Part One of a 12 part series on the Argentina economic collapse of 2001.
Argentine Economy Shrinks for First Time in 8 Years
From Reuters:
“Capital flight climbed during the second quarter, with net outflows of $4.279 billion from the non-financial private sector.
INDEC also reported that the August trade surplus narrowed by 48 percent from the same month a year ago to $1.16 billion, below market expectations [nN18267672].Six analysts polled by Reuters gave a median forecast for a surplus of $1.53 billion with estimates ranging from $1.2 billion to $1.90 billion.
Imports fell by 37 percent during the month of August to $3.25 billion, while exports dropped by an even bigger 40 percent to $4.40 billion due to lower prices and reduced volumes — particularly by the drought-hit farming industry.”
My Comment:
Mind you, even these figures are considered “upwardly mobile” (that is, massaged upward) by private analysts. The government has been habitually manipulating economic data (over at least the last two years), exaggerating growth and understating inflation, in order to pay lower interest rates on bonds. Previous figures for the current account surplus (from Q2 2008) have been revised three times, which gives you an idea about the unreliability of official statistics.
Meanwhile, according to a report in the Wall Street Journal real estate transactions in Buenos Aires in July were down almost 40% from a year ago, and down nearly 2% from June, 2009. Those are government figures too, so it’s likely that sales have slowed even more.
Adding to the hit in global trade (especially the decline in commodity prices) was a lengthy drought, the worst in 50 years, that devastated the farming sector, spilling over also into parts of Uruguay and Paraguay.
Here’s a NY Times piece from earlier in the year (February) on some of the fall-out:
“A separate problem is that the country’s supply of dollars is falling as demands increase and capital flight continues, said Daniel Kerner, an analyst at Eurasia Group, a risk consulting firm. That could add pressure on the government to tap Central Bank reserves or to severely devalue its exchange rate. Last year, Argentines pulled out about $25 billion from the country, Mr. Kerner said.
Though most economists say they believe the government can squeak by and avoid another crippling default on its debts, sidestepping a major devaluation of the currency, the peso, will be a more delicate dance.
For now, the Kirchner government appears committed to gradually devaluing the peso to avoid stoking a widespread panic.
With the cash that the government seized from private pension funds and other instruments, it can shave down a $10 billion financing gap this year to a more manageable $2 billion, said Esteban Medrano, an economic adviser at LatinSource, a consulting firm. .”
Apparently, one farmer lost 106 cattles in three hours, the investment and work of five years.
Not what I would call a confidence-builder..
Liberty, License, or Rudeness
” Wow. In China, the “moral outrage” police aren’t in charge, at least not as they are in most of America. This article is about how a woman was NOT reprimanded, let alone arrested, for her toplessness on a beach because there were no laws banning it…”
A blog post from Lew Rockwell, about a Belgian-Chinese teacher who went topless, but wasn’t hassled by the police because there was no law against toplessness.
(I’ll get the links up a little later – in a rush)
If the blog post confined itself to admiring the fact that officials didn’t trot her off because there was no law against toplessness, I’d be in agreement. It does say something positive about China that the officials wanted to stick with the law. But it doesn’t say nearly as much as the article’s author seems to think. I’m more inclined to think it tells us how foreigners (half or full) can get away with things locals can’t.
But if we’re meant to admire the story as a kind of libertarian fable, I’m a bit baffled. I doubt if local Chinese people liked the display – despite the gawkers and photographers – and thumbing your nose at every kind of social convention doesn’t strike me as the actions of a free spirit so much as the rudeness of the very selfish. If I turned up at Christmas mass in the US in a loin cloth (as many swamis in India might attend a religious ceremony), is that to be applauded or does it show my utter lack of respect for how other people might feel?
The latter, in my opinion. I might not want a law against rudeness, but as a libertarian, I would support censure and disapprobation for it.
[Substitute a man pulling down his shorts on a beach, and see if you think that should fly too].
Unfortunately this inability to discriminate between contexts seems to be pervasive in political discourse today. If people would consider context, you’d see this has nothing to do with the moral police. It has everything to do with courtesy, respect for others, and cultural sensitivity.
Don’t insist on wearing your entire native paraphernalia complete with feathers and train on a public bus in France; don’t wear daisy dukes to a corporate office in Manhattan, and don’t take your top off where it’s not done. It’s uncouth.
We needn’t have laws against it. But we should have public opinion against it.
Public opinion that applauds uncouthness and uncivility doesn’t encourage libertarianism. It encourages license. Which in turn invites an expansion of the state.
The National Debt Road Trip
Asian Auschwitz…
Trying to read up on the history of biological weapons (what with all the theories about the swine-flu vaccines circulating on the web, some wildly inaccurate, some more plausible), I came across this article on Z Net:
“ A New Type of Bomb
After the 1942 failure, the Japanese army general staff lost all confidence in the efficacy of biological weapons. The pressure was on to find a new approach that would ensure the safety of friendly troops and deliver a more reliable, more devastating blow to the enemy.
The new approach developed was to pack the pathogens in bombs or shells, which would be dropped from airplanes or delivered by artillery. This would satisfy both of the requirements, to deliver massive carnage while maintaining the safety of the attacking troops. At the same time, the only way to prevent disasters like that of the Zhejiang campaign was to improve communication among the troops.
Two hurdles confronted the effort to load bombs with pathogens. The first was the need to keep the pathogens alive for long periods of time. The second was the need to develop a bomb made of materials that would break apart upon impact using little or no explosives; this would prevent the pathogen from being destroyed by heat. Alternatively, if a bombshell could not be made of fragile material, a pathogen that could withstand the heat of an explosion would have to be selected. When a bomb or a shell lands, people do not immediately gather at the point of impact, so it was necessary to convey the pathogen from that spot to wherever people were. Again a live host like a plague flea that would physically carry the pathogen and infect people was considered the best solution to this problem.
A bacteria bomb using the plague bacteria was developed to satisfy most of these requirements. The bomb used plague fleas packed in a shell casing of unglazed pottery made from diatomaceous earth (a soft, sedimentary rock containing the shells of microscopic algae). This same material was used in a water filter that Ishii had developed and patented. As this bomb would break apart using minimal explosive, it was expected that the plague fleas inside would survive the heat and scatter in all directions, to bite people and spread the disease. This bomb, called the Ishii bacterial bomb, was perfected by the end of 1944. In the beginning of 1945, the collection of rats went into high gear, and Unit 731 went to work cultivating fleas to be infected with the plague.
Japan’s Defeat
The main force of Unit 731 left the unit headquarters by train soon after the Japanese surrender and returned to Japan between the end of August and early September 1945. Some members of the unit and officers of the Kwantung Army were captured by the Soviet military. Twelve of these POWs were tried by the Soviet Union at a war crimes trial in Khabarovsk in December 1949. In addition to members of Unit 731, officers of the Kwantung Army and the army’s chief medical officer were also charged as responsible parties. All of those charged were given prison sentences ranging from two to twenty-five years, but aside from one man who committed suicide just before returning to Japan, all had been repatriated by 1956. The record of the Khabarovsk trial was published in 1950 as Materials on the Trial of Former Servicemen of the Japanese Army Charged with Manufacturing and Employing Bacteriological Weapons (Foreign Languages Publishing House, Moscow).
On the other hand, not one of the members of Unit 731 who returned to Japan was tried as a war criminal. Instead, the American military began investigating the unit in September 1945, and unit officers were asked to provide information about their wartime research, not as evidence of war crimes, but for the purpose of scientific data gathering. In other words, they were granted immunity from prosecution in exchange for supplying their research data. The American investigation continued through the end of 1947 and resulted in four separate reports. The investigation took place in two phases……
The Hill and Victor Report concludes with the following evaluation: “Evidence gathered in this investigation has greatly supplemented and amplified previous aspects of this field. It represents data which have been obtained by Japanese scientists at the expenditure of many millions of dollars and years of work. Information had accrued with respect to human susceptibility to those diseases as indicated by specific infectious doses of bacteria. Such information could not be obtained in our own laboratories because of scruples attached to human experimentation.”
The above account makes clear the nature of the crimes committed by the Ishii Unit. At the same, it is necessary to question the responsibility of the American forces who provided immunity from prosecution in exchange for the product of these crimes.”
More here on the experiments in the Daily Mail.
Central America Musings…
A number of people have written me and asked my opinion about different parts of the Americas as possible destinations. So here’s a brief precis of some of my thinking on the subject:
Before I came down here, I went through a lot of research on the different Central American countries and on Mexico too.
Mexico was my prefered expat location, because I’m deeply interested in the Mayans. I love Mexican food, the architecture, the people, the crafts, and the weather. It was always my first choice. But the drug wars and the accompanying violence scared me off. Then too, land is not cheap in Mexico, except in the Yucatan, and the Yucatan has problems. Some areas look like they might have water problems, and other areas are targets for hurricanes. Then there’s the weather – humid and very hot. But the primary problem for me was corruption. I hear everyone has to be paid off and that police can be untrustworthy. Crime is said to be high. And then the Mexican economy is very tied up with the US economy. So, reluctantly, I looked elsewhere.
In Central America, the only country I really thought long about was Panama. But there again, there were problems. The weather is very humid and hot. Panama City is overcrowded and expensive – more expensive than many parts of the US. I liked the mixed culture, the entrepreneurial energy and the fact that it’s become a hub of financial services and banking. But that has its draw backs too. It’s also attracting attention from the US authorities who are concerned about off-shore havens. Also, land isn’t cheap and what there is of it is attracting the developer crowd – which I tend to avoid. Nothing turns me off more than condo complexes going up, Starbucks everywhere you look. For that, you can go to Miami. It’s probably cheaper now. So no to Panama.
The Honduras struck me as too poor a country. Extremes of wealth, especially in a small country, are a bad sign. How long will the place go without a revolution of some kind, I asked myself. And how long before US business or government interests start fiddling around. And sure enough, there’s been a coup.
The rain forests of Guatemala sounded..and looked..beautiful. But clearing rain forest isn’t exactly the easiest or the wisest thing to do. Guatemala also has a reputation for corrupt and cruel police. Real estate prices in the capital city were high. I nixed it too.
Nicaragua was cheaper. But also poor and unstable. No foreigner would make it a permanent base, unless they liked living dangerously. It’s the kind of place where a certain sort of person from Norte America hides out…keeps a low profile.. or swindles the next fool who comes along..none of which interests me. And it’s too close to other hot spots for comfort.
And so it’s turned out….the Honduras coup seems to be spilling over into Nicaragua (see below).
Belize has its problems with hurricanes and it’s not cheap, except in the more remote areas. It also doesn’t have much to offer in the way of infrastructure and business. But again, the main problem, as for the other Central American countries, was that it looked like the back yard of the US, vulnerable to interference, to a spill over of the drug wars, and to increased surveillance.
That’s why I decided to go further south, despite the expense, and despite the feeling that overwhelms you every so often in a foreign country – what the heck am I doing here? But I was asking that in the US anyway…
And in the US, I understand everything’s that being said….which tends to upset me, as you can guess from my fiery boycott-the-US post (it’s preceded by the word “IF”).
Here, I don’t understand most of what’s said. Ergo – peace of mind…
Some news on the spill over from the Honduras:
“Mónica Zalaquett, director of the Center for Prevention of Violence, says the problem in Honduras has become a “political instrument” in Nicaragua, used by both the Sandinistas and the opposition to promote their own agendas..
….On Aug. 4, a group of four Nicaraguan opposition lawmakers who tried to travel to the Honduran border to express their discomfort with what they called Zelaya’s two-week “occupation” of northern Nicaragua were turned back 12 miles before the town of Ocotal. Sandinista and Zelaya supporters blocked their caravan on the highway and attacked their vehicles with sticks and rocks…”
I feel vindicated in my research…I usually do. My problem isn’t sound investment decisions. I make good choices. My problem is I’m too cautious and tend to wait a bit too long. I don’t lose, but I sometimes miss out – which some people would say is the same thing.
I don’t see it like that though, because you have to take into account your risk appetite and tolerance for stress. If you live your life pretty much on your own terms, answer to no one, can walk away from unpleasant people and things, and spend all your time in your own company and not in the company of annoying people, you are way ahead of 99% of the world.
And the other 1% is probably broke.
Which means that if you’re not broke, then you are better off than practically everyone.
I’m not broke.
Ground Hog Ben: Fed Declares Depression Over…
I expanded an earlier post into a diatribe:
That’s it folks. Wrap it up. This here recession…er.. correction…er.. depress…oh, whatever..is over. Time to put away your pens and papers, boys and girls.
Professor Bernanke says there’s going to be no test. You hear that? Or maybe, there’ll be one little teeny-weeny take-home. Better yet, you just get to write in and ask for whatever grade you want.
Billy Gross, Bobby Rubin, and Jamie Dimon, you boys get A’s, as usual.
(The rest of you clods better learn to to suck up if you want A’s).
Everyone else gets B’s….
No one fails. Ain’t life great?
Whew. That depression stuff was so, well, depressing. Glad it’s over.
There. That wasn’t so bad, after all, was it, seeing as how it was supposed to be the worst one in half-a-century and the sky was falling and we were all going to live in the Ozarks or Patagonia on canned peas and raw mackerel until we got raptured up… and really all that happened was some green paper got printed and we had to listen to a lot of speeches about schools an’ stuff in Barackistani (not as weird a lingo as Bushlish, but just as daft) and then, bingo, everything’s back to normal again.
Yessir. The economy is healthy. Grade A, certified organic, flu-vaccinated healthy. A bit weak. But wholesome. Except for jobs, that is. No jobs.
What kind of recovery is that, you ask?
What kind? It’s the new deadbeat, can’t-get-a job, rocketing-inflation, trashed-currency, can’t-sell-my-house, can’t-make-my-payments, bankrupt-mafia-government, kazillions-in-debt, trade-warring-with-China recovery – that’s what it is. Glad you asked.
It’s kind of a new thing. No one’s really tried it so far, but they’re doing it in Europe, we hear. And maybe a bit of it in Asia. But it’s back here in the US of A that we’ve got the whole thing down. Right here in Washington. And from now until the economy gets really going, we’ll be getting the full Bernanke on it – at least, that’s the buzz.
Yep. Professor Ben’s all but promised us he’s going to be inflating grades all around this time.
No F’s. No D’s. Heck, no C’s. It’s A’s and B’s all the way. That’s the way they do it in Princeton. It’s a self-esteem thing.
Like that pep talk back on March 16, when Ben first spotted those green shoots. Now it’s September15 (exactly six months later), and Ben says the recession is over.
He says it’s all in the numbers from the National Bureau of Economic Research. The numbers say the recession ended this summer or fall. Man, the things they can predict these days.
Ole Ground Hog Ben. Puts his head out and the sun comes up. Amazing. Who knew you could even keep score of an economy?
Kind of like a lacrosse game at Princeton. Swat. Swat. Swat Take that, Harvard.
Of course, being a Princeton professor and religious and a pretty nice guy from all we’ve heard, Ben couldn’t bring himself to tell an outright whopper. He let the truth out dribble-drabble at the end.
Something about “impaired credit”…. and “head winds”…. and “digging out from personal debt”…. and “ongoing adjustments”….. and “unwinding massive stimulus efforts”…. and “risking igniting inflation”…. and “lingering high unemployment”…. and “sluggish outlook”…. and “higher gas prices” and…. “consumer reluctance”…. and “widespread job insecurity”…. and “significantly impaired credit”…. and “less lending”…. and “higher costs”…. and “deep freeze in credit”…. and “fearing defaults.”
But they put that way down in the report, after paragraph 5 (“Bernanke: Recession is Over,” Kansas City Star, Sept 15, 2009).
Before that, they just had him muttering something about the economy “underperforming”. ‘ Yeah, underperforming. Like the old geezer just needs a shot of Viagra.
But don’t let any of that bad stuff worry your little head, ’cause you know, the numbers say we’re okay. The numbers say the recession…er correction..er depress…oh, whatever…is over.
And numbers don’t lie, you know.
Like August retail sales. That went up by 2.7% over July. (I know, I know, cash-for-clunkers, high gas prices, blah blah blah. Gimme a break. It was still up wasn’t it?)
And the ISM numbers are good too.
August PMI (Purchasing Manufacturers Index) came in at at 52.9, 4 percent points higher than July.
(A number over 50 indicates an expanding economy. Below 50 is a contracting economy. This is the first time since June 2007 that the number’s been over 50).
Oh you don’t say!
And New Orders came in at the highest reading since December 2004. You know what that means. Businesses are stocking up. GDP is on it’s way up.
Woo-hoo
. Ride that gravy train.Ka-ching! Bada boom!
Hold just a moment though.
What’s this Non-Manufacturing Index stuff here?
Oh, you mean those bozos in medicine and law and teaching and real estate and construction and finance and retail?
Yeah, consumers. You know, guys who consume stuff. That stuff the manufacturing guys are producing. Seems like they still aren’t doing so good. So who’s going to buy all the stuff?
Not consumers. They’re cutting back.
You don’t know? That’s what comes of being a grade-inflated B student.
I bet Bob Rubin knows. And Jamie Dimon. And Bill Gross. And Warren Buffett.
And all their hedge-fund managing, private-equity-directing, leveraged-buying-out, sovereign-wealthy speculator buddies lining up to start the casino all over again.
They know whose money they’re using to do it too.
Hey, Professor Bernanke. Can we see you outside class? We have some questions….
Note:
The indicators that are looking positive (ISM number, retails sales, the price of copper) are all numbers that could reflect no more than
1. The business cycle restocking of inventories 2. Cash for clunkers 3. The beginning of the school year 4. State purchases/investments being made by China in an effort to get rid of dollars
It’s Not the Borrowers, It’s the Lenders
Karl Denninger at Market Ticker is usually someone I agree with, but on this he strikes me as at least partially wrong:
“But just as occurred in the 1930s, Bernanke cannot change the dynamic because there are no willing and able borrowers left.
THAT is the dynamic that sets off deflation and makes it pervasive. This is the condition that Bernanke has ignored and claimed does not exist, but the fact remains that it does.”
No willing and able borrowers left? Even anecdotal evidence says that’s not true.
People with solid credit histories are being refused loans.. and if you have some kind of credit glitch, forget it. And forget about getting NINJA loans and liar’s loans and all the rest of the credit that used to gush from the spigot.
The banks aren’t lending. But it’s not because there are no borrowers. Of course there are people who’d like to borrow and can. A
ll the people who weren’t flipping houses and maxing out plastic, for instance. Believe it or not, there are plenty of us.
Banks aren’t lending because they don’t want to. They have other reasons besides unqualified borrowers:
*They have to shore up their balance sheets and build reserves
* They’ve been burned before, and don’t know what kind of collateral is out there and what kind of assets.
*No one knows the correct price of anything, because values are deflating in all sectors or are badly manipulated by government subsidies and intervention; and also, because the mark-to-market model was suspended (correctly, in my opinion).
*Lenders are uncertain about the future and are waiting
*Banks can get a better return investing/speculating with their money – and there are plenty of borrowers for that.
Investors are just waiting on the side-lines for the commodities/currencies/metals/housing/you-name-it casino to reopen.
Johns Lanchester on Neo-Feudal Bad Times to Come
John Lanchester in The London Review of Books cited by Chris Hedges at Truthdig:
“The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value. The negative equity that already plagues 25 percent of American homes will expand to include nearly all property owners. It will be difficult to borrow and impossible to sell real estate unless we accept massive losses. There will be block after block of empty stores and boarded-up houses. Foreclosures will be epidemic. There will be long lines at soup kitchens and many, many homeless. Our corporate-controlled media, already banal and trivial, will work overtime to anesthetize us with useless gossip, spectacles, sex, gratuitous violence, fear and tawdry junk politics. America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite.”
Bernanke Declares Depression Over…
That’s it folks. Wrap it up. This here recession…correction…depress…oh whatever..is over. Time to go home. Put away your pens and paper, boys and girls.
Professor Bernanke says there’s going to be no test. Or there’s going to be just a take-home. Or better yet, you just get to write in and ask for whatever grade you want. Bob Rubin and Jamie Dimon get A’s, of course. The rest of you get good B’s…. No one fails. Ain’t life great?
Whew. That depression stuff was so, well, depressing. Glad it’s over.
Wasn’t so bad, after all, seeing as how it was the worse one in half-a-century and the sky was falling and we were all going to live in the Ozarks on canned peas and mackerel until we got raptured up… and really all that happened was some green paper got printed and we had a to listen to a lot of speeches in Barackistani (not quite as strange sounding a dialect as Bushlish but just as daft…) and then, bingo, everything’s back to normal again.
Yessir. The economy is healthy.
Except for jobs. No jobs.
What kind of recovery is that, you ask? It’s the new jobless, rocketing-inflation, trashed-currency, falling-house-price, bankrupt-government, kazillions-in-debt, trade-warring-with-China recovery – that’s what it is.
Glad you asked. Now you know…
Old Ground Hog Ben.
Here’s the news clip:
“Gold futures climbed back above the $1,000-an-ounce mark on Tuesday, after upbeat U.S. economic reports and as Federal Reserve Chairman Ben Bernanke said the recession is likely over.
However, he and other Fed officials reiterated views that unemployment will remain high and economy stay weak well into next year, fueling expectations that the central bank will continue to provide ample liquidity. ”
More at Market Watch.