Argentina: Cruising For A Bruising
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  • Gordon Pasha


    Conservative analysis on Argentina has to sharpen considerably. These types of hatchet job pieces really look bad. If you do a google news search for “Argentina economy overheating” you will find articles already appearing in 2005.

    The reality is the continuous growth spell that started in 2002 and is still ongoing is the longest and largest in Argentine’s living memory (and possibly in history, it is difficult to get good numbers pre-1940’s).

    Now, there is no theorem that states that an economy cannot overheat for 9 years and then crash spectacularly, but there are few signs in the horizon that indicate trouble, at least imminently.

    Inflation of 20% (more likely 25-30%) may scare people in the US, but countries like Argentina have a lot of experience operating in that environment (no one, for instance, would write a Peso amount into a law, like one foolishly sees Dollar amounts in US laws and even constitutions!). They have built in many automatically adjusting mechaniss in how they operate. Inflation has been running at that level since 2007 at least.

    There are obviously other factors at play here, and I wish serious conservative economists would disentangle them. For instance, it could be that it is all gimmicks, as Walter claims. The default provided temporary respite in canceling interest payments. Then the government confiscated the IRA-style pensions Menem had introduced, so that gave them a bundle of cash to be repaid way in the future. Commodities may have helped (although academic studies indicate otherwise). But instead of getting serious analysis, we get this drivel where “house-building, cars, air conditioners and mobile phones” is not considered “productive investment” in order to make things look bad. What would happen if you do the same when analyzing the economies of the US and Europe?

    The Cato Institute used to write almost weekly about Argentina pre-default. They went silent after. There are a lot of wrong things in Argentina, but they seem to be getting something right. I wish we could understand it better.

    Best wishes


  • Mick Reactionary


    “Argentina is like Greece: it is a country whose popular attitudes and instincts do not mesh well with the requirements of capitalist growth.”

    But if USA will import 100 Million of Argentine-lite people from south of the border, with attitudes, if anything, even worse than that of Argentinians … well, what could go wrong?

    But wait, we are already half way there (50 Million Mexicans and their off-spring are in the USA).

    Nothing possible could go wrong, we have Proff Mead and the rest of ruling class assurances for that.
    Their word is solid as gold, we could take it to the bank, I hear Lehman Brothers offers good interest of fools gold deposits.

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