Wednesday, May 19, 2010

Is USA going to end up like Argentina?

No, not at all. I mean in real of possibilities just aobut anything CAN happen, but no I dont think USA will ever end up like Argentina. I”m saying this because I”ve been asked this question twice in the last 24 hours and I thought other people may have the same feeling.
What I have said though, is that exclusively based on what already happened in USA and is happening right now, you will see some similarities, specially how the society is impacted and changes.
I”m here right now and you can see them easily: The first thing I noticed was the one dollar coin which I didn”t even know existed, and that brought me dejavu of Argentina (they introduced in 1994). You also hear on the radio talk about advertisement of debt reducing programs, or this or that school actually being an investment in these hard economic times. Also the stores that have any other line of work, put up «I buy gold signs» which is typical of post 2001 Argentina and an y other country that went through a devaluation.
Crime is and will be getting worse too, but in spite of all this , no, I dont think USA will end up like Argentina.



Anonymous said...

I think we are going to end up like France. High inflation, but tolerable. Disgruntle government workers, who put on the occasional strike. Then the spatting moocher march of welfare and government aid recipients.

They will only be in the big cities run by progressives liberals, and be short in duration, and only mildly destructive to private property.

I also don't see them happening for about another two years or so.

Just my thoughts on the matter.

Anonymous said...

If we run the numbers of the economy, debt 87% of GDP and perpetual deficits year after year, there is no reason why the US is not already like Argentina or worse. If the US was traded on the stock market like a stock it would be a highly leveraged stock with a very high P/E ratio. But just like highly leveraged stocks, the expectation of returns (in the good times) attracts investors (China primary in this analogy). The other reason the US is still standing as the strongest country in the world and the strongest economy is that it still is the beacon of liberty. When compared to other countries, the US still has plenty of liberty to foster capitalism. So long as there are more people willing the carry the dead weight of the welfare state, the country will be OK. If the socialist get too greedy and decide to kill the goose of the golden eggs, then all bets are off. It is a delicate balance.

Gallo@GTA forum

Anonymous said...

I'm curious as to *why* you don't think the USA will end up like Argentina. Also, have you always felt this way (seems you've changed your mind but I might be wrong) and, if so, why?
- z

Anonymous said...

This is best I can do at the moment. Once SDR's replace the dollar as the world reserve currency, our free ride will be over and our currency will be subject to volatility. The U.S. is not Argentina, yet it is not immune to the risk of hyper inflation and will very likely have similar woes. The destruction and hopefully a rebirth, will take decades and we will experience many stages of political and economic upheaval. The result may be different in regions of the country. Should the U.S. 'break up' somewhat like the U.S.S.R, deflation may be dominate in periods. It is more likely to be a 'soft' break up where the Federal government looses control in regions that insist and return to it's traditional and weaker role.

There are many states in various stages of exerting their state's rights. It's become a movement and will likely be a big part of what unfolds. Should Max Kaiser convince Iceland to offer Icelandic passports for a fee to recapitalize, I'll be one of the first to grab one. Sweden is considered to have the best looking females. Being a frozen rock on top of a volcano, Iceland's secret is well kept. :O)


Maldek said...

"if so, why?"

a) The US is spending more than it earns (unsustainable deficit)

b) The US dollar is artificialy overvalued due to reserve currency/oil currency/strong military to enforce the above.

People have a higher standard of living this way but the cost is a ruined economy.

Same happened to argentina - peso overvalued, economy killed -> 2001...

Anonymous said...

I have thought about the future of the US and I think that this country is experiencing a slow decline into the third world. As the demographics of the country change and there is an increasing number of people who can't/won't pull their own weight, social programs will continue to be developed to take advantage of this voter block with out an end in sight. Most cities will become like Argentina (Detroit) while other places will be relatively safe. The difference is that you can drive out of Detroit to get what you need. I don't think things are going to dump all at once like Argentina, but it will happen slowly decade after decade.

Anonymous said...


For you to say "no" to Argentina-like collapse in U.S. seems like a change for you. I don't know why you would be surprised to be asked that question from people who read your blog. Your book shows perhaps the worst case scenario (Argentina) and many of your posts suggest preparations (body armor, dogs, constant attention to firearms, big changes and near collapse of many societal structures) that imply a pretty profound change.

Very puzzling.

Constant Reader

Anonymous said...

The USA has a net worth of about $60 trillion. Without leverage (debt) it takes a long time to squander that amount of national wealth. With leaverage, anything is possible. We now learn that the scope of "creative" financing, derivatives, CDS, CDO, etc is measured in hundreds of trillions (total instrument size). Worse, they are not standardized products, so there is no way to gauge potential downside risk with even a partial default of counteparties .. 1%, 10%, 50%? Add to that the US Govt unfunded liabilities and the net worth of the country starts to look small.

While it is probable that the decline of the USA will mimic Rome in 375 AD, and the United Kingdom in 1900, with electronic currencies it may occur much faster than anyone imagines. We simply don't have anything to make a comparison. The recent 1000 point DJIA "blip" is a great example.

The only difference between the USA and Argentina is relative size, and the fact the USA is the last remaining world superpower. If the USA economy collapses, leaving the world in a power vacuum, all other countries will be severely impacted, and there may by few safe harbors. And if history is any gauge, the USA would then use its military power to extract what it needs by force. What that world will look like? Different, I'm sure. But there is no valid reason to believe we are immune from the realities in Argintina, both past and present.

Look at Germany! The most powerful democratic country in the world in 1914, decimated by the treaty of Versaille post WWI, and birthplace of Hitler in the '30s. Never say it can't happen here. Economic rot is fertilizer to the growing of tyrants.

Anonymous said...

I'm afraid that I share your perspectives.

Constant Reader