Saturday, 3 January 2015

My reply to a certain view about Argentina

[quote=Richard Wilson]
Argentina is far from a neoliberal paradise. You're thinking Singapore or Hong Kong.[hr]Under President Cristina Fern├índez de Kirchner, Argentina has strengthened ties to governments in the region that are hostile to liberty and has threatened the Falkland Islands’ right of self-determination. The judiciary has been politicized, and the central bank is no longer independent. The government’s seizure of nearly $30 billion in private pension funds in 2008, failure to settle with creditors since the 2002 default, and expropriation of Spanish oil company Repsol’s YPF subsidiary in 2012 have severely damaged Argentina’s investment profile. Although the economy has benefited from booming commodity prices, expansionary fiscal and monetary policies have fueled already high inflation that is underreported in official statistics. Foreign currency controls have created a black market for dollars.
The government manipulates official inflation statistics; regulates prices of electricity, water, and gasoline; and pressures companies to fix prices and wages.
 Twelve state-owned banks account for over 40 percent of total bank assets, and the presence of foreign banks has fallen in recent years.

1-You know who else regulates energy/gas prices? The EU states and the USA.

2-Foreign policy is irrelevant to domestic economic policy choices. By that reasoning, the USA is the biggest communist/statist of all when it comes to foreign policy.

3-In the EU state owned companies such as Gas du France and OMV participated in Romania when my country privatized its public enterprises. And the EU IS the very definition of NEOLIBERAL ideology across the board - regardless of the outside rapping.

4-I'm sorry, but it's false. Expansionary monetary and fiscal policy did not add to already high inflation, because there have been no expansionary measures to begin with. Argentina's budget deficits are a result of private debt deflation in the rest of the world + pro-active austerity measures (pro-cyclical fiscal policy). The automatic stabilizers are trying to correct the fall in AD.

Though running pretty much perma trade surpluses, their capital account was negative.

The reason for Argentina's chronic inflation rates remains the fall of the fixed exchange rate with the strong dollar. Chronic corruption at national and local levels. Failure to enforce government taxation. Black market for dollars isn't a problem. China doesn't allow private citizens to own fx either, yet the yuan is stable.
Last time I checked, Argentina did have a negative output gap. But at the same time, they still lacked full utilization of labor. So IN FACT, max output was not reached. It's all about how the so-called economists calculate potential GDP.

5-I'm not trying to paint past and present Argentinian governments as good or anything. But it's pretty obvious that labeling the countries' problems as being "because they followed socialist policies" is not the real answer to the real question.

6-As for "bullying the banks", please read this article...

The most effective way for governments to run their fiscal affairs is to use the currency-issuing capacity embedded in the consolidated government (treasury and central bank) directly without erecting a labyrythincic structure of voluntary constraints, which make it look like the funding is coming from the private sector savings.
Public sector welfare provision should only be targetted at those who are disadvantaged with the aim of providing opportunities for all to be included in society at acceptable real living standards.
It should never be provided to private (rich) bond traders nor be used to create derivative financial products that spread this wealth among the financial market casino.
In that sense, while direct purchase of government debt by the central bank is preferable to issuing the debt in the private bond markets, the more obvious solution is to have an arrangement where the central bank credits and debits bank accounts to reflect spending and taxation flows, without having to issue any ‘debt’ instrument at all.
After all, it is just taking something from the left pocket and putting it in the right pocket of the same jeans!
~Bill Mitchell[/quote]

For the full discussion on the thread, see here:

No comments:

Post a Comment