Argentina: The Party’s Over


Argentina’s party is over.  The drunken guests are at the door ready to leave. Like a punctual house-cleaner, crisis is standing on the doorstep.  Somewhere in all of this rings Evita Peron’s advice from the hit musical. The nation is now about to pay the price of corruption, greed and unfathomable economic policies.

Argentina defaulted on its debt in 2001. The price tag on this historic failure to pay debts was $95 billion. Immediately following the default, the government seized bank accounts to try to hang on to the coveted greenbacks. Argentines took to the streets and there was rioting and killing in the avenidas and bulevars.

Following the financial crisis, more corrupt leaders gained power through bribes, illegal campaign contributions and by filling the Argentine Supreme Court with their soccer pals.  This kicked the downward spiral into high gear and it’s never done a U-turn.

In 2003, the husband-and-wife team of Cristina Fernandez de Kirchner and Nestor Kirchner rose to long-term power. Continuing the corruption that began after the default, they fueled a slow-motion  train-wreck into a tornado of crisis. Using the national treasury as their own piggy-bank, the Kirchners have amassed millions in real estate. Kirchner’s own former personal secretary went on national television a few months ago to talk about personally seeing a bank vault in Kirchners’ southern Argentina home. The vault was often filled with dollars, greenbacks from America, that were being prepared for shipment to Kirchner accounts in other countries The average Argentine just shrugged and accepted it as business-as-usual.

Last week in Argentina, the peso was devalued again, and the market imploded like a building on “How’d They Do That.”  In January, so far, the peso has dropped 20 percent when measured against the dollar. Inflation has risen rapidly, and the cost of basic household goods jumped 20 percent in one day. Again, people grumbled for a few moments, then shrugged. It was accepted as “that’s Argentina.”

What did President Kirchner do when her country was taken by the biggest devaluation of the its peso in 12 years? She headed off to a summit meeting in Cuba. Maybe the trip was to get some economic advice from her pal Castro.

For 10 years, the Kirchner machine has managed to keep up a stampede of government spending. Cozying up with the Venezuelan President, Hugo Chavez, now deceased, the inflation rates in the country are running upwards of 25 percent. Today, Argentina is facing another massive default. A deep recession and more currency devaluations are sure to follow along with the rioting in the streets.

Chavez was the Kirchners’ teacher in economic dogma. It’s no surprise that Venezuela also has had a major shifting of the bolivar.  Today it takes 82 percent more bolivars to buy one dollar than before. The real shocker is the black market rate, where it requires 1,050 percent more bolivars to buy a dollar. Venezuela’s rate of inflation last year was 56 percent. To try to keep on top of the rising water of economics, the central bank kept cranking out more dollars on the printing press.

Venezuelans and Argentines are now seeing again what happens when corrupt governments drive out capital and use public funds as their personal savings and loan.  Almost everyone is quickly agreeing that socialism doesn’t work, and has never succeeded for more than a few years at a stretch.  As Margaret Thatcher said one time, socialists eventually run out of other people’s money.

Argentina keeps repeating the cycle for two reasons.  First, socialism is the perfect environment for power-hungry politicians to rule.  Their greed for power body checks any semblance of ethical behavior.  The totalitarians use the authority to tax freely and their government power to buy off, or eliminate, critics.  Elections are bought and voters who supported them are rewarded with handouts, subsidies and food.

Secondly, Argentines have come to expect corruption from their leaders.  Corruption has been so pervasive for so long in South America’s second largest country, that corrupt politicians are accepted as the norm and anyone honest who dreams of higher office is seen as an anomaly.  Even the “policia,” already notoriously corrupt, recognize this. Tired of seeing everyone else in power get a piece of the pie, police went on strike in 14 provinces in December.  Crime is so rampant in Argentina that, except for a few isolated instances, no one noticed that the police were not working.

The country will eventually implode and leave behind a wrecked economy.  Among the tangled pieces of debris will be gargantuan debt, currency devaluation and continued inflation caused by government borrowing and money-printing.  The  finale of socialist-caused crises showcases rioting and looting in the streets, the imprisonment or assassination of critics and extreme shortages of basic necessities along with sharp increases in poverty.

Socialism won’t end well for the population.  If you’re going to play with the junkyard dog, you’ll eventually get bitten.   Socialism’s bills come marked overdue when the tyrants run out of other people’s money.  It’s payback time in Argentina and the party’s over.

By Jerry Nelson

Financial Times
Wall Street Journal

2 Responses to "Argentina: The Party’s Over"

  1. Takisha Radder   February 26, 2019 at 2:40 pm

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  2. Filiberto Ortmeyer   February 24, 2019 at 2:44 am

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