Guest Post by Martin Armstrong
Argentina’s economy has collapsed. Around 57% of adults in the nation are currently unemployed. The Socialist nation has programs in place to compensate, costing the country around $6 million daily. However, socialism no longer works when you run out of other people’s money. July’s inflation report showed an uptick over 60%.
Harry Lorenzo, chief finance officer of Income Based Research, told The Epoch Times, that the government’s constant spending has exacerbated the problem ten-fold. “The Argentine government has been grappling with a collapsing economy for some time now. The main reason for this is the government’s unsustainable spending, which has been funded in part by generous welfare programs,” Lorenzo stated. This is the same issue we see in the US, Canada, Europe, and elsewhere when governments spend without the intention of ever paying off their debt.
Argentina has defaulted on seven separate occasions since gaining independence in 1816. Speaking more recently, Argentina’s economy was already in ruin in the 1980s when they faced a serious debt crisis, and the currency became worthless. Inflation reached 2,600% in 1989, and the nation experienced hyperinflation into 1990. They decided to peg the Argentine peso against the USD in the late 1990s, which proved disastrous. Never in the history of economics has a peg survived because the economy is not a flat line.
By 2001, the peso was completely devalued. US Treasury bonds and Argentine government bonds rose 5,000 bps – bank runs ensued. There was an immediate freeze on bank deposits that December and the people were left with nothing. The International Monetary Fund simultaneously announced it would no longer support Argentina and cut them off from funding. This is when the nation lost its last tie to any foreign capital. The nation had no choice but to default once again at the end of December.
Various leaders, whoever could stick with the job, promised that the government would provide the people with basic needs. Nearly 60% of the nation was below the poverty line by 2002. By 2010, Argentina restructured 92% of its debt. The nation tried to remove trade restrictions and attract investors – but who would want their debt? The IMF granted Argentina one of the largest bailout packages in history in 2018, which totaled $57 billion. The IMF again agreed to restructure $44 billion for the nation in January of this year.
The problem with social programs is that there is never enough money. Rising inflation has increased the poverty level, and the average person can no longer afford an abundance of basic necessities such as food. The people of Argentina have been on strike for months, many refusing to work. The government promised them social programs in exchange for a cut of their pay. Argentina’s economy minister, Martin Guzmán, resigned at the beginning of the month. The Argentine peso continues to decline against the dollar, pushed down further by recent Fed rate hikes. This is what happens when governments spend recklessly, peg their failing currency, and promise the people security that they cannot provide.
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“No matter how many times you save Argentina’s economy, it always manages to collapse again. Sometimes I just want it to stay saved!”
Government – the creator of problems and solutions that make them worse.
Gee, a totally corrupt nation fails…. again. Who woulda thunk it.
Interesting.
Not surprised, but intrigued, and would love to hear from Doug Casey about how this current storm will be weathered.
See, Casey and quite a few high net worth people from around the world have been living in remote, rural Argentina in a somewhat closed community.
Self sustaining IIRC.
Ranches with huge stocks of beef cattle, Malbec & other vineyards, premium golf courses, living residences, spas, markets, polo grounds…a veritable paradise for the rich and shameless.
Plus, Doug’s always advising to leave western civ and move there or to Uraguay, or P.R., where the government is so incompetent, or the tax liability is so favorable to expats.
Some other peeps from the Daily Reckoning crowd set up shop in similar fashion down in Nicaragua about a dozen years ago, too, and a sweet oceanside community development for expats.
But, like Argentina today, Nicaragua got dangerous a couple years back, with social upheaval, too.
I’m just wondering how those expat communities are faring, when the host country starts collapsing.
Are they insulated?
Any regrets?
Doug?
Sovereign Man?
Jeff Thomas?
Bill Bonner?
TBP’s own Jimmy Torpedo, down in Nicky?
Do tell, if you’d please.
Of course, those places seem dreamy compared to the multitude of shit holes in close proximity to many of us currently here on the platform ablaze.
Casey now lives in Uruguay and the US. I think the development he was promoting in the small town of Cafayate in northern Argentina failed. I liked Argentina when I was there many years ago but I believe it is too dangerous now. It is becoming very difficult to leave the US or Europe and settle in most of the countries touted by the travel mags or YouTubers unless you are fairly well off. The days of the carefree expat on a budget are over.
I should have figured you’d be in the know about such endeavors, Mr. Miller, I presume.
Cafayate was it exactly!
My memory thanks you.
And it’s astounding to me that it failed or went belly up.
Do you remember the gang from Agora that bought residence in Nicaragua a dozen years ago. Pretty sure Addison Wiggins was part of it, but I can’t remember the name of the place. I wonder if anybody there had to pull out, and lost a bundle, or has buyers remorse.
Agreed, and I figured, too, that after the last 2 years, that it’s not that easy anymore to pull up stakes & move somewhere warmer and far cheaper.
Maybe best to hunker down right where we are, preferably in a rural setting, removed a stretch from the big cities.
Blue ones in particular.
Thanks, too, for your insights that get posted on TBP by JQ.
I for one, enjoy learning from your research, efforts, and writing.
Like the recent interview with Chuck Butler.
Don’t let the critics ever dissuade you from further efforts, Sir.
~Cheers!
Has he released his new hit single?
We live in Ecuador and get by on an $1800 monthly budget.
I hope they’re able to keep the Malbec coming, at a reasonable price……
Some good value Pinot Noir and Cabernet comes from there too.
“Malbec” grape drank.
Ultimately, the lauded Plan B will be what it will always be.
An https://www.merriam-webster.com/dictionary/abortifacient
Tanks in front of banks. The media and WH are nitpicking the meaning of a recession because they want to distract from the fact that several countries defaulting on their sovereign debt and the early corporate bankruptcies indicate we’re actually headed for a global depression.
Excellent find. Grappling with our fiat pittance placement. Reticent to invest in moar PM since the boating accident provided a negative ROI. Perhaps the transitory inflation will make the matter moot.
The economic situation in China is another reason Pelosi may trigger a war….
The next two weeks could be two of the most dangerous in the history of the United States because it appears Joe Biden and his clueless national security team are bumbling their way towards a showdown with China that is fraught with the peril of war…
All of this comes as China faces a major economic crisis at home–a collapse of the real estate market:
The crisis in China’s property market, exemplified by the default of Evergrande, the country’s most indebted real estate developer last November, is spreading. It is threatening a significant fall in economic growth under conditions where the government is battling to deal with the effects of the COVID pandemic.
Over the past few weeks, a home-buyer boycott movement has developed in which purchasers are refusing to continue payments for apartments they have purchased but which are still under construction.
One tried and true method throughout history that governments use to distract domestic discontent is to focus the public attention on a foreign threat.
Will Tweaking the Dragon’s Tail Ignite a Terrible Fire With China?
If China did shoot down Pelosi’s plane, that would almost certainly trigger…a huge celebration!
Hint to pilots for Nancy: Call in sick!
I watched a discussion of Tianerman Square (1989) and got a better grasp of how tightly controlled information is in China and has always been.
My husband saw this and decided it is time to turn cash into materiel and materials. We are expecting the unexpected.
Ten years ago in August, we paid off the log home and I moved here to build a barn.
If you’d ever like to see my place, Stephanie, I would love to meet you in person.
Argentina is all Italians. I don’t know what that has to do with it. Maybe nothing, maybe something.
Argentines are Italians who think they are British and speak Spanish.
If that is your apothegm, J Far, it is simply brilliant.
57& unemployment in Argentina? The working minority of adults cannot bear the weight.
It really could happen here.
Could?
I believe I’ve read that headline at least 5 -6 times during my lifetime.
“Argentine economy did NOT collapse this year!!” <==== THAT would be ground-breaking news!
Wow. It’s like doing whatever the IMF bankers tell your country to do, never ends well for your country.
Sorta like Sri Lanka?
Again? Oh dear Lord!
THAT means ONLY one thing.
Time to trot out yawn penn.