Sunday, June 10, 2012

Argentina on the Brink of Collapse

From Economic Policy Journal:
Cry for Argentina (They took Paul Krugman's advice) 
Yesterday, I reported that the Argentine economy was on the verge of collapse.

There is a huge flight of money out of the country and out of the Argentine peso and into the U.S. dollar. Price inflation in the country is around 25%.

I warned this would occur back in April:

Two women have taken control of Argentina's central bank and are about to use it as if they are on a weekend shopping spree.
Paul Krugman, on the other hand, has been encouraging this mad money printing for some time. He wrote last October:
Argentina was facing deflation; the trouble was that by pegging to the United States, which did not by any means dominate its trade, Argentina exposed itself to the fluctuations of the dollar (any perceived similarities to the problem of a gold standard are completely right)...
Oh yes, according to Krugman, everyone is suffering from deflation---although prices aren't going down at the consumer level anywhere, certainly not in Argentina.

In May, seemingly ignorant of the developing price inflation storm, he wrote about the current Argentine economy:
[I]t’s a remarkable success story, one that arguably holds lessons for the euro zone.

From our 2011 post, "A Cautionary Tale: 'Argentina files criminal charges against consulting firm for publishing inflation data'"
Argentina is definitely an interesting place.
From the cult of Juan Perón to the current president Cristina de Kirchner (Hey gang, let's nationalize private pensions!), from the Barings debacle* of 1890 to the hyperinflation of 1990 and the collapse of 1999-2002 there are a lot of lessons to be taught or learned....
Also, January 2012's "Squid Wars and Rumors of Squid Wars as Falklands Oil Could Triple British Reserves (BOR.L; RKH.L)" on what that kind of economic mess might lead to.