, you can read a very touching review of the casualties here. The author, Miguel Bonasso is a very well respected journalist who is often consulted by international media about current affairs in Argentina.

I hope that freezes your'(sic) and Yanna's smiles into grinning super power morons for eternity. mami
[ Parent ]

Editorial help? (5.00 / 2) (#32)
by UncleMikey on Fri Dec 21, 2001 at 01:23:20 PM EST

I know that the K5 editors will help in a situation like this, but I figured I'd offer my services as well. Only trick is that I'm going away for part of the weekend for the holiday, but if you get it to me today, I can probably have it fit for K5 consumption by Sunday at the latest.
--
[ Uncle Mikey | Radio Free Tomorrow ]
[ Parent ]

Do it man! (5.00 / 2) (#33)
by FredBloggs on Fri Dec 21, 2001 at 01:44:16 PM EST

Theres so much posturing and bullshit on this site from people who dont know what they are talking about. Please, if no-one else re-writes it in `proper english`, i`ll do it!

[ Parent ]
Please Write Your Article! (5.00 / 2) (#58)
by Bear Cub on Fri Dec 21, 2001 at 07:51:38 PM EST

I'll read it and vote for it, bad English or not. I do think that K5 should hold up some editorial standards, but I place a much higher value on the content. A first-hand account of what's going on in your country is too important an article to turn away because of poor grammar.

------------------------------------- Bear Cub now posts as Christopher.
[ Parent ]

What's happening? (2.50 / 4) (#20)
by czth on Fri Dec 21, 2001 at 09:29:09 AM EST

Looks like they're basically going to hell in a handbasket. That's my detailed analysis.

Then again, looks like the rest of the world is, too.

There are a lot of desperate people in the world now, and even worse, most of them can get hold of destructive technology or training. And they have nothing to lose - even much to gain, in their warped view, and yes I'm mostly speaking about Mohammedans here - by suiciding and taking as many of "the enemy" with them.

Whether it's our fault or not, the West is going to be in for a rough time of it (hm, sort of reminds me of the Rendorish uprising against the West in Eddings' Elenium trilogy, many (vocal) Mohammedans being similar frothing-at-the-mouth fanatics).

I maintain it's not our fault, as states have the right and obligation to protect their own citizens and their interests, and not to babysit and coddle the rest of the world.

czth

IANAE (4.60 / 5) (#29)
by chrome koran on Fri Dec 21, 2001 at 12:19:17 PM EST

So, I have to ask some ignorant questions here.
  • My somewhat flawed understanding is that the US$ is no longer tied to the Gold standard. So, what exactly does the chart you linked to mean? I see a plot of Gold Futures Pricing in US$ over Time. Isn't the price of Gold Futures based on a lot more factors than the relative value of the US$? (e.g., if World Stock Markets are seen as being currently unstable, doesn't the price of gold go up regardless because it will be seen as a safe haven for investors?)
  • If the US is going through a deflation right now, why does the CPI continue to rise? (I'm not talking about for a month here - I mean annualized. One or two months of deflation can be blamed on short-term circumstances like the price of gasoline dropping because no one in the US is going anywhere. I don't see this as the result of monetary policy???) Are you referring to the relative strength of the US$ vs. other currencies?
  • Why in the hell would someone tie the value of their currency to the value of someone else's? That would seem to be an effort to make your currency behave in ways that will work counter to free market forces???
  • Isn't political corruption a factor in the Argentine mess as well?

    OK, I think I've asked for enough there...I just don't really understand the forces at work here well enough to comment one way or the other. :-/

  • Currency tying (5.00 / 5) (#38)
    by tjb on Fri Dec 21, 2001 at 04:03:58 PM EST

    You're absolutely correct that currency tying would cause their currency to act in ways counter to the free market. However, this is sometimes the desired result over the short term.

    Consider a country experiencing hyper-inflation. What we had in the US in the 1970's is nothing compared to what panic-induced inflation can do. Think Germany in the 1930's: 50% to 100% inflation *monthly*. This generally occurs when people begin to believe that their currency is worthless and want to get their hands on something with lasting value.

    US Dollars are something with a fairly stable, universal value. A US dollar, will, for the forseable future, have value backed by the US government. However, in countries outside the US, dollars are scarce. So, when people begin to panic about their own currency and start going after something with a guaranteed value, they are paying more than market price for that value, further increasing the runaway inflation in a positive-feedback loop.

    At this point, the government in question has two choices: They can either stop printing money and hope everything settles out while risking abject poverty for their citizens, or they can link their currency to the US dollar (or gold, but gold is out of favor and expensive to link to). By linking to the US dollar, the currency immediately becomes valuable. The US government is amenable to this as the economy that has been linked in is generally very small compared to the US economy and any impact on the US will be negligible.

    But, this is not a long term solution! It only buys time. It will settle things down temporarily, but the government should immediately start looking for ways to de-link from the dollar as the deflation caused by linking to the much larger US economy will begin to have an adverse effect. And it will almost certainly be deflation: Unless the economy in question is as productive on a per capita basis as the US, being linked to the US dollar will create trade problems as they price themselves out of most markets. There are very good reasons why stronger economies (generally) run trade deficits, and strength of currency is one of them. The US can absorb massive trade deficits with little harm, but a country like Argentina simply can't. They need a weaker currency in order to compete globally.

    Also, the original poster is under some delusion that the US is going to face massive deflation. He's almost certainly wrong about this. While there is a bit of deflation this year, its less than one percent. Not too bad considering over the past 18 months a few trillion dollars of wealth have been lost (I think I left it in the cab...). Add in the fact that the economy looks like its recovering and the federal reserve is more-or-less giving away free money (less than 2% interest now), and i think that our biggest worry should be about inflation after Q2 2002.

    Tim

    [ Parent ]
    gold (4.50 / 2) (#78)
    by willwillwill on Fri Dec 21, 2001 at 11:45:39 PM EST

    OK thanks for your comments and questions.

    The gold price has been the historical proxy for money throughout history, so it's a good indicator of where the purchasing power of any currency is headed.

    If it makes you uncomfortable, you can also check out the Commodity Research Board's index of the same time period:

    http://futures.tradingcharts.com/chart/RB/M

    Basically what you see is falling prices for these things in 1997, in the middle of a huge economic boom in the USA, just predating the Argentine crisis or the Asian crisis etc.

    We could go into a long discussion of this, but as far as gold goes, nobody just cuts the price of the stuff by 33% for no reason.

    So yes the US is off the gold standard, but it doesn't mean that the price of gold or any of these price-sensitive commodities is still not a good indicator of the change in purchasing power of the dollar.

    CPI
    The CPI is a lagging indicator. That is it shows you data from what happened last year, not what's going to happen next year. In any case, it could take 20 years for the deflation to work its way through our economy, so the CPI may be showing us just the tip of the iceberg in broad consumer prices.

    How this happened monetarily
    The economy picked up a lot of steam in 1996-97 and the Fed failed to give the banks all the money they were requesting. The Fed feared that the money would go to unsafe investments, or cause inflation... basically it's hard to know just WHY they did what they did, but the signs that they withheld money the banking system desired are unmistakable.

    You see each dollar became more desired than it had in 1996 and so more valuable. That's why there is a change in the purchasing power of the dollar.

    So if you have a lot of dollars "under your mattress" they will gain in purchasing power just by sitting there. If you went into debt before 1996, you will have to work 1/3 harder than you expected to in order to pay off the principal of your debt.

    Even if you're a banker, and all these people are paying you these more valuable dollars, a lot of those people will go bankrupt, so even lending will become a risky business. Nobody escapes.

    [ Parent ]
    Unsafe investments (none / 0) (#121)
    by dachshund on Sun Dec 23, 2001 at 12:20:57 PM EST

    The economy picked up a lot of steam in 1996-97 and the Fed failed to give the banks all the money they were requesting. The Fed feared that the money would go to unsafe investments...

    Hmm. 1996-97. Can't imagine why they would've worried about unsafe investments...

    [ Parent ]

    the difference here (4.00 / 2) (#34)
    by aphrael on Fri Dec 21, 2001 at 02:10:04 PM EST

    The big difference I can see is that the US can pump more money into the economy by reducing taxes and spending more because it has the flexibility to go into debt. Argentina doesn't, because of the rules the IMF and the lenders have placed upon it.

    Restrictions (4.00 / 1) (#61)
    by jayfoo2 on Fri Dec 21, 2001 at 09:06:35 PM EST

    The restrictions the IMF and lenders place on Argentina are entirely reasonable. You don't lend money to someone if you don't think they will be able to pay it back (otherwise it's called a gift, not a loan).

    The US can go _further_ into debt than Argentina because it has better credit.

    The very simple analogy is personal credit. Every time you apply for credit the lender checks how much debt you have. They then balance this against your income (and history). If they believe you are likely to pay back the loan they will make it, if not they wont. It's simple good business and common sense.

    Corporate debt works the same way. The ratings agencies (like Standard and Poors) monitor the debt on a companies balance sheet. If it exceeds a certain percentage of the companies total assets they will lower that companies rating (this is of course a simplification, other factors, such as growth, figure in)

    In the case of a nation the limit is based on debt as a percentage of GDP (with growth figured in). At some percentage (up for debate) the debt load gets too high for an economy to dig out of. The smart thing to do at that point is stop lending.

    That is the microeconomic view. When you throw in currency and inflation (and a bunch of other factors) you get into the macroeconomic picture, for that go take a class ;)

    [ Parent ]
    I think that's an oversimplification (none / 0) (#108)
    by aphrael on Sat Dec 22, 2001 at 12:18:59 PM EST

    The restrictions the IMF and lenders place on Argentina are entirely reasonable.

    That may be, although I suspect that you'll find a fair amount of dispute about that in the international economic community; there's been a lively debate in recent years over whether or not the IMF inadvertantly made the asian economic crisis of 1998 worse, for example. But, regardless, the point remains that *the people of Argentina* are not free to determine their own governance; the freedom of choice of their governments is locked in by some shadowy foreign entity which is not responsible to them. One does not have to be anti-capitalist to understand that this is the case.

    The US can go _further_ into debt than Argentina because it has better credit.

    It's not even in the same class. But a good part of that is for political reasons, not economic ones.

    In the case of a nation the limit is based on debt as a percentage of GDP (with growth figured in).

    That's arguably the way it's *supposed* to be, but it isn't, because their are other intangibles. Some countries are 'allowed' to have a greater debt as a percentage of GNP than others --- Russia, for example, would be allowed to borrow money even if it were technically bankrupt, again for political reasons. Much of the international lending is either done by agencies of governments or under heavy political pressure from governments; and governments usually make their choices for political, not economic, reasons. Argentina is in the unfortunate position of having lost all economic credibility while also being irrelevant politically.

    you get into the macroeconomic picture, for that go take a class

    *sigh* You know, this is the single most frustrating thing about discussion online. You disagree with what i'm saying, so you automatically assume that i'm completely uneducated on the subject, and dismiss me with "go take a class", without any clue whether or not i ever *have*, or what my credentials are. (For what it's worth, I have a degree in political science, with an emphasis on international relations; my thesis --- and this was, oh, seven years ago or so --- was on something having to do with the economics of what had just, at that time, become the European Union. But it irritates me that I have to produce those credentials to avoid being dismissed in the fashion of the previous post).

    [ Parent ]

    yah (none / 0) (#113)
    by jayfoo2 on Sat Dec 22, 2001 at 04:55:39 PM EST

    The last line (go take a class) wasn't meant to be a crack. I meant that sorta tounge in cheek, I shoulda put a ;) next to it. My point was that a full macroeconomic evaluation would fill up a book, hard to post on k5.

    I agree that I was oversimplifying, you are right, there are a lot of additional considerations when determining how much debt a country (or person, or company) can carry. Many of these reasons are in fact political. One of the large ones is stability. The US government is percieved to be highly stable and highly motivated to maintain its debt. Argentina (with it's history of non-democratic governments and it's history of nationalizing foreign assets) is not considered as stable as the US. The fact that the US may have had something to do with those bad governments is a separate (non-economic issue)

    The example with Russia is good too, but I'd argue that when additional loans are made to Russia the lenders are semi-considering those loans as aid, not necessarily evaluating them on purely economic considerations. It's considered cheaper (and I agree) to keep Russia functioning, if they pay back the loans it's gravy.


    [ Parent ]
    restrictions (none / 0) (#134)
    by marc987 on Tue Dec 25, 2001 at 01:29:54 PM EST

    The restrictions the IMF and lenders place on Argentina are entirely reasonable

    Renowned U.S. Economist thinks otherwise

    [ Parent ]

    Paul O'Neill (2.50 / 2) (#40)
    by glassware on Fri Dec 21, 2001 at 04:31:19 PM EST

    What I think is the worst part of the whole situation is the behavior of America's treasury secretary, Paul "Rich Obnoxious American" O'Neill, who simply doesn't care about Argentina.

    Although I can't sift through the negative articles about Paul O'Neill fast enough, I would suggest typing his name into a search engine and reading through all the painful things he says. My analysis is that he basically says that overseas markets don't matter to him.



    Advocacy for the Devil :-) (4.33 / 3) (#44)
    by UncleMikey on Fri Dec 21, 2001 at 05:38:24 PM EST

    Would you explain to me exactly why the Secretary of America's Treasury Department should care about markets anywhere but America? I mean, yeah, maybe in the general sense that no sane person really wants to see anyone else suffering. But from a professional standpoint, his job is not Secretary of the Treasury for the (thankfully non-existent) World State. It's Secretary of the Treasury for the United States of America.


    --
    [ Uncle Mikey | Radio Free Tomorrow ]
    [ Parent ]
    ok that's a good point (none / 0) (#82)
    by willwillwill on Sat Dec 22, 2001 at 12:14:08 AM EST

    O'Neill is no more the problem than Argentina's Cavallo was. I care because 1. it would be good for the US if the world economy would get back to growth, and 2. The problem in Argentina is just a symptom of a much larger problem in the US with our dollar. Argentina is just a very visible part of what's wrecking the US economy.

    O'Neill ought to care because 1. if the economy is ruined, he loses his job and 2. He has some power to fix the problem.

    [ Parent ]
    Why? (none / 0) (#90)
    by ariux on Sat Dec 22, 2001 at 02:10:05 AM EST

    Would you explain to me exactly why the Secretary of America's Treasury Department should care about markets anywhere but America?

    Er, because we share a world with them? And because what affects them affects us?

    [ Parent ]

    Um...sure, but... (none / 0) (#133)
    by UncleMikey on Mon Dec 24, 2001 at 01:33:28 PM EST

    ...they have their own government, and it's their government's job to figure out their economy, not ours.

    Put it another way: if we manage their economy for them, isn't that just another kind of imperialism, so often decried here on K5?
    --
    [ Uncle Mikey | Radio Free Tomorrow ]
    [ Parent ]

    Damn the Man! (4.50 / 2) (#42)
    by core10k on Fri Dec 21, 2001 at 05:23:18 PM EST

    I hate America as much as any self-respecting Canadian, but the US has absolutely no blame, and claiming that they do is absolutely bizarre.

    They need to default on debt (4.66 / 3) (#45)
    by vastor on Fri Dec 21, 2001 at 05:54:02 PM EST

    That was basically what I thought when I read an online newspaper article a few weeks back that said something like debt repayments for Argentina were up to about 45% of the GDP.

    For half the countries product to be needed for overseas repayments is insane. I bet the N.American colonies weren't having to provide that kind of a taxation back to the UK before they had they revolted. The circumstances may not have been implemented as an act of imperialism (though that could be argued, looking at World Back and IMF policies), but it looks like Argentina is a victim of economic imperialism where its local concerns are simply ignored.

    I'd not think anything less of Argentina simply defaulting on all the debts, saying they won't be repayed and then issueing a fresh currency or whatever. They'd be viewed as something of a rogue nation - could aim at being more self sufficient (basic needs such as food really ought to be able to be met by the a nation by Argentina), keep whatever they export as US dollars/euros or whatever and then pay cash for deliveries (Zimbabwe apparently has to do that for oil, they've just run out of credit and are supposed to be defaulting on debt repayments rather than the entire loans, which could well be an economic reason behind making a big deal about the land acquisitions - especially since that stuffs up the ability to repay the debts even more by turning export farms into tons of little subsistance farms).

    Cuba ran the gauntlet but with heavy subsidies from the USSR when it nationalised, Argentina would certainly be doing it tough if it dumped all the debt and reformed now, however it seems to be the most responsible action to undertake (for its citizens) and perhaps could lead to a whole wave of countries in similar positions following suit and then they could possibly work together as a cash-only economic block even if the rest of the world pretty much froze them out.

    I'm pretty amazed the IMF recommended increasing tax, most of the other cases I've seen have always pointed to slashing taxes and slashing services even further to balance budgets (so reduce taxation by 10% but expenditure by 20%).

    And as for the cheap goods - it's been a major problem. Dozens of countries are told to make X,Y and Z as cash crops to export, they all do and then there is a big glut and they fail to get the money they were told to expect and were counting on for debt repayments. I think these countries need to take a hard look at themselves and think more about solving their own problems rather than taking advice from outside that ends up making things worse.

    Given the "fight inflation first" campaigns that have led to high unemployment levels, I think people sometimes just need to accept it is the lesser of two evils. The economy is about serving us, not us serving it. If it causes us major problems (unemployment of 10% here as it was for a while or food shortages in Argentina) you overhaul the economy. You wouldn't rely for your livelyhood upon a car that broke down every five minutes, you'd either fix it or replace it.

    I'm not sure deflation is anymore an evil than inflation, it was massive debt problems that just got worse with the currency devaluation that is the problem. Tied currencies don't need to have fixed ratios - if the currency board in Argentina had adjusted the Peso to the US Dollar every month to adjust for the changing economic situation it'd have been more in control of things. So the US dollar increased in value by 30% relative to the world - the Peso could have devalued by 30% relative to the US dollar to maintain its position with everyone else (and making exports cheaper for the US, though if the bulk of its debt is to the US then it also means 30% more money owed back).

    Historically for many nations, going from a fixed ratio (say 2 australian dollars to a UK pound) to a flexible yet still fixed ratio (which may adjust it by small increments periodically - set by the reserve bank just the same as domestic interest rates are) to eventually the free floating currency (which tends to be moderated by buying/selling from the reserve bank for stability and often also at a big profit for the gov't, ours typically makes more than AUD$1bn a year off its currency dealing that is handed back). Anyway, I think Argentina just needs to default on its debt after electing some politicians with some guts to stand up for the people they represent. Maybe it'd work, maybe it wouldn't, but I think people should atleast make a serious effort rather than just accepting a slide towards impoverishment.

    further information about argentina (3.00 / 2) (#46)
    by doviende on Fri Dec 21, 2001 at 05:56:09 PM EST

    here are some links with more info:

    current info: www.indymedia.org (english) argentina.indymedia.org (spanish)

    first hand reporting of the riots: here

    (many links in this page): background economic info

    argentina and US militarism (talks about the School of the Americas in georgia, where the US trains terrorists)



    Lets see if I understand this... (3.00 / 1) (#47)
    by unstable on Fri Dec 21, 2001 at 06:04:07 PM EST

    Argentina was sinking...
    They grabed hold of the US $ as a life raft to help stay afloat...
    and now its our fault that that raft tilted a bit and threatens to dump them off?

    Maybe they should have learned how to swim on there own instead of depending on outside help.

    Maybe linking there currency to ours saved them back then.... should they have kept it that way?
    I dont know...
    but saying the US is now responsible for there econimy as well as ours... well, you need to rethink that a bit.



    Reverend Unstable
    all praise the almighty Bob
    and be filled with slack

    it wasn't intentional (4.00 / 1) (#73)
    by willwillwill on Fri Dec 21, 2001 at 11:16:59 PM EST

    Thanks for your comment.

    That the US dollar is the pre-eminent world currency today is basically inarguable.

    The rest of your comment I basically agree with.

    But even if it wasn't intentional, the US will get some of the blame as the catalyst for the disaster.

    The overall solution would be for the US to price the dollar by some means that avoids these inflations and deflations.

    It would be better for the world and better for the US economy too.

    [ Parent ]
    invitation (3.00 / 1) (#49)
    by el_guapo on Fri Dec 21, 2001 at 06:26:25 PM EST

    i just invited a couple of people i know that live in beaunos aires (and are right in the middle of this) to come join this discussion - they should have some nice insight!
    mas cerveza, por favor mirrors, manifestos, etc.
    Previous monetary policy (4.40 / 5) (#50)
    by roystgnr on Fri Dec 21, 2001 at 06:33:42 PM EST

    It was an immediate disaster and it is very hard to argue that the last 30 years have seen better monetary policy than the previous 170 on the gold standard.

    I think that would be relatively easy to argue, actually. Take a look at the money supply during the Great Depression, for example. 1929 didn't have to be much worse than 2000, as stock market crashes go, but protectionist curtailing of international trade and panicked reduction of the money supply (to keep the value of the dollar from dropping, you see) turned it into a decade of poverty, which only ended when governments were forced to print money, inflation be damned, for wartime spending.

    What have we seen in the last 30 years to compare? A short bout of inflation? A "recession" or two to let us know that the boom bust cycle isn't entirely gone?

    Why the 70s were bad (5.00 / 1) (#74)
    by willwillwill on Fri Dec 21, 2001 at 11:27:11 PM EST

    Thanks for your comment.

    The inflation of the 1970 saw prices rise by 1000% over ten years, so it was hardly a short bout.

    The 1982-83 deflation was the worst loss of jobs since the Depression, and who knows what will happen in this deflation.

    Inflations and deflations are incredibly damaging to the capitalist system. The infect the relationship between the creditor and the debtor with uncertainty, because no only do they have to worry about whether the venture will succeed or fail, they also have to try to get inside the mind of Alan Greenspan to figure out which way he's going to twist the money.

    I would like to see the survival and spread of capitalism but having it run by wise men who are bound to make mistakes on one side or the other will undermine confidence in the system.

    The previous episodes of disaster were also brought about by failures of the leaders, but how could they know any better? I know they're all trying to do their best. I hope in some small way this article can activate a message back to Alan Greenspan that he's doing the wrong thing.

    [ Parent ]
    70's was good for us (economically) (none / 0) (#95)
    by Juan Rojo on Sat Dec 22, 2001 at 02:46:32 AM EST

    yes, US was doing really bad. But people here remebers the 70's as a time when they were living extremely well and did their little fortunes... yet again. go figure!

    [ Parent ]
    You slipped an extra zero in there (none / 0) (#114)
    by roystgnr on Sat Dec 22, 2001 at 05:31:44 PM EST

    The inflation of the 1970 saw prices rise by 1000% over ten years, so it was hardly a short bout.

    This didn't seem nearly right, so I looked it up. A 1999 dollar is worth either .232 1970 dollars or .493 1980 ones. That implies price rises of 110%, not a very good thing... but not an unprecedented one, either, since it doesn't seem to compare to the ~140% inflation between 1910 and 1920. I'm pretty sure neither Alan Greenspan nor fiat money in general were responsible for that one.

    [ Parent ]

    You're kidding, right? (4.00 / 4) (#52)
    by weirdling on Fri Dec 21, 2001 at 07:12:34 PM EST

    Ok, first of all, if Argentina has sound monetary policy, it wouldn't have such a high debt. By this, I mean that any entity whose debt repayments approach 50% of their income is in deep trouble. US debt payments are around 10% of tax receipts, IIRC, and are high enough to cause consternation amongst conservative economists. Anyway, when your back is against the wall, you take whatever requirements that are handed out by the people who are giving you loans. Had you better credit, you'd have better options. That's the way the world works.

    I may not agree with IMF requirements. I don't even agree with the existence of the IMF. I certainly don't agree with throwing good money after bad and loaning money to a country already up to its eyeballs in debt. What do we expect but more mismanagement and worsening economic conditions? That's the tradition, anyway. It's not a use I like to see my tax dollars put to.

    Now, to the glaring errors in your report: the US is not suffering serious deflation. It has seen short periods of mild deflation as a result of massive increases of production, not as a result of miscalculation on the part of the fed, which tried desperately to ward off deflation by dropping the prime down to the lowest level in history, which would normally trigger massive inflation.

    So, your assumption that the US has been trying for deflation or that it was caused by the fed is incorrect. However, had the fed not done as they did, the possibility exists that the US could have seen a massively deflationary economy followed by a strong recession, which would have been worse for Argentina.

    Once again, you cannot micro-analyse. Argentina is part of a global economy. Argentina gets to make its own decisions, including that it linked its peso to the dollar and that it has borrowed money from the IMF under ruinous policies. Those are its decisions. You place your bets, you takes your chances.

    As to the US involvement with Pinochet, try to remember that Argentina is a warlike country and that stability in South America was an important thing during the cold war, so the actions of the US *seemed* like a good idea at the time. Oddly enough, Pinochet was responsible for a long, long time of fiscal responsibility and moderate prosperity in the country, despite being a despotic dictator.

    I'm not doing this again; last time no one believed it.
    You *DON'T KNOW* what a dictator ship is. (5.00 / 3) (#67)
    by jazzido on Fri Dec 21, 2001 at 10:37:06 PM EST

    Oddly enough, Pinochet was responsible for a long, long time of fiscal responsibility and moderate prosperity in the country, despite being a despotic dictator.

    I'm sure you live in a rich 1st world country, you pay your taxes, so you get your well deserved social security and you buy your microwave oven, and you get hardware updates whenever you feel it necessary.

    Here in Argentina we NEVER had that. People thought they had it with the Menem administration, which was nothing but a façade to the biggest sell-off in LatinAmerica.

    People I know had they parents KILLED (and when i say killed, i mean it: one of their techniques was to drop people off a plane to the De La Plata River).

    If a dictator does things that seem right, but despite that kills people, it ain't right and MUST BE REMOVED.

    --
    "Patriotism is the last resource of scoundrels" (Samuel Johnson)

    [ Parent ]

    yes (none / 0) (#89)
    by Juan Rojo on Sat Dec 22, 2001 at 02:00:41 AM EST

    yes, and do you people know how do they get such wonderful "fiscal responsability" ?
    1-scaring the heck of the people. do anything nearly revolutionary/communist-like and they kill you, your family and your friends, the friends of your friends, etc.

    2-Continued funding by the US. US invested money to grant sustained dictatorship (to avoid communist for taking over). After the Malvinas(falklands) war against england, (because the military just went crazy to gain popularity), US cut fund, and dictatorship died. chile otherwise, helped US/UK in that war and they got a prolongued dictatorship. Pinoched WAS CRAZY, he wanted to take over peru and the south of argentina. Did you know that?

    [ Parent ]
    Hmm, yes. (4.00 / 1) (#92)
    by ariux on Sat Dec 22, 2001 at 02:34:51 AM EST

    For example, how would we in the US take it if some "fiscally responsible" Big Leader went around hurling his political opponents from planes?

    [ Parent ]

    Deflation (5.00 / 1) (#72)
    by willwillwill on Fri Dec 21, 2001 at 11:08:49 PM EST

    Thanks for the good comment.

    The Fed held a "tight money" course during the tech boom, because they thought the boom would cause inflation.

    The deflation will manifest itself unevenly, just as an inflation does. For instance in the 1970s the prices of raw materials, metals and farm goods rose much faster and earlier than the price of intellectual goods. This is because those products are traded on the spot market and their prices will reflect a change in the purchasing power of the dollar immediately.

    In this deflation, the prices of metals and farm goods dropped immediately and simultaneously. Here's the Commodity Research Board's index, notice the sudden prolonged dropoff in 1997.

    http://futures.tradingcharts.com/chart/RB/M

    The fall in prices for the rest of the goods in our economy, the intellectual property and service goods, occurring now is not simply technology driven, as it has continued and accelerated even as tech investment fell off a cliff. It's not driven by low demand, but the steady spread of the adjusted purchasing power of the dollar through the US economy.

    When people get payed $40K to make asp pages, and get fired and hired somewhere else at $30K, that's the tech business cycle. But when it happens to everybody, you know something else is up.

    [ Parent ]
    Let me explain a bit what happened in here (4.75 / 8) (#54)
    by Juan Rojo on Fri Dec 21, 2001 at 07:39:36 PM EST

    Hello, I'm argentinian, I live in Buenos Aires. I'll try to explain what happened in this country. Argentina, until after the military ocupation, developed a very strong industry. Despite the inflation, until the end of Alfonsin's government (end of 80s), unemployment was low and overall, we lived well. After him, menem came and his minister (Domingo Cavallo) tied the currency to the dollar. This WAS NOT, as many people says here, what caused most problems. Menem's goverment, after it, opened imports unrestrictedly in favors of free market (something considered a wonderful thing by economists back then), and not only that After that, all the local industry was bloodily killed by it and by illegal imports. Of course, in this kind of economy, you have to live from external investments or you die. Well, that never happened, the industry died and the unemployment raised enormously. At the same time, poverty also raised, helped by a lot of illegal inmigrants from limit countries (which are much worse than us) that think they'll find a job or something here. The card-pyramid exploded when the economy minister (domingo cavallo, who managed to get back again to the goverment) decided to restrict money extraction from banks to $250 (in cash) per week, to avoid people from taking out money out of the bank, thus imposing a bank-based economy. The lack of cash left people without hand-money, and poor people, without a way of getting money (they obviously cant get a debit/credit card or cheques) and started looting. Citizens (low and middle social classes) started a massive protest, which ended up with the president (after bloodily repressing the protesters without any reason) quit. Now, the question, "what's happening with argentina?" should apply more to the world. It's simple, no economist has a real clue about what to do, there's a lot of groups proposing different methods, none with any real base. Of course, in a countries like US, which has a lot of money, it's easy for economist to try things and succed or fail and not care, but cultire is different all around the world, and the IMF wants to use us as lab rats (words of the ex-economy minister). What else has happened in argentina? the second politican party (Radicals) are now dead, after three times proving their total and complete incompetence. (illia, alfonsin, and now de la rua). And there is no third political force. We are now in hand of the peronists, which nothing have to nowadays do with Juan Domingo Peron. They've been known for being extremely corrupted people. Menem's govermnet sold weapons secretly to ecuator when the country was supposed to mediate in its war to peru. Closing, i'll post here what our new president "Rodrigez Saa" (elected by peronists of course, until march when new eletcions will happen) has just said to reporters:

    Reporter: "Mister Saa, what will be of more importance to your goverment? the debt, or the people?"
    to which he replied: "The Debt. ... uh sorry!! the People!!"


    world bank and the imf (4.14 / 7) (#55)
    by kpeerless on Fri Dec 21, 2001 at 07:40:57 PM EST

    When the Asian economies melted down a couple of years ago, the only country to come through relatively unscathed was Malasia. Although I am not generally a supporter of their Prime Minister, in this case he did the right thing. He told the World Bank and the IMF to go screw.

    Pretty much all of the SE Asian economies went into the basket but Malasia's.

    Gotta be a message there.

    Asia (4.00 / 1) (#70)
    by willwillwill on Fri Dec 21, 2001 at 10:52:53 PM EST

    Good thinking. The Asian crisis is part of the same error on the US Fed's part.

    Relatively small economies around the world pegged their currencies to the US dollar to gain stability in their currencies. Many countries in the Asian crisis had the currencies pegged to "baskets" of foreign currencies, including the dollarat various percentages.

    By doing this, the Asian countries unwittingly imported the deflation of the US dollar engineered by the Fed in 1997.

    Because their debts were denominated in dollars, they had to sell their produce, mostly raw materials which fell in price immediately, for less and less, in order to pay off debts that were becoming worth more and more.

    The price of their goods was falling, but the value of their debts were rising. You could see this happening in US farm goods during the same period. It's happening now in everything else.

    Most of these countries struggled for a while but finally had to bail out of the connection to the dollar. Malaysia did the same thing but with currency controls that irked the IMF.

    Brazil incidentally could fit easily into this description.

    Argentina's imported 100% of the deflation, and it overcome their country. The distress was compounded by the misguided efforts of the IMF and the government's acceptance of those efforts.

    [ Parent ]
    no. (4.00 / 1) (#91)
    by Juan Rojo on Sat Dec 22, 2001 at 02:32:55 AM EST

    > Argentina's imported 100% of the deflation,
    >and it overcome their country. The distress was
    >compounded by the misguided efforts of the IMF
    >and the government's acceptance of those
    >efforts.

    no, really, i dont blame you for saying such things. Did you even bother look at charts or something? This didnt overcome the country as you say. we're a big source of rural production, so that's not an issue, actually, it helped exports. We're not an asian contry or some small country like ecuator. The way this affected us was in relation with brazil, when the remaining of the industry moved there due to cheaper costs (brazil's devaluation causes manufacturing to be twice as cheap, besides the workers being really poor -i'm not even going to mention the slavery problems they have-). This just simply stabbed an agonizing industry, which was hurt since years. And YES, US economists say manufacturing in argentina should be cheaper. This is straight comparing us to china or brazil. But argentina is completely diferent to those countries culturally. Argentina HAS A HUGE MIDDLE SOCIAL CLASS, unexistent in most other south american countries. US economists predicted our middle class to be dead by now. It didnt. it's still very strong and kicked the president out. Go figure! We DO have high living stantards, since we allways had, and people is just too used to it and ready to fight for it. We are NOT brazil, a country overwhelmed by endless poverty.

    [ Parent ]
    and actually forgot.. (none / 0) (#93)
    by Juan Rojo on Sat Dec 22, 2001 at 02:41:27 AM EST

    part of the crisis, is that citizens wont move a cent. Argentina has a huge middle class, there's no commerce. People does have money in the banks, but they're just not moving it, so they're living saving as much as they can. It's a middle social class resisting, saving because they might lose their job, etc. I seriously dont know where economists in US get the sources of their information, but really. I dont think they couldnt be missing it more than now.

    [ Parent ]
    Not Only Malaysia (none / 0) (#118)
    by Nerant on Sun Dec 23, 2001 at 09:04:19 AM EST

    Singapore was relatively unscathed too. However, Singapore has always chosen an approach that involves as much economic transparency as possible : lack of bad debts, efforts by the government to focus on retraining etc etc. To say that Malaysia was the only country to emerge unscathed is to be uninformed.
    Be part of the solution
    [ Parent ]
    Views from an Argentinian (4.71 / 14) (#56)
    by Yanna on Fri Dec 21, 2001 at 07:41:47 PM EST

    Disclaimer: I am Argentinian. I was born there. My family still lives there (mother, brother, aunts & uncles, cousins, etc), although I have lived in Europe for a few years now.

    I have a question regarding this article: this is the IMF's fault, exactly how? What makes you believe that the IMF should have any morals or concerns? It's not their job. Their job is to lend money, collect the interests and suggest some policies. Listen up: the IMF suggested devaluation weeks ago. It was the President's inhability to listen what led to this situation.

    As much as I would like to blame America for the current situation, it's not America's fault. It's the responsability of decades of corruption with politicians stealing as much as they could and then going to the IMF requesting more money so that they could continue stealing. Why should America, the IMF or any other country or institution care about Argentinians when our own politicians merrily pillage the Federal Reserves for their own benefit?

    Oh, and I have some very bad news. News that made me cry earlier today. The new president, elected by the Senate, is an alleged criminal. For those who read Spanish, you can find a brief account of the facts here. I have to link to Google's cache because the newspaper removed the page.

    Corruption in Argentina is so deep that there is no single politician who is not under suspicion. Probably there are some decent ones, but no one trusts them anymore. The former president, Menem, spent a season under home arrest because he is acussed of being part of a "maffia conspiracy" to smuggle weapons into Croatia, Ecuador and some other countries. He is free now even when there is conclusive proof of his wrong doing. Why, you may ask, is he free then? Corruption. The never ending disease.

    For the Spanish speakers on K5, I would suggest you read Pagina 12 a popular Argentinian newspaper.

    I hope that freezes your'(sic) and Yanna's smiles into grinning super power morons for eternity. mami

    IMF (3.00 / 1) (#68)
    by willwillwill on Fri Dec 21, 2001 at 10:41:25 PM EST

    Thank you for your comment.

    The IMF granted money on the condition that Argentina would balance their budget by raising taxes and cutting spending. When the program failed to balance the budget the IMF recommended higher taxes and less spending.

    I don't recommend abolishing the IMF but I would be happier if they recommended policies that were geared first to generating growth. As it is, the IMF is a bank, and a bank's institutional concern is "how do we get our money back out of this?"

    All of the things you mentioned do exist. But any attempt to tax a country out of corruption is doomed.



    [ Parent ]
    IMF... (4.00 / 1) (#94)
    by Juan Rojo on Sat Dec 22, 2001 at 02:42:53 AM EST

    "They are treating us like lab rats" -Domingo Felipe Cavallo, ex-argentinian economy minister.

    [ Parent ]
    Lab Rats. (none / 0) (#104)
    by Weezul on Sat Dec 22, 2001 at 06:05:51 AM EST

    Actually, It's not so bad to be used as a lab rat if your lab tech is a responcible and objective scientist, i.e. he has a basket of differing policies and he recommends diffrent policies to diffrent countries (randomly). Instead, you got a bunch of randroid groupthink lunatics at the IMF, i.e. you got the shit end of the economic religion stick.. not science.

    I've claimed for a long time that the U.S. should use small foreign nations as economic guine pigs, but it should suggest vastly diffrent policies in diffrent countries, including some vaguely socilistic policies. The world will be a better and more economically stable place if people in diffrent countries run things diffrently and we will all eventually learn some things that we would never learn without such experements. We will never see this under the current IMF randroids.

    "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini
    [ Parent ]
    why not? (4.00 / 1) (#111)
    by Juan Rojo on Sat Dec 22, 2001 at 02:21:53 PM EST

    Because of the high unemployment. People is starving, experiment with the situation and more will die. It amazes me that at this point politicians still try to keep the country inserted into the world instead of trying to close economy. Argentina has more than enough resources to subsist by itself while undergoing deep changes.

    [ Parent ]
    Compasion (none / 0) (#116)
    by Weezul on Sun Dec 23, 2001 at 01:08:52 AM EST

    I would hope the experiment would have some compassion. Fewer people go hungry if you give even mildly intelegent aid, i.e. don't destroy the local farming economy with free food, give them trucks & roads instead (so they can move the food they have).

    I had been thinking this would be tied to aid like the current IMF junk. We do not give all countries aid anyway. Whats wrong with expecting those countries we aid to repay it with an experement. I would like to see diffrent U.S. states do the same thing, say a diffrent socilized medicin for every state. The truth is that there are a lot of people in politics who think they know what they are talking about and have no clue. The only way to cure this is to give the next few generations a wide variety of experences with diffrent economic systems.

    Regardless, we will all be better off if diffrent countries have diffrent policies. If the world is populated by mini-U.S.s then any economic factors which damage the U.S. economy could cause real global problems.

    "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini
    [ Parent ]
    Are you kiding? (4.00 / 1) (#117)
    by svampa on Sun Dec 23, 2001 at 05:48:06 AM EST

    I've claimed for a long time that the U.S. should use small foreign nations as economic guine pigs,

    What if the experiment fails? will they help the country to rise again?



    [ Parent ]
    People (none / 0) (#126)
    by jazzido on Sun Dec 23, 2001 at 11:13:10 PM EST

    I am being used as a lab rat if Cavallo is correct, as I live in Argentina.

    The fellows at the IMF are dealing with people when they do their "scientific" experiments.



    --
    "Patriotism is the last resource of scoundrels" (Samuel Johnson)

    [ Parent ]

    IMF are idiots (none / 0) (#132)
    by Weezul on Mon Dec 24, 2001 at 01:28:16 PM EST

    not scientist. As I said below I would like to see U.S. states used as economic & plicy experements too. The truth is that no one knows what the right answers for many of the questions are. That means you need to try diffrent things. That means you need to do experements. Actually, it's the lack of *scientific* experemnetation that put the randroids in power and cause your problems anyway.

    "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini
    [ Parent ]
    on crooks as president (none / 0) (#75)
    by turmeric on Fri Dec 21, 2001 at 11:34:31 PM EST

    well, george W bush was a cocaine user. a draft dodger. he cheated his way into office. etc etc etc. not that theres anything wrong with all that, but really, its all illegal. ie. he was a crook. oh, and all the shit he is pulling now, that will go down in history books as some kind of 'dangerous slide into fascism', alot of which is undoubtedly illegal, as will be confirmed by the supreme court or whoever perhaps 20 or 30 years from now (when everyone regrets being such racist shitheads). but anyways, at that level, they dont care about the law, they only care about their 'good intentions' how they are 'saving lives' etc etc blah blah blah end justifies the means (and my fat brothel of crack whores i keep in the lincoln bedroom)

    [ Parent ]
    Whose job? (none / 0) (#96)
    by ariux on Sat Dec 22, 2001 at 02:53:39 AM EST

    What makes you believe that the IMF should have any morals or concerns? It's not their job.

    The more people have morals and standards about dealing with other people, whatever their nominal responsibilities, the lower the chance, frequency, and severity of stupid, preventable disasters. This applies to the IMF and to Argentina's corrupt politicians too.

    [ Parent ]

    One might just as well ask - Why is terrorism bad? (none / 0) (#122)
    by greenrd on Sun Dec 23, 2001 at 05:44:49 PM EST

    What makes you believe that the IMF should have any morals or concerns? It's not their job.

    Nonsense! How could any caring person believe that? Everyone should have morals - what are you, some kind of psychopath who thinks killing people is ok? (which is exactly what the IMF is doing - killing people, by imposing un-sustainable non-development - so that is a relevant example, actually!) Do you think the social prohibition on murder has somehow nothing to do with morality? Or are you just too blinkered or ignorant to see the gross immorality of the IMF's behaviour, and the immense suffering it causes?

    Furthermore, what you seem to be implying is, it's not wrong for them to behave in a morally wrong way. That's not only thoughtless - it's even logically contradictory!


    "Capitalism is the absurd belief that the worst of men, for the worst of reasons, will somehow work for the benefit of us all." -- John Maynard Keynes
    [ Parent ]

    Partly (none / 0) (#135)
    by marc987 on Tue Dec 25, 2001 at 01:45:16 PM EST

    I have a question regarding this article: this is the IMF's fault, exactly how? What makes you believe that the IMF should have any morals or concerns? It's not their job.

    Renowned U.S. Economist perspective on the IMF

    [ Parent ]

    How did this crap get on the main page? (3.57 / 7) (#60)
    by omegadan on Fri Dec 21, 2001 at 09:05:37 PM EST

    Rarely do I post on kuro5hin ... but rarely do I see articles as bad as this one.

    This guy is way off base ... *Argentina* made the decision to base its currency on the dollar. The USA represents something like 1/4th of the world economy, and we're supposed to change our fiscal policy because Argentina did something stupid?

    My question to the author, did you think that the dollar would never faulter? or did you think you could have the *success* of the US without taking any of the risk? Why have you failed to mention the decades of corruption in Argentina, that most of the IMF loans were plundered and stolen? And the years of poor fiscal policy that got Argentina in debt in the first place ...

    its easier to blame the US

    Religion is a gateway psychosis. - Dave Foley

    why the US will get blamed (3.00 / 1) (#65)
    by willwillwill on Fri Dec 21, 2001 at 10:30:58 PM EST

    I can only say that all the things you point out do exist, and the currency board was a flawed approach, but the currency board worked fine in spite of the problems you point out from 1991-1997 because the dollar was stable.

    The deflation brought about in 1997 was not targeted at Argentina but at the US stock market. Argentina is only an indicator of how wrong things have gone. The US is on the early edge of this deflation. Maybe if people in the US see what can happen to a country in deflation, they will pressure their own government to change its policy. It would save Argentina, and it would save the US economy too.

    The blame doesn't rest on the US for tying the currency, although the architect of the currency board, Steven Hanke is an American economist and ardent free trader.

    The blame is on the Fed for engineering the deflation and ignoring the warnings.

    The IMF is the difference between the US and Argentina. In the US we've had tax cuts; while in Argentina they've had tax rises and austerity budgets.

    [ Parent ]
    So? (none / 0) (#80)
    by Silver222 on Fri Dec 21, 2001 at 11:56:06 PM EST

    So, the US is going to go back to the gold standard, and this terrible deflation you speak of is automagically going away? Please. I can't believe this article made the front page. What next, the one about the 12 Jews who run the world from secret meetings in Zurich?

    [ Parent ]
    why this article is on the front page (2.00 / 3) (#83)
    by willwillwill on Sat Dec 22, 2001 at 12:22:51 AM EST

    because it was rated to be there by many of the readers. Why don't you argue with them. Many people apparently like you are unaware how few people actually create US monetary policy, and many more resented the idea that US monetary policy could have an unintended effect somewhere else in the world, and argued such very strenuously.

    In the end, my article won out because the prevailing counter-argument is to blame the corrupt, hot-blooded Argentines for being too stupid and stubborn to quit their jobs and starve their families as part of an economic development program.

    [ Parent ]
    You don't have an argument (none / 0) (#98)
    by Silver222 on Sat Dec 22, 2001 at 03:17:14 AM EST

    You're a gold standard crank. I hardly think that counts as interesting or insightful economic analysis. It's common sense that a country that ties its currency to something loses the benefits of monetary policy. It's just not news.

    [ Parent ]
    Misconception (none / 0) (#101)
    by jasonab on Sat Dec 22, 2001 at 04:20:42 AM EST

    In the end, my article won out because the prevailing counter-argument is to blame the corrupt, hot-blooded Argentines for being too stupid and stubborn to quit their jobs and starve their families as part of an economic development program.
    I'm sure someone else will also correct you, but generally rating stories is like rating comments (or, like it should be): they're rated based on discussion factor, not "correctness." Just because you're on the front page, does not mean anyone agrees with you. In fact, the comments seem to be running against you.

    [ Parent ]
    sorry, yours is just a plain insulting rant now. (none / 0) (#102)
    by Juan Rojo on Sat Dec 22, 2001 at 05:13:45 AM EST

    >In the end, my article won out because the
    >prevailing counter-argument is to blame the
    >corrupt, hot-blooded Argentines for being too
    >stupid and stubborn to quit their jobs and
    >starve their families as part of an economic
    >development program.


    I find it insulting, really. You have proven to lack real knowledge about the situation. Your pragmatism at this point is shameful. I wont bother posting any more replies to your pointless rant. I think, from the point of view of an argentinian citizen who has been following this for his whole life, tried to make it as clear as possible in my previous posts, because your ranting by now is just insulting and falls by itself.

    [ Parent ]
    Corruption, huh? (4.00 / 1) (#71)
    by Juan Rojo on Fri Dec 21, 2001 at 10:53:16 PM EST

    >This guy is way off base ... *Argentina* made
    >the decision to base its currency on the
    >dollar. The USA represents something like 1/4th
    >of the world economy, and we're supposed to
    >change our fiscal policy because Argentina did
    >something stupid?


    When the decision was made, it worked very well, it stopped inflation and gave great confidence to investors who knew that they wont have any risk of devaluation. It definitively wasnt stupid. What killed it was mantaining it in the long term, since it froze all kind of social development/improvement.

    > My question to the author, did you think that
    > the dollar would never faulter?


    The author is Domingo Felipe Cavallo, and he was thought to be one of the best economists of the world when he did that, by the IMF too. He was kicked out later (and yet kicked out yesterday when he managed to get back). Still, economists of the country mantained the system blindly believing religiously that it's the only way. Even the new elected president still belives that It's the only way. This is _definitively_ because of corruption at this rate, I'm sure of it (see my previous post).

    > Why have you failed to mention the decades of
    > corruption in Argentina, that most of the IMF
    > loans were plundered and stolen?


    you're wrong. IMF loans were destined to pay interests of the debt and "delay" the void-date of it. Still, they didnt really give all the announced money, but only a little part of it.

    >And the years of poor fiscal policy that got
    >Argentina in debt in the first place ...


    Fiscal policy is allright, 80% of the people still can pay taxes,etc. remaining 20% is subemployed or unemployed. The problem is strictly economical, NOT fiscal. I never post on K5 either, but unlike you, I try to only do it when I think I really know what i'm talking about.

    >its easier to blame the US


    no, no.. you dont understand US foreign cheap politics.. first, I assume you know that the military governments in south america, where thousands of people died, were funded by US to avoid the growing communism in the area. You also know all the damage that US caused to countries like cuba, panama, miscelaneous oriental countries with economic restrictions. "Everything that may represent a threat to the united states of america, and its (arguable i think) "freedom", must be shamelessly repressed". So, dont expect foreigners to really think that US is an innocent sheep. US economical groups told the argentinian president (alfonsin by then) "open imports please, we want to sell in there, we know there's a lot of money". He refused, thus, economic groups started taking money out of the banks, causing that big inflation that "no one knows where really came from". Next president negotiated the opening of imports and you see the result (local industry dead). Yes, US has _that_ power and it used it countles times. Do you people up there think that US goverment does only what bush says on TV? And No, i'm not talking about the US goverment, i'm talking about those huge economical groups with the power to easily crush countries to take money out of them. US govt. has never done a thing to help that i know. Europe has been debating laws to avoid such things from happening and US refuses them. Go figure!! So.. if you say "its easier to blame the US", i answer "No, US is _really_ most of the times to blame in some proportion"

    [ Parent ]
    Idiot (none / 0) (#128)
    by streetlawyer on Mon Dec 24, 2001 at 04:24:05 AM EST

    Why have you failed to mention the decades of corruption in Argentina, that most of the IMF loans were plundered and stolen?

    Idiot. Full stop fucking idiot. There were no such decades. Every single IMF cent lent to Argentina has been accounted for and nobody has ever suggested otherwise. Why don't you do some research before slandering whole countries?

    --
    Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
    [ Parent ]

    We need to un-f*** our economy! (1.60 / 5) (#62)
    by scanman on Fri Dec 21, 2001 at 09:23:34 PM EST

    A series of mistakes by the US government has made our economy a lot worse than it could be. We are dangerously close to a depression. Our leaders should be required to have a degree in economics before they begin their term! If we want to avoid depression, we need to get back to pre-1970 policy.

    1. Stop printing money. Inflating the dollar is a BAD idea. Inflation is like a heroin addiction, you get higher and higher, until you eventually die. We should go back to the system where 1 dollar = 1 ounce of gold.

    2. Stop selling government bonds. The national debt is essentially soaking up jobs, by making less money available for venture capital.

    3. Lower taxes. The government has essentially become another mouth to feed for working families, decreasing their standard of living.

    4. Stop social security. Let people invest their retirement savings in mutual funds, where it will help the economy.

    4. Sell government property. Obviously the above will cost the government a lot of money. Luckily, the government already owns about 30% of the property in the US! There is enough to pay off the national debt and still lower taxes.

    There are more, but these are the biggies. See http://www.lp.org/

    "[You are] a narrow-minded moron [and] a complete loser." - David Quartz
    "scanman: The moron." - ucblockhead
    "I prefer the term 'lifeskills impaired'" - Inoshiro

    Go study history again (5.00 / 3) (#64)
    by Shadow Knight on Fri Dec 21, 2001 at 10:01:41 PM EST

    OK, you contradict yourself greatly, Mr. Libertarian-party-line-spouter. You claim we should go back to a pre-1970 monetary policy, then go on to list quite a number of things that directly contradict said policy! Let's go in your order...

    1.) Ok, here you're close to reality. Pre-1970 was indeed a time when the US was on the gold standard.

    2.) Government bonds were very definately sold before 1970. I'm not clear on the connection to anything here... people choose to buy bonds and lend money to the government, you know. Are you suggesting they shouldn't have that option? Not very Libertarian of you...

    3.) Are you aware that taxes were much higher then than now? I mean much higher! So how would lowering taxes be going back to pre-1970? Also, how could the government have only recently become "another hungry mouth" when it is, in fact, asking far less money now than it used to? Although maybe you have a point, because the taxes on the poor ("working families") have decreased much less than the taxes on the rich and on corporations. Perhaps you did mean to raise taxes on them, as per pre-1970?

    4.) OK, so they sell off all of the national parks, resulting in a vast reduction in the amount of unspoiled and beautiful land for future generations, all for the temporary benefit of putting more money in your pocket! Great idea... NOT! Sure, selling off that land could serve to pay off the national debt (not likely, though...) and lower taxes... for a year or two. But the military would still need paychecks, and the land would be gone... guess lowering taxes on the idea of offsetting it with a one-time sale was a bad idea! Also keep in mind that flooding the land market would drive prices down for everyone, bankrupting quite a large number of people...

    Next time, do a little thinking before you parrot anybody's party line. And I swear any relation in my views to any political party is entirely coincidental, although I'm something of a Democrat with respect to domestic policy, and a Republican with respect to foreign policy...

    later,
    Shadow Knight


    Supreme Lord High Commander of the Interstellar Task Force for the Eradication of Stupidity
    [ Parent ]
    More parrot squawkings (none / 0) (#79)
    by Robert Hutchinson on Fri Dec 21, 2001 at 11:52:50 PM EST

    2.) Government bonds were very definately sold before 1970. I'm not clear on the connection to anything here... people choose to buy bonds and lend money to the government, you know. Are you suggesting they shouldn't have that option? Not very Libertarian of you...
    Very wise of him, though. Lending money to any entity that can never (or will never) learn its lesson when it spends the loaned money poorly is a bad idea. How many businesses get to keep taking out loans, year after year, decade after decade, until they finally turn a profit?
    3.) Are you aware that taxes were much higher then than now? I mean much higher!
    Perhaps he should've suggested a pre-1910 monetary policy here.
    4.) OK, so they sell off all of the national parks, resulting in a vast reduction in the amount of unspoiled and beautiful land for future generations
    Yeah, there are certainly no environmental problems to be found on government-appropriated land.
    But the military would still need paychecks, and the land would be gone... guess lowering taxes on the idea of offsetting it with a one-time sale was a bad idea!
    Because, of course, once the land it sold, it evaporates into the ether, never to make anyone a profit ever again.
    Next time, do a little thinking before you parrot anybody's party line. And I swear any relation in my views to any political party is entirely coincidental, although I'm something of a Democrat with respect to domestic policy, and a Republican with respect to foreign policy...
    Truly, the best of both worlds.

    Robert Hutchinson


    No bomb-throwing required.

    [ Parent ]
    Oops (none / 0) (#88)
    by scanman on Sat Dec 22, 2001 at 01:49:37 AM EST

    > Perhaps he should've suggested a pre-1910 monetary policy here.

    Erm, yes. That's what I meant to type.

    "[You are] a narrow-minded moron [and] a complete loser." - David Quartz
    "scanman: The moron." - ucblockhead
    "I prefer the term 'lifeskills impaired'" - Inoshiro

    [ Parent ]

    Government debt (none / 0) (#106)
    by Znork on Sat Dec 22, 2001 at 07:35:57 AM EST

    Actually, while government debt can be a bad idea for purely economic reasons I find myself opposed to it on purely ethical grounds.

    Western civilization in general doesnt support inherited debt for a lot of reasons. If your parents gross out on a shopping spree the children dont have to repay those loans when they die.

    If, however, the government decides to give everyone a new tv, car and house, and borrows money for that purpose, those not of voting age also get to pay that money back, thus amounting to inherited debt. Inherited debt or taxation without representation.

    For those reasons above any economic reasons, I suggest that as a general policy governments should not be able to enter into debt, or at least not enter into debt on the part of anyone but the current voting generation. In that case the state-debt part of taxes should become a floating part that applies only to those generations responsible for electing those entering into debt. Restructuring loans or reissuing them to apply to other generation should be strictly forbidden, of course.

    This would also have some other very good aspects; countries wont get irrevocably stuck in a debt trap. The part of the voting base that are responsible for repaying the debts will eventually die, thus cleaning the slate. The loan givers (other countries, international banks and bond purchasers) would have to be a bit more careful with checking how the money is going to be used, as well as the future possibilities for the indebted generations to repay within the available time.



    [ Parent ]
    Taxation without Representation (none / 0) (#140)
    by vectro on Sun Dec 30, 2001 at 01:54:34 AM EST

    Of course, minors are subject to everything from the income tax to sales tax. I find it quite amusing that the united states has taxation without representation after all these years.

    “The problem with that definition is just that it's bullshit.” -- localroger
    [ Parent ]
    #1 (none / 0) (#69)
    by Anonymous 6522 on Fri Dec 21, 2001 at 10:44:02 PM EST

    What's the point of tying the value of your currency to some random commodity like gold? Sure, that's how is was done in the past, but that doesn't mean it's the right thing to do. And why gold? Why not wheat or steel?

    [ Parent ]
    Money didn't grow on trees (5.00 / 1) (#77)
    by Robert Hutchinson on Fri Dec 21, 2001 at 11:42:31 PM EST

    What's the point of tying the value of your currency to some random commodity like gold? Sure, that's how is was done in the past, but that doesn't mean it's the right thing to do. And why gold? Why not wheat or steel?
    It was done that way in the past through market forces. That is, no one suddenly declared that gold would be money; rather, gold proved itself to be an ideal medium of exchange (well, that and silver). Gold and silver are relatively rare, very easy to group into smaller and larger units, can be shaped into coins ... those are only a few of their benefits as money.

    You certainly wouldn't want to tie the value of a currency to wheat if you could help it: wheat is perishable. Steel is a somewhat better choice, but one disadvantage that comes to mind is that it has to be manufactured, while gold does not.

    Robert Hutchinson


    No bomb-throwing required.

    [ Parent ]
    Koku (5.00 / 1) (#100)
    by gnovos on Sat Dec 22, 2001 at 03:30:34 AM EST

    I recall the old old style of money in Japan was based on Rice. One koku of rice was a set amount, i think, that a family needed to survive for a year (or a month, or whatever it was). It was a great commodity becuase it devalued itself over time automatically. It was very difficult to "horde" rice for any leangth of time.

    A Haiku: "fuck you fuck you fuck/you fuck you fuck you fuck you/fuck you fuck you snow" - JChen
    [ Parent ]
    gold doesnt grow on trees, either (none / 0) (#131)
    by venalcolony on Mon Dec 24, 2001 at 10:04:20 AM EST

    But I'm sure once we adopt a gold standard, Russian and South African miners will play nice with middle class American interests.

    [ Parent ]
    The stable wonders of venture capital (none / 0) (#97)
    by ariux on Sat Dec 22, 2001 at 02:58:16 AM EST

    Stop selling government bonds. The national debt is essentially soaking up jobs, by making less money available for venture capital.

    Yeah, just look at what Enron accomplished with... er... um.

    [ Parent ]

    Gold is inflationary (5.00 / 1) (#112)
    by Paul Johnson on Sat Dec 22, 2001 at 04:28:40 PM EST

    1. Stop printing money. Inflating the dollar is a BAD idea. Inflation is like a heroin addiction, you get higher and higher, until you eventually die. We should go back to the system where 1 dollar = 1 ounce of gold.

    This is actually a bad idea. Lots of people seem to think that the gold standard will prevent inflation. In fact it does no such thing. You may not be able to print gold, but you can dig it out of the ground. People have always done so, and there is no indication that they are slowing down. If there is more gold available then that implies that the gold in your bank vault will have less buying power.

    It used to be the case that tying money to a physical commodity imposed an effective discipline on whoever controlled the mints (usually but not always the government), stopping them expanding the money supply merely because they wanted something to spend. But for the last 20 years that has not been a problem. See for instance the graphs at The Australian Instutute of Geoscientists. The US suffered inflation through the 70s. Then they figured out the problem (it wasn't hard), raised interest rates and tightened the money supply. End of problem. Gold is now worth about half what it was in 1980, in dollar terms.

    Meantime tying your currency to a commodity destroys your financial flexibility. There are times (like in a recession) where you do actually need to increase spending and one way to do that is to print money. Inflation is bad, but deflation is even worse (one of the few things the story poster got right). If the currency is deflating then the cash sitting in your pocket increases in value without you having to do anything. Normally the "real" rate of interest on a loan is defined as the difference between the rate you pay and the rate of inflation. If the economy is deflating at, say, 10% a year then even an interest free loan is costing you 10%, since you are going to have to pay it back in dollars that have become 10% more valuable over the year. This high rate of interest stifles investment and spending, thus preventing economic activity. Nobody wants to spend anything, so people lower their prices even more in order to attract buyers, and the rate of deflation is thus increased even further.

    The only way out of this is to start pumping money into the economy. And it may well be that the only way to do this is to print it. If your currency is tied to a commodity then you can't do that.

    Finally, the gold standard means paying a lot of people to dig gold out of the ground (at great environmental and personal cost). This gold is then carefully stored in huge expensive vaults. Why should we want to do this? It seems a singularly futile activity.

    Paul.
    You are lost in a twisty maze of little standards, all different.
    [ Parent ]

    Gold standard=good. (2.00 / 1) (#115)
    by scanman on Sat Dec 22, 2001 at 05:42:19 PM EST

    Lots of people seem to think that the gold standard will prevent inflation. In fact it does no such thing. You may not be able to print gold, but you can dig it out of the ground. People have always done so, and there is no indication that they are slowing down. If there is more gold available then that implies that the gold in your bank vault will have less buying power.

    This is not the point. The problem with the dollar is that it's valuable only because the government says it should be. Eventually, some scaremongerer will spread rumors that the value of the dollar is going to go down, causing people to try to push all their dollars onto someone else, and suddenly a dollar is worth nothing more than a piece of paper.

    "[You are] a narrow-minded moron [and] a complete loser." - David Quartz
    "scanman: The moron." - ucblockhead
    "I prefer the term 'lifeskills impaired'" - Inoshiro

    [ Parent ]

    Belief in gold (4.00 / 1) (#123)
    by Paul Johnson on Sun Dec 23, 2001 at 05:53:18 PM EST

    The problem with the dollar is that it's valuable only because the government says it should be.

    How, exactly, does the government tell people that dollars should be valuable? Why would this hypothetical scaremonger have more credibility? And how does using gold solve this problem?

    I can imagine someone claiming that the government was going to print lots of dollars and cause hyperinflation. I can't imagine them being taken seriously.

    I can also imagine someone claiming that there is soon going to be a way of transmuting iron into gold or extracting it from seawater for 10% of its current value. I can imagine that being taken seriously. Indeed, it has been in the past.

    So now which currency looks more stable? Belief in the value of gold is no more rational than belief in the value of printed pieces of paper. Both derive their value from a combination of scarcity and their general acceptance as a medium of exchange.

    Paul.
    You are lost in a twisty maze of little standards, all different.
    [ Parent ]

    Runaway inflation. (none / 0) (#124)
    by scanman on Sun Dec 23, 2001 at 07:21:31 PM EST

    There is a law that says, if a sale is not offered in US dollars, then the buyer has no obligation to pay. For example, if I offered you foo, and you agreed to pay me in gold, you could legally take my foo without paying me.

    The trouble with baseless currencies like the dollar is that they tend to collapse. It has happened over and over throughout history. It starts out as a general unspecific lack of confidence in the economy. People start to buy valuable things, like gold, fine china, etc. The problem then starts to feed on itself. The supply of dollars skyrockets, and the supply of merchandise plummets. This causes inflation, even though no new money is being printed. This cannot happen with something like gold, because gold is merchandise.

    "[You are] a narrow-minded moron [and] a complete loser." - David Quartz
    "scanman: The moron." - ucblockhead
    "I prefer the term 'lifeskills impaired'" - Inoshiro

    [ Parent ]

    Is gold merchandise? (none / 0) (#137)
    by Paul Johnson on Fri Dec 28, 2001 at 04:47:41 PM EST

    ...they tend to collapse. It has happened over and over throughout history.

    Can you give me some examples? This would need to be where the issuer is not under direct threat (e.g. revolution or invasion) and has not started printing large amounts of money.

    I can see that something like this might just happen (emergent phenomena and all that) but I can't think of any examples.

    This cannot happen with something like gold, because gold is merchandise.

    I followed you right up to this point. I can see how you could have a collapse of confidence in paper money, but I fail to see how gold is "merchandise". Gold has a few minor industrial uses, and some of it gets used in the jewelery industry. But apart from that I don't see why anyone would want to own gold. Surely the only real reason to own gold bullion is as a store of value, just as dollars or euros are a store of value. Since a store of value gets its value from the expectation of everyone that it is a store of value, surely gold is just as liable to a collapse of confidence as any other form of money.

    Paul.
    You are lost in a twisty maze of little standards, all different.
    [ Parent ]

    Legal Tender (none / 0) (#139)
    by vectro on Sun Dec 30, 2001 at 01:50:16 AM EST

    You're close, but you haven't got it quite right.

    In the US, US dollars are what is called "Legal Tender." What this means is that they are valid for repayment of a debt: If I owe you money and offer US dollars, you have to take it, or the debt is void. This includes everything from the penny to the largest bill in circulation, the $500 bill, as well as many (but not all) "collectors" coins made occasionally by the mint.

    This dosen't mean you can't contract for some other payment in a sale. In the example you gave, I would still be obligated to provide you the requisite gold, although it might be legal for me to pay you the equivalent in US dollars as well. Similarly, if I were your landlord, I might say that rent must be paid by check. If you paid me in cash, that would be valid against back rent, but also might constitute a breach of the lease.

    “The problem with that definition is just that it's bullshit.” -- localroger
    [ Parent ]
    Go read a book on US economic history & the pa (none / 0) (#120)
    by duffbeer703 on Sun Dec 23, 2001 at 11:51:20 AM EST

    Libertarians always give me a chuckle.


    1. The government is not inflating the dollar.

    2. Government debt is not a looming crisis. The debt as a percentage of GDP (the only truly accurate way of measuring it) has been dropping in the last decade.

    3. Taxes cannot be lowered more than a few percent without affecting entitlement programs like social security & medicare.

    4. Social Security is one the the essential services that the government provides. Many people, if not most, are not savvy enough to invest their retirement savings. Even people who thought they were (ie. Enron employees) are subject to a great deal of market risk that they are not fully aware of.

    The government has a responsibility to represent & protect all citizens. Social Security is a key part of that.

    5. Much of Federally-owned land exists in such hotspots as the tundra of Alaska and the Nevada desert. Nobody would purchase such property for any signifigant amount of money.

    [ Parent ]
    Social Security (none / 0) (#138)
    by vectro on Sun Dec 30, 2001 at 01:44:00 AM EST

    I vehemently disagee that it is the government's responsibility to ensure that individuals have retirement money. It is one a major characteristic of a nanny state.

    However, even if you assume that individuals are not responsibile enough to manage their own finances, Social Security is still the wrong way to go about it. It is unacceptable to steal money from the working and give it to the retired, on the (unfounded) assumption that there will be more working citizens later to fund the retirement of today's workers. If you tried to run a private retirement system like that, it would be illegal in innumerable ways. In addition, social security is so hopelessly inefficient that only about half the money makes it though in any case.

    If you're going to have a government-mandated retirement program (which I strongly disagree with), then make in a mandatory IRA.

    “The problem with that definition is just that it's bullshit.” -- localroger
    [ Parent ]
    Once again, they fail in their calculations (4.50 / 2) (#76)
    by Robert Hutchinson on Fri Dec 21, 2001 at 11:40:51 PM EST

    Where they began to have trouble was in 1997, when the US dollar went into a sharp deflation. This happened because of some mistakes at the Fed, mistakes by Alan Greenspan that are not widely known and not really crucial to go into here.
    Alan Greenspan's job title is a mistake. Central planning is a recipe for f*ckups. I also have my doubts that the dollar truly went into deflation; the standard measurements for such are seriously lacking.

    I pretty much agree with the rest of your article, though. (If you listen closely, you can hear the economic illiterates ripping their hair out.)

    Robert Hutchinson


    No bomb-throwing required.

    OK how about another chart (4.50 / 2) (#81)
    by willwillwill on Sat Dec 22, 2001 at 12:06:29 AM EST

    Hi Robert, thank you for your comments.

    I didn't mean to be confusing, in fact it's a difficult thing to get one's head around.

    I hoped in posting that people would see the dramatic effects of deflation (people dying) but everybody wants evidence so here's a bit and some explanation.

    The reason deflation isn't immediately apparent is that deflation, like inflation, will work its way through the economy in a slow uneven way. For instance after the civil war, when the government took gold, which had inflated to $20/ounce, back down to $10/ounce, the deflation took 20 years to work through the American economy. Hate to digress...

    For instance during the 70s, when inflation was rampant, it was really great to be a farmer or an oil driller. The price of your stuff went up immediately, and you could buy all the bankers and insurance men you wanted. Intellectual goods took a longer time to catch up.

    In deflation, the farmers, miners and oil drillers were the first to go down, and it's been fun to be a banker or a computer guy, get cheap raw materials and still get paid $50K to make ASP pages or something. The late 90s saw much thought on why the "new economy" was doing so great and the "old economy" was doing so bad for this very reason. Now the new economy is catching up (or down) with the old.

    Commodities and physical goods, which can be traded on the spot market, are the first signs of a change in purchasing power of the dollar.

    http://futures.tradingcharts.com/chart/RB/M

    The drop happened even during a huge boom in the American economy. Why? Because there's too much food around? I think not.

    Something made this happen. That something was the Fed's failure to provide the capital to banks that they were requesting during the boom. Why did they do it? To fight phantom inflation and irrational exuberance? I don't know, but the effects of their action is clear.

    [ Parent ]
    Corruption (1.00 / 1) (#84)
    by Juan Rojo on Sat Dec 22, 2001 at 12:35:22 AM EST

    I'd like to also point out. I dont think Argentinian government is much more or less corrupt than the US government. In US, there's so much money that they can rob and nobody will notice or even care, so corruption isnt really a problem to the eyes of the people. Still, I think monopolies in the US are living proof of such corruption.

    is it corruption (1.00 / 1) (#86)
    by willwillwill on Sat Dec 22, 2001 at 12:55:08 AM EST

    corruption
    The prevailing view from professional economists in the US is that Argentina's companies are too close to the government, and they are afraid of competition, and the people who work for those companies fear change because they don't want to work any harder. Together those two cozy up to the government and prevent any reform.

    spanish influence
    Also there is the idea that South Americans are uneducated in democracy because their political system is decended from the Spanish, whereas the USA and Canada are decended from Britain and France. So the South American voters can't take the long view the way voters in the US can.

    That's why the prescription is for shock therapy in Argentina in order to squeeze out the bad ideas, bad companies and lazy workers so good ones can take over.

    The idea tends to founder when the voters decide they would rather not risk their personal survival for an economic development plan.



    [ Parent ]
    sorry, plain 100% wrong. (4.50 / 4) (#87)
    by Juan Rojo on Sat Dec 22, 2001 at 01:44:12 AM EST

    >corruption
    > The prevailing view from professional
    >economists in the US is that Argentina's
    >companies are too close to the government, and
    >they are afraid of competition, and the people
    >who work for those companies fear change
    >because they don't want to work any harder.
    >Together those two cozy up to the government
    >and prevent any reform.


    first: "professional economists?" do you have any idea of how many economical groups and thoughts exist in the world? Sorry, i'm not sure if you're used to see economist speaking, but most of that people is completely lost. US economists follow certain concepts as if they were some religious idiologies. I've heard the IMF people speaking many times, and believe me. They have no idea about what they're talking about. They live in a bubble, they never had a company, they never had to face risks, they never had a lot of people they had to be responsible for. they just follow theorical concepts like jesus. I feel bad for you by using the term "professional economists" it's a poor argumentative resource. > and the people who work for those companies
    > fear change because they don't want to work
    > any harder


    What?? you mean *employes* of the company? if that's your point, i'm sorry, just think.. with the HUGE AMOUNT OF UNEMPLOYEMENT. people is *AFRAID* to quit because they dont know if they're getting another JOB. If you mean new companies, you're evern wronger. Telephony (biggest monopoly) has started being deregularized, and there's a lot of competition in the area. For Internet, we have Cablemodem, ADSL and Wireless all around the country and a hard competition in the area. you can also CHOOSE your telephone company, unlike in US. We DEFINITIVELY DONT HAVE problems of competitivity in companies, and we have much less monopoly than US in most areas. Goverment pushed reforms of that kind some years ago. your information sources, or the sources of your sources are probably outated.


    >spanish influence

    > Also there is the idea that South Americans are

    >uneducated in democracy because their political

    >system is decended from the Spanish

    I think you (or wherever you found this info) didnt do the homework here. You know! i allways thought it was all the opposite!. First, most of us are italian descendents, and from other european countries. Julio Argentino Roca killed all the indians at the end of 19th century. When we declared the freedom for slaves (much before US) they all left the country in their will, thus no african-descendents here either. (I'm not being "racist", that's a term almost unknown here, just a fact). You see, we're a country that has just shown that if we dont like the government, we all stand up, go to the street and kick them out. THAT is democracy. We also must ALL vote, (unlike us/canada), that way most of the people knows what happens in the country. Also every citizen's vote is worth the same, NOT worth the state he/she lives in. People in US talking about politics probably has no clue whathever happens in there. Here most of the people very much knows and thinks the same. Oh,and also, if there's a tie in the elections, we go to ballotage, and the PEOPLES decides, not a bunch of people in a room. So, who's more educated in democracy? to me US is more like a undercover-dictatorship compared to this, trying to group the political power into a minory.


    >That's why the prescription is for shock
    >therapy in Argentina in order to squeeze out
    >the bad ideas, bad companies and lazy workers
    >so good ones can take over.
    BAD COMPANIES?! what ON EARTH are you talking about?! where did you get such thing? __LAZY WORKERS__????? that's the most ridiculous statament ever made, if people here goes lazy, gets kicked out, loses the job, and starves. People here is also worked in INSANE conditions, usually 12 hours per day to keep their job. you have NO IDEA what you're talking about. any average job is 9/10hours per day and you get a few minutes to eat.


    >The idea tends to founder when the voters
    >decide they would rather not risk their
    >personal survival for an economic
    >development plan.

    no, sorry. two facts. -"economic development plan" <- this is unexistent, just a myth created by the IMF. ECONOMIC DEVELOPMENT PLANS DO NOT EXIST, show me wrong otherwise!! whole latin america gets worse every day (except chile which is one of the biggest mineral exporters in the world). All african and oriental countries get worse every day, so ECONOMIC DEVELOPMENT PLANS ARE A MYTH. also, do you think people is not risking their lives to change the situation?! do you have a little idea of what happened on wednesday or why did the president quit, or how many people died on it?? not many countryes have such BALLS to do this. <br>
    sorry, as an argentinian citizen, you're just insanely wrong, as most US economists. How do I know? I just have to hear them speak on CNN, they're like in some other galaxy with their comments.

    [ Parent ]
    Resentiment to USA (4.00 / 1) (#107)
    by svampa on Sat Dec 22, 2001 at 10:34:14 AM EST

    This comment should be quoted and put verbatin in the article the roots of resentiment to USA

    What hell are you talking about?, all that comment is based on misconceptions, topics and myths.

    I agree corruption, but the seeds of that are not in a flaw of character or heritage, their roots are in a lot of things.

    And one of them is USA, that helped a lot. when USA set companies there in a conditions that USA would allow foreign companies in its soil

    Why did they allow so? they didn't, so USA supported cup d'estat, and corrupt dictators, have you ever heart about Videla, and Condor operation.?



    [ Parent ]
    Re: is it corruption (none / 0) (#110)
    by MeanGene on Sat Dec 22, 2001 at 01:22:23 PM EST

    ...please excuse me while I puke in the corner...

    Corruption does exist in the US just like in the rest of the world with some minor (on a grand scale of things) differences:

    • nobody talks about it at the local scale because it's wrapped inside the legal system. For example, you're getting ticket driving through some small town. Instead of taking your money directly, sheriff will write you a ticket so that you can formally contest it in the local court - if you ever want to come back to that town to face his brother the judge.
    • nobody talks about it (mainstream) at the state/national scale because it's bad for business. Do you know that, for example, Disney put up only 7% of the money for their much talked-about Times Square store in NYC? What other places call "corruption" we call "lobbying", because - let's face it - it's awful hard to do an honest business.

    On the subject of British and French influence - do you realize that the best things in life really came from Dutch? NYC is what it is now only because it used to be New Amsterdam. The rest of this country settled by British and French (ever been to Louisiana?) is just to scary-ass to live in.

    [ Parent ]

    The bottom line (3.33 / 3) (#109)
    by MeanGene on Sat Dec 22, 2001 at 12:49:42 PM EST

    Argentinian government plundered the country's USD-denominated savings in order to pay off the international banks - and they're still going to get both default and unhinging of local currency. Wouldn't it be wiser to default earlier?

    They had to know that once the run on the money started and the banking world decided to cut off further credit, there was no use in public displays of desperation.

    Generally I view IMF and the World Bank as at best clueless in everything that doesn't fit the monetarist economic theories.

    Russia may also have taken this path (2.00 / 1) (#130)
    by 21mhz on Mon Dec 24, 2001 at 09:43:11 AM EST

    Oddly enough, the Russian government considered adopting the Cavallo's strategy right after the financial crisis in 1998. At the time, it was perceived by many as the way to salvation. However, Russia had taken another course, planning to slip off from the IMF dope eventually. Today, many would thank God for that.

    A Tidal Wave is Forming (5.00 / 1) (#142)
    by LordMayhem on Thu Jan 03, 2002 at 05:45:18 AM EST

    Like Argentina before it, Mexico is about to be overtaken by a "scissors crisis" of simultaneous hyper{inflationary} financial and hyper{deflationary} physical economic processes. In Argentina, the scissors took the form of the demented "zero deficit budget" implemented by Finance Minister Domingo Cavallo, at IMF insistence.

    The concept is simple ... and thoroughly incompetent. First, interest payments on the public debt are pronounced sacrosanct, and will always be paid, regardless of the consequences. Second, the government will only spend what it has left over from collecting taxes and other revenue, {after} subtracting out its debt payments. In other words, the government will not run a deficit and borrow money to cover that deficit: it's deficit must equal zero at all times.

    But what happens if interest payments keep rising, and tax revenues keep dropping, {as has been occurring in Argentina}? For example, interest payments rose from 11% of the total budget in 1998, to 15% in 2000, and to 18% in 2001, while the tax base simultaneously contracted. In December of 2001, tax revenues plummeted at a shocking annual rate of -33%. The parasite is rapidly growing bigger than the host. In this fashion, a hyperinflationary debt payment process was unleashed in Argentina, along with a hyperdeflationary process of contraction of the real physical economy.

    The results are visible: Argentina's work force is unemployed; its pensioners go hungry; its tax base has collapsed; its banking system has ground to a halt; and political chaos is the word of the day.

    Rosario Archbishop Msgr. Eduardo Miras recently warned that "A people cannot die to pay the debt." But that is exactly what Argentina's creditors have demanded; and it is exactly what the last few governments have tried to do.

    No agreements are going to hold, unless two conditions are met. First, there must be a system of Hamiltonian national banking put in place. And second, this system must put in place real economic improvements, including the creation of 1 million jobs in the productive areas where they are needed.

    Otherwise, no measures are going to work, and the situation is up for grabs. We are facing another tragedy like Russia 1917, where one government after another fell, until Lenin took over. Now, in Argentina, Czar de la Rua has fallen, but he's being replaced by a succession of characters who have been unable to deal with the situation, and Duhalde himself will be replaced, if, when he is faced with the choice between the IMF program and that of protecting the nation, he chooses the IMF. Pressures are already being put on Duhalde to capitulate to devaluation, through Brazil. But reality sooner or later will assert itself. The current situation is unworkable, and either Duhalde changes the deal, or Duhalde will go.

    The financial breakdown crisis is not Argentine, of course. The whole system is finished. It's also exploding in Europe with the chaotic euro game, and in Japan. In none of these places are there governments capable of governing. When the dollar collapses, it will also bring down the euro. We will be in a chaotic breakdown crisis, like that of the early 20th Century. The fate of Argentina is the fate of the world if the INF is not replaced with a system that works.

    We are at the end of the system. The 400 trillion dollar speculative bubble is disintegrating, and the IMF's policies will not work to restabilize the situation. Governments that capitulate to them will only produce more misery and death, and then go the way of De la Rua in Argentina. It's time to build an alternative quickly, or the world will enter a new dark age.

    Personally, I am a Lyndon LaRouche supporter. He has been forcasting this collapse for years, in the face of much ridicule and abuse by the people who would rather send the world to Hell, rather than let the American constitutional principle of the General Welfare call the shots. For all of you dot-com folks here, LaRouche was predicting the current collapse of the so-called "New Economy" while it was at its peak while all the other so-called "Economic Experts" saw no end in sight. He saw it for what it was, a speculative bubble with no physical basis.

    The INF is much the same thing, a speculative bubble based on nothing but air and leeching. Think of the INF as a credit card for countries, that starts with a low interest rate, and then that low rate expands exponentially, once they have that nation in debt to them. The country's debt is increased by the devaluation of their currency. Then the pirates sweep in and by up everything in that country for pennies on the dollar. The country borrows more because it needs more "investment stimulation" to keep from collapsing from the leeching, and the cycle repeats. Now you have a good model of what the INF really is, a big scam on a global scale.

    The INF greed machine has finally run out of new victims, and faces certain death. Nothing can save the current INF-based world financial system; it is hopelessly bankrupt. The question is, are we going to jump ship from the INF before it sinks, or are we going to go down with it?

    See: Larouche Web Site

    What's happening to Argentina | 142 comments (133 topical, 9 editorial, 0 hidden)
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