Argentina’s Economy Collapses

From Martin Armstrong at Armstrong Economics:

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.

[Doug here: the "black market" rate for the Argentina Peso has been plunging again and is now over 300 per USD while the "official" rate is about 175.  There is a real collapse going on here.  Don't be surprised if this turns into another "Sri Lanka" in the very near future.

The most annoying thing is that I have met a few Argentinians living here in Texas. During the 2016 election season they were ENTIRELY UNABLE TO SEE that Hillary was EXACTLY the same animal as Christina DeKirchner of Argentina who has COMPLETELY wrecked that country AND STILL IS!!!  They were entirely unable to see that the non-politician Trump was a plausible answer to the grift and corruption of the professional politicians.  They had NO ABILITY whatsoever in seeing or even suspecting that Hillary or Obama are exactly the type of politician that brings ruin to any country including Argentina, Venezuela and the US. 

There is literally no hope there--- just death and destruction with the top politicians expropriating ALL THE WEALTH.  Why?  Because those people have all the wrong ideas, all the time.  It's been that way for nearly 100 years and countless country debt defaults.  There is a cost for those that never learn or who are apparently too stupid to learn. 

Lower average intelligence in these South and Central American nations/populations will not permanently support real democracy, real freedom, real prosperity, organized civil life or any competent politicians.  Instability is all they will ever know (to varying degrees) for probably 100s of years.  The same can be said for all of Africa, most of the Middle East and, indeed, 90% of the world.  The worldwide average IQ is estimated at 82 to 85. This doesn't mean that these people are bad or in any way despicable.  In fact most of these 3rd world populations are very courteous, kind and enjoyable to meet and interact.  I've traveled to about 45 countries on 6 continents and find most people are very sweet/kind despite somewhat unfortunate genetic heritages.   

But I will exclude from that generalization much of the US Black population; who just keep sinking into a morass of depravity, lies, delusion, death and crime thanks to their Democrat masters.]