What can We Learn from Argentina?

Just this fall, the government of Argentina has seized the pensions of citizens, 'The failed experiment' of private pensions is finished, ANSES Director Amado Boudou said at the ceremony with Fernandez, before hundreds of political supporters.Why should we care? What can we learn from the crisis in Argentina?http://www.reuters.com/article/marketsNews/idUSN2128838220081021 Argentina's capitalist economy was liberalized during the 1990s, along lines drawn by the IMF and applauded by the pro-capitalist (Hoover Institute/Chicago School) theorists. These theorists and policy wonks are neoclassical theory fundamentalists, arguing for absolute faith in the ability of unbridled markets to solve all problems (in the long run?). In other words, Argentina's leadership did just about everything the pro-capitalist theorists said they should do to be prosperous and were rewarded with 40 billion US dollars in support. But what was the result? Argentina is three years into a deep recession, now has almost 20% unemployment, homelessness has doubled in the last four years, and more than 50% of the population is now below the poverty line. And this in a country that was once one of the richest in the Western Hemisphere and that is still one of the richest countries in natural resources on the planet. Why did capitalism fail in Argentina? http://www.mtholyoke.edu/courses/sgabriel/argentina.htm Currently, Argentina is experiencing what the government describes as a 'great depression.' Using the'Great Depressions' methodology developed by Cole and Ohanian (1999) and Kehoe and Prescott(2002), we find that the primary determinants of both the boom in Argentina in the 1990s and the subsequentdepression were changes in productivity, rather than changes in factor inputs. The timing of eventslinks the boom to the currency-board-like Convertibility Plan and the crisis to its collapse. To gain credibility,the Argentine government took measures to make abandoning the plan more costly. Because thegovernment was unable to enforce fiscal discipline, however, these increased costs failed to make the planmore credible and instead made the crisis far worse when it failed.http://www.econ.umn.edu/~tkehoe/papers/argentina.pdf (2002)In other words, Argentina became caught in a vicious cycle of weak activity, overvaluation, and mounting debt.http://internationalmonetaryfund.com/external/np/speeches/2002/071702.htm There are in this last article some suggestions for the prevention of the crisis, and lessons learned.What i have learned from this is that the crisis in the US will be felt for years to come, the debt will be hard to maintain and it cannot be ignored and running up indefinately,a dollar may not be worth what you thought so don't assume it will retain its value, credit should be hard to get, listen to policy advice (from who, getting to that one) and change policies when needed, and lastly when things are good is the time to show restraint and discipline even if private money is pouring in.

And here is an interesting thing...'Hence our proposal for a sovereign debt restructuring mechanism that would empower the debtor and a super-majority of creditors to take the key decisions in a restructuring in a timely and efficient way. Perhaps if such a mechanism had been in place, Argentina's debt time-bomb could have been defused a few months before it finally blew up? Anne Krueger of the International Monetary Fund.

I had also been thinking of this type of thing, a sort of *Consumer Credit Counselor for people in the US who cannot afford their mortgages because of rising interest rates. But such an office for whole nations.....hmm. It sounds like the prevention or the cure, no matter, it is perhaps the goal?