Wednesday, January 15, 2014

Argentina is Falling Apart

The Wall Street Journal has a good article about it. With reserves dropping like a rock, out of control inflation and massive social problems, it is now just a matter of watching how further down it can go.

The recent scenes of widespread anarchy due to the police strike across the country are still fresh in people’s minds. Due to recent blackouts, some people have been without power in Buenos Aires for three weeks and inflation according to independent firms is 30%, a very different tune compared to the one sung by the government that claims inflation is 10%.

Argentina's Crumbling Economy


Officially, inflation is 10.5%, but skeptics think it's much higher. Capital flight is accelerating.


On a visit to Buenos Aires in November I noted a sense of foreboding hanging over the city. With the economy in a stall, consumer prices rising and capital fleeing the country, porteños from every walk of life seemed to be bracing for a storm—and resigned to the hardship it would bring to this harbor city.
The city infrastructure looked defeated too: The wide boulevards and grand 19th-century buildings are now tired and grungy and the streets smelly. Angry graffiti and tattered posters deface walls, adding to the general feeling of lawless decay. It takes a long time to destroy a nation's wealth but a decade of kirchnerism o—government by President Néstor Kirchner and now his widow, Cristina —seems to be doing the job.
In recent weeks things have gotten worse. The way out also looks more difficult. Three big developments in December raised the specter of descent into full-blown chaos. The first occurred when the police in the provincial capital of Cordoba suddenly walked off the job to protest low salaries. Hooligans took the work stoppage by law enforcement as an invitation to sack the city. More than 1,000 stores were looted and two people killed. 

The national government could have helped Gov. José Manuel de la Sota, who is not an ally of Mrs. Kirchner. But it was unresponsive, instead suggesting that the violence was part of a plot to destabilize the president. His back against the wall, the governor gave the police a 33% salary hike. They returned to work. But police in 20 other provinces learned a lesson. Strikes across the country followed and so did looting and violence. Look for more pressure on public-sector wages.
Behind the difficulty in paying provincial employees a decent wage is the same old problem that brought Argentina to its knees in 1989: inflation. According to the Foundation for Latin American Economic Research (FIEL), based in Buenos Aires, inflation for December was 3%, driving the total for 2013 to 26.4%. Food and beverage prices were up 28.9%, FIEL says, despite "repeated freezes" mandated by the government.
The government claims annual inflation is 10.5%. But there is widespread distrust of official figures. In 2011 one of Mrs. Kirchner's henchmen fired the head of the institute charged with measuring the price level because he didn't like its inflation findings. Even the International Monetary Fund took note. In February 2013 it censured Argentina for its failure to divulge accurate inflation data to the public.
 Money-printing by the central bank has Argentines selling pesos whenever they can. Capital controls in effect since 2011 make that harder than it used to be but not impossible. They have accelerated capital flight. More sellers than buyers drives down the price of the peso where it trades freely. While the official exchange rate is now 6.6 pesos to the dollar, it now takes almost 11 pesos to buy a dollar in the black market.


cryingfreeman said...

Somebody should tell Doug Casey!

Don Williams said...

1) Argentina's misery is due to her billionaires selling Argentina's treasures off so they could export their wealth abroad and escape retribution for their failures in the decades leading up to 2001.

Their complaints of Kirchner crony capitalism seem ironic given that many of their fortunes were acquired by buying Argentina's state-owned properties at very low prices when THEIR cronies were in power and privatized state properties.

I noted some of them two years ago:

2) The lives of a nation's population depend upon complex systems which collapse if their capital is looted.

Controlling the government is not the same as controlling capital. Especially if the country is weak and the billionaires have friends in more powerful nations.

3) One of Argentina's billionaires,
Amalia Lacroze de Fortabat, died at age 90 in Feb 2012.


4) The New York Times noted that she was often photographed with her buddy Henry Kissinger.

In recent years, it's been discovered that Kissinger --the US Secretary of State at the time -- gave Argentina's military the green light to execute the Dirty War.



Don Williams said...

The growing concentration of wealth within a small part of the population is becoming a political issue in the USA --whose income inequality is even worst than Argentina's.

So the decades-long, bitter fight between the Rich and the People that we've seen in Argentina -- and the associated collapse in living standards and prosperity -- may be a preview of what awaits the USA.

The old European military aristocracy recognized that they had heavy obligations to the fief that went with their rank. That while rank has its privileges, it also has responsibilities.

Modern day Rich, in comparison, are mere thieves planning to hop onto their Gulfstream jet with their chests of gold and fly away after looting their countries.

And they are encouraged to do so by their fellow thieves on Wall Street and in the City of London.
Look at how London has welcomed exiled Russian oligarchs who made their fortunes in Yeltsin's reign.

A big change from the old days when wars between nations meant that an elite depended upon their countrymen to fight for them-- and so had to show some small signs of loyalty to the common people.

Don Williams said...

One thing that is ironic is that Argentina is the land of machismo and yet has been ruled by warring women during its collapse.

Take Christina Kirchner, her bitter enemy Ernestina Herrera de Noble (owner of Clarin), and
billionaire Amalia Lacroze de Fortabat (Argentina's richest person at the time of her death in 2012) out of Argentine politics and what would you have left?

Women can be good rulers -- some of Britain's best have been queens: Elizabeth I, Victoria, and Elizabeth II. But they were trained by their fathers to rule
and reared from an early age to recognized their responsibilities.

Argentina's rulers, by contrast, obtained their great power and wealth in bed.

Ernestina was a flamenco dancer when she met Roberto Noble, who was married at the time.

Both Amelia and wealthy Alfredo Fortabat were married to other people when they met.

Don Williams said...

1) An article on how billionaire Paolo Rocca, who ranks 105 in the world's richest men, has used tax dodges to avoid paying $16 million on income earned by his Argentina company.


2) A number of major US corporations are doing similar things.

Anonymous said...

I'm not trying to be insulting, but 4 out of 5 comments are Don Williams grinding his axe against the rich as he does on every post. Mr. Williams, have you considered writing your own blog?


Don Williams said...

1) The Davos meeting of the global elites in Switzerland is now in progress.

2) By way of the Financial Times, here is a report of possible global crises to be presented at Davos --a report prepared by the World Economic Forum:


3) The Financial Times of London is the newspaper of the global elite -- the Wall Street Journal is a rag put out for the Great Unwashed in comparison. As is shown by the much greater average income and wealth of FT's subscribers.

So it is interesting that one of their columnists -- Martin Wolf -- recently put out a column with the title "Failing elites threaten our future"

Subtitle: "Leaders richly rewarded for mediocrity cannot be relied upon when things go wrong "

Anonymous said...

Don Williams has a point about the rich. At one time they understood their responsibility to the rest but they no longer do. Their responsibility is to their money and globalization, they can fly away anywhere.
There is no longer a need for a middle class, in the US, it is being destroyed. No one likes comparisons but this has happened before throughout history.
One must understand our leaders (and the rich), do not care about the rest of us.
Recent polls show 3% consider immigration reform to be important but Congress is going to push it for the tech and hospitality rich.
We are going the way of Argentina and Venezuela, there will be no middle class as both political parties are comfortable in destroying the middle class.
Manufacturing made the middle class, it is gone. Drones and gps and computers will destroy trucking, fast food, taxicab and delivery services. Where will these people work?

Anonymous said...

"Income inequality" is not the problem. That is nothing more then a left wing propaganda tool for the useful idiots so they can be used to help the Marxists gain power. The problem in the world is not the rich the problem is the government. High taxes and massive regulations are the problem and the cure is certainly not more government. Please keep your eye on the ball, the government wants you to divert your attention to the rich so they can continue to loot the treasury.

Don Williams said...

Re Anon at 12:28 PM.

1) It is right wing propaganda for the Rich that makes up imaginary enemies to conceal the real ones.

2) Who does Anon think government leaders WORK for? Each political party in the USA has to raise $2 Billion every two years for Congressional races -- and another $1 billion each to run someone for President once every 4 years.

3) Does Anon think that money comes in as $25 checks? Or that it has no strings attached --no demands.

4) The Rich have been running the US government since at least the time of Reagan -- and the Democratic leaders are just as big prostitutes as are the Republicans. Worse actually -- they act like moles to destroy from within. Taking control of populist revolts so that they can sabotage them.

5) Politics and government are the only way the common citizens can restrain the malign acts of the rich --short of civil war. A politican needs our vote --a Rich man doesn't.

Don Williams said...

6) Anon is delusional if he thinks he can restrain government by supporting the Rich.

History shows that the Rich themselves CREATED government --to use the power of the state to keep the common citizens in economic slavery. To have corrupt judges to rule in their favor and protect their "property rights". To draft the common citizens to die in wars for Profit.

7) My ancestors fought to throw Lord Cornwallis out of North Carolina and create this country.
The US Army's official history notes that it was a revolt by
common citizens in the Carolinas--not George Washington --who won the Revolutionary War. George Washington's subordinate commander had lost the entire Southern branch of the Continental Army stupidly trying to defend the warehouses of the Rich against the Royal Navy on the peninsula of Charleston, South Carolina.

8) But as soon as the war was won, the Rich --who had let George Washington's Continental Army starve in winter -- started mounting a counterrevolution to put the chains back on.

8) Meeting in SECRET here in Philadelphia. Aedanus Burke noted that the Constitutional Convention was a Second Revolution -- to overthrow the First. See Burke's "Reflections on the Late Remarkable Revolution in Government" at
(Scroll to bottom and click to download the PDF file)

9) James Madison designed the Constitution with the view that
" “the first object of government" was preserving
people’s “different and unequal faculties of acquiring property”.


Madison ignored Jefferson's urging that the People have protection against commercial , monopolistic power. And Alexander Hamilton was an even bigger prostitute for the Rich.

10) Anon's comment re Marxists is hilarious. I worked on national intelligence programs and defense projects for decades and had 4 SCI clearances. I saw what happened when we defeated the Soviet Union and Communism fell.

Our Rich started throwing hundreds of thousands of American workers out on the unemployment line and plunging us deeply into debt to build a military Empire that would let them go on a money hunt in Asia. The incomes of American citizens have DECLINED greatly in the past two decades --and that decline began with the fall of the Marxists. Because the Rich felt they no longer needed us.

Anonymous said...

The only reason the rich buy politicians is because the politicians have too much power. Take away some of the power of the government and the rich will find other toys. Rich people have no power over me short of what they can impose through government.


Samsays said...

Don Williams is delusional if he
thinks the "the Rich" have only been running the US government since the Reagan years. Go back at least to the Roosevelt administration who were rich socialists that confiscated all of the gold. Go even further back to President Woodrow Wilson who signed the Federal Reserve Act into law in 1913.

Don Williams said...

RE Samsays comment, note that
the REAL median income of working men in the USA ROSE steadily from
$19,844 in 1947 to $41,000 in 1976 ( in 2010 dollars). Since then it has FALLEN to $37,102.


In the 1950s, 1960s, and 1970s most men could support their family without the mother having to work. What is it like today?

When Reagan entered office in 1981, our federal debt was only around 35% of GDP. What is it now?


Don Williams said...

Re Y.G at 10:02 pm:

1) I find it remarkable that someone who thinks we should have no government is also opposed to "Marxists."

Did we defeat the Communists in the Cold War by having no government? Is that how we beat the Nazis in World War II? Just sat around on our laissez faire behinds and waited for the "free market" to work its magic? I seem to remember something called a "draft" and I don't recall the GIs getting the "market rate" for risking their lives.

2) The fantasy sketched by libertarians and some Tea Partiers is astounding. We are not a small tribe of hunter-gatherers invading a virgin continent 12,000 years ago as the glaciers receded. And , of course, those small tribes did not last very long once they encountered foreign invaders organized by a ..wait for it.. government.

3) We are a nation of 312 million people. You can not feed, shelter, and protect those Americans with anarchy.

You might argue that power should be moved from Washington back to local governments --and I would be inclined to agree in some instances. But my experience is that the Local Rich are even more tyrannical than is Washington.

4) Look, for example, at the Coal Fields of Appalachia. Billionaires and multi-millionaires like Don Blankenship have made their fortunes there whereas the people who actually mine the coal have gotten black lung and an early death from gas explosions.

5) And as soon as the price of coal dropped the Rich men moved off to mansions on Hilton Head Island and discarded their workers like used toilet paper. And then lie about their betrayal of their people by trying to blame Obama.



6) Billionaires in Argentina did the same. There's no room in those Swiss banks accounts and on those jets for the workers whose sweat created the wealth.

free for now said...

Don Williams' selective history and propaganda is boring and trite. HIlarious that he shops it on this blog run by a guy who has seen first hand the direct consequences of (i) socialism and (ii) crony capitalism and (iii) populism (war of the poor v. the rich). Don, go sell this crap on HuffPo or something, readers here have too much of a head start to buy your nonsense.

Don Williams said...

free for now @ 10:39 am

1) This is not High School and I really don't give a hairy rodent's posterior if I'm "popular" with the high status kids or not --especially since I can guess what they do to get those nice clothes and cars.

2) I have provided hard data, facts, and citations. As far as I can see, apologists for the Rich have only provided the Fox News standard -- Fiction disguised as reality. Insistence that their political football team will win. Attempts to shoot the messenger because they can't face --much less refute -- reality.

Anonymous said...

'Free for now' said it best.


Anonymous said...

We'll Don has a point. Crony capitalism.
It's no surprise that Keystone pipeline is going nowhere. Guess who owns the only RR's that service the only way to move grain from the Dakotas? Gee, Warren Buffett. Berkshire Hathaway bought it and raised shipping prices only 21%. After the screaming they lowered the increase to 17%.
While Obama is president,the Keystone pipeline is going nowhere and folksy old Warren is taken care of.
The rich own the Democrats and Repiblicans.
But there is more, the only way to move oil from Canada and the Dakotas without the pipeline is by RAIL.
Go figure. Just sayin'

Anonymous said...

Don Williams monopolizes this blog more than I have ever seen on any other blog. Needs to start his own blog. And speaking of "the rich" no one but someone pretty rich or at least financially very stable, could possible spend so much time on others' blogs. When do you actually work?

Anonymous said...

Don Williams monopolizes this blog more than I have ever seen on any other blog. Needs to start his own blog. And speaking of "the rich" no one but someone pretty rich or at least financially very stable, could possible spend so much time on others' blogs. When do you actually work?

Don Williams said...

Re Anon at 1:07am (and 1:08 am)

1) So I am supposed to be a traitor to my class? That's a rather ..er.. Marxist viewpoint.

But then how did Pat Buchanan describe the Republican Neocons who dominated the Bush Administration?

"Who are the neoconservatives? The first generation were ex-liberals, socialists, and Trotskyites, boat-people from the McGovern revolution who rafted over to the GOP at the end of conservatism’s long march to power with Ronald Reagan in 1980"


Don Williams said...

Re Anon at 4:29 pm:

1) Oh, Warren Buffet's investing goes beyond that. After his Moody's rating service
helped cause the current Depression (by giving AAA to poisoned derivative junk),
he is buying up the real estate rubble left by that crisis. Cheap. Hasn't anyone noticed
those Berkshire Hathaway real estate signs?


2) And , of course, the News Media prostitutes never noted who got rich from the overbuilding of houses in the Bush Administration. Can you say Koch Brothers (Georgia Pacific)? Or how about big money donor Bernie Marcus (Home Depot)?

3) And while veterans returning from Afghanistan and Iraq were suffering 15% unemployment in 2012,
some people are prospering: