Argentina: Another IMF debacle

Patrick J. Buchanan

12/29/01

After street riots left dozens dead and brought on a state of siege, forcing President Fernando De La Rua to resign, his Peronist successor, to the thunderous cheers of parliament, defaulted on the Argentine national debt of $155 billion.

It is a catastrophe for South America's second economy and nation. Four years deep in recession, with unemployment at 18 percent, tax revenues vanishing and credit rating ruined, Argentina will now resort to the printing press. Fiat money a "third currency," the "argentino" will be introduced in January.

"Printing money to satisfy the popular desire for spending unmatched by taxation is a recipe for chaos," warns the Financial Times. "The new currency would then swiftly disappear into the hyper-inflationary flames." Rely upon it. For the Peronists are less concerned with chaos than victory in the March elections.

For this disaster, Argentinians are, themselves, to blame. They have repeatedly elected demagogues and wastrels who misruled and looted their nation. But the International Monetary Fund once again carries off the Oscar for Best Supporting Actor in an Emerging Market Debacle.

Argentina is a tragedy. A century ago, she was predicted to become a rival to America. Ten years ago, she appeared to have said goodbye to all that populist-socialism and adopted the Reagan model: hard money, free markets and fiscal discipline. A currency board was set up to back up every peso with one U.S. dollar. Inflation fell to zero. Argentina took off, growing at 10 percent a year.

But by the mid-1990s, the Peronist regime of Carlos Menem had fallen off the wagon. Money raised from a fire sale of state enterprises was being squandered. Spending was rising at twice tax revenue. Fresh money had to be borrowed to let the good times roll.

Had the IMF stayed out, default would have come years ago. But the IMF bailed Argentina out, again and again. Like a gambling house that keeps handing out chips to a losing player to keep him in the game, to clean him out, the IMF kept shoveling dollars into Argentina, until she had lost everything she had.

A year ago, a fool could see Argentina was headed for chapter 11. But Treasury Secretary Paul O'Neill, who came into office preaching the old-time religion no more bailouts! suffered a failure of nerve. He prodded the IMF to keep funneling money in, so Argentina could keep paying principal and interest on a soaring debt she could no longer service with her own tax revenues.

Argentina has now told foreign creditors to take a hike, but not before the IMF had bailed U.S. taxpayers in for billions. The Money Power will see to it that we never know how much we have lost. Such is the way of the New World Order. If there were a true free-market party in Washington, this Big Con, this looting of America, would have long ago been exposed.

Cui bono? Who benefits from an IMF with the power to put U.S. taxpayers at risk for billions? U.S. taxpayers? How? Their wealth is siphoned off and sent abroad in huge and risky loans to bankrupt regimes. Do the Third World poor benefit? How? In his final hours, De La Rua was raising taxes, slashing social programs and looting the pension funds of his own Argentine workers to pay off foreign creditors.

No, the beneficiaries of IMF bailouts are the First World speculators and plungers who find their emerging market paper going rotten, but can access the Treasury and Fed to get the IMF to bail out their clients, so they can get their money out, while ours pours in.

A second beneficiary is the overpaid IMF employees with tax-free salaries, who travel the world first-class as they play savior of troubled nations. With the hook of our dollars, they acquire real power by making the recipient nations debtors, clients and captives of that rising New World Order in which the IMF is to play a commanding role.

Bottom line: The IMF is the social safety net of Goldman Sachs. It exists to spare the Money Power the free-market consequences of its idiot investments.

Argentina's is the greatest default in history not the last. More are coming. For all that keeps this game going is a U.S. trade deficit of $450 billion and IMF and World Bank loans that shovel tens of billions of dollars abroad annually to stave off defaults.

But one day, the defaults will come so fast even the IMF will not be able to bail everybody out. Then the chickens will come home to roost, and the global economy will be exposed for the mega-fraud that it is. Prediction: Before the decade is out, Japan will default on a national debt that is already 125 percent of GDP.

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