Documentary on the events that led to the economic collapse of Argentina in 2001 which wiped out the middle class and raised the level of poverty to 57.5%. Central to the collapse was the implementation of neo-liberal policies which enabled the swindle of billions of dollars by foreign banks and corporations. Many of Argentina’s assets and resources were shamefully plundered. Its financial system was even used for money laundering by Citibank, Credit Suisse, and JP Morgan. The net result was massive wealth transfers and the impoverishment of society which culminated in many deaths due to oppression and malnutrition.
THE ARGENTINE DEBT CRISIS of 2001-2002: A CHRONOLOGY and SOME KEY POLICY ISSUES
By Sebastian Edwards
University of California, Los Angeles And National Bureau of Economic Research
Revised: January 25, 2002 anderson.ucla.edu/faculty/se … nology.pdf adobe acrobat required]
Country Tom seems to have something along those lines in mind, judging by some recent comments charted elsewhere on this site.
One of the main things that shook me out of my own cosy existence and got me asking a few questions about how things really work was a visit to Argentina a couple of years back, and in particular, the sight of whole families of Portenos (citizens of Buenos Aires) forced to live on the side of the street in what was, and still is for many (or even most), a very wealthy city. Apparently this was unheard of before the crisis.
These people are labelled “cartoneros”, and make their living from scavenging cardboard from bins at the end of each business day, which they then sell on to recycling plants (I think). There is literally an army of them, many of them children, who emerge from the shadows each evening for that purpose. Its truly shocking in a city which is so wealthy on so many levels and which could easily be mistaken for Madrid or Paris.
All bets are off, we’re in the greatest financial crisis to hit the Western world since the 1930’s and it’s time to start considering scenarios that we really would not have before example: David McWilliams floating the idea last Sunday of us dropping out of the Euro.
When we were calling the top back in 2006, we were not thinking in terms of the credit crunch (it’s a year old this week.) and as the formerly optimistic Dan McLaughlin has recently acknowledged everything that can go wrong has gone wrong. Look at us, we are seriously considering the possibility of a collapse of the Irish banking system (unthinkable two years ago), rising cost of living driven by food and energy, supply disruption of oil, large scale bankruptcies, mass unemployment, rising taxation, losses in pension funds, bailouts for the banks.
Where is the breaking point? all the above are ingredients for major civil disruption and breakdown in communities across Ireland. The only answer coming from politicians of all sides of the political spectrum in Ireland is more regulation and taxation (and will continue to be), who are we going to rally around in order to get the politicians off our backs?
Are Irish people going to take a more pragmatic approach and either emigrate or roll up our sleeves and get on with it? Are we going to become so desperate that we willingly give in to the conniving Sarkozy?
Paul Blustein’s book, ‘And the Money Kept Rolling in And Out: Wall Street, the IMF, and the Bankrupting of Argentina’ is a great account of the crisis there. And it’s also a page turner.
I don’t think Ireland is in anyway comparable to Argentina though. In hindsight, it is ridiculous that they let their currency board situation go on for so long in Argentina when they had the option of getting out. Leaving the euro is probably a really bad idea for Ireland though. Unlike Argentina, we have a good debt to GDP ratio, so we can borrow a fair bit to keep the place ticking over while prices return to normal and competitiveness increases. Of course the wild card is the government, who I have no doubt can still bottle it all through bad policies.
Argentinas debt prior to the collapse was 55% of its GDP , not very extreme by any means. The country had a fiscal deficit and unemployment was rising. The big problem was the currency peg to a country which they did very little trade with. Brazil devaued, the euro collapsed and the dollar soared. the countrys foreign reserves were declining rapidly as people lost confidence in the currency peg and the banking system. There was also rampant corruption in political and business circles.
Now compare that to Ireland, we have a fixed exchange rate, and our main trading partners ( US ,UK) intend to devalue their currencies into oblivion. We have a large fiscal deficit and unemployment is rising. Theres is a very high level of personal debt that was used to purchase depreciating assets. We have no foreign reserves or gold after 10 years of debt fuelled growth. Our political and business elites are mired in corruption and incompetence.
So what do you think is going to happen?
So comparing Argentina 1999 with Ireland 2008 it looks much the same to me.
As far as I am aware, citizens’ bank deposits weren’t lost in Argentina (with the exception of those with $-denominated accounts, but since we don’t have a comparable scenario here, that is moot really).
Prepare to be surprised. The refusal of Herr Weber to head up the ECB tells me that there is something afoot in Germany. If push comes to shove the Germans will not pay to make depositors whole in hard euros. Expect them to be paid back (eventually) in a greatly depreciated new domestic currency, backed by hard euro bonds, but discounted by 30%/40%. Its not only the bond holders who can suffer a haircut.
But sooner or later their banks will be far enough away from 2008 to have traded through a good chunk of their losses and the Germans will decide that the costs of the euro perma-crisis outweigh the benefit of an artificially depressed exchange rate and then the game changes. This day may be closer than you think.