Of Argentina and her students

Argentina is waiting for a new court decision that some analysts expect to trigger its second default in country’s new history. But something else is more interesting and can be a lesson for some other countries that are to repeat the Argentina model. Including USA among them.

Up to 90s of the 20th century Argentina was an economic wonder. It had a rapid economic growth and the salaries were closing the ones of developed countries very fast. Then there happened some economic adventures, some Keynesian games and indebting the country, some social bullshits. At the end the country defaulted, the national currency devalued and the wealth of the middle class vaporized.

And then it happened the most interesting. Argentina has fallen in a leftish spiral that constantly worsens the situation. Due to the economic troubles, the voters turned left. They elected socialist leaders that implemented leftish policies. This worsened additionally the situation and made the people even more left.

The end of this will be the total crash, total poverty and shutting off the last electric bulb (Atlas Shrugged).

The Argentina lesson is very important, because it is repeating in developed world. Due to economic troubles, the people are becoming more left and politicians are following them. In USA the budget deficit is enormous, but the White House is refusing to think of spending cuts. Instead – they say more stimulus is needed. I.e. more deficit and debt. In EU the austerity is under fire, in a moment a serious and needed austerity is not yet implemented. The politicians are stepping back even before going ahead. New stimulus is needed, new debt will be created. In Japan is the same. The 230% of GDP debt is considered nothing and the government is printing money to stimulate the economy. And voters have just voted for exactly this.

But what is the difference with Argentina?

No difference. And the result will not differ. No one is immunized against economic laws…


Dobri
March 15th 2013


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