Very interesting read on debt default.

[chaska]

https://steveblizard.wordpress.com/2010/01/08/sovereign-debt-default/

I don't know who this guy is, Republican or Democrat. It's an interesting read regardless, and a POV you don't hear often enough..


Standing up to the IMF is not a well-worn path, but Argentina forged the trail. In the face of dire predictions that the economy would collapse without foreign credit, in 2001 it defied its creditors and simply walked away from its debts.  By the fall of 2004, three years after a record default on a debt of more than $100 billion, the country was well on the road to recovery; and it achieved this feat without foreign help. The economy grew by 8 percent for 2 consecutive years. Exports increased, the currency was stable, investors were returning, and unemployment had eased. “This is a remarkable historical event, one that challenges 25 years of failed policies,” said economist Mark Weisbrot in a 2004 interview quoted in The New York Times. “While other countries are just limping along, Argentina is experiencing very healthy growth with no sign that it is unsustainable, and they’ve done it without having to make any concessions to get foreign capital inflows.”

Weisbrot is co-director of a Washington-based think tank called the Center for Economic and Policy Research, which put out a study in October 2009 of 41 IMF debtor countries. The study found that the austere policies imposed by the IMF, including cutting spending and tightening monetary policy, were more likely to damage than help those economies.

snip

Where Argentina broke ranks with the IMF, however, Turkey followed its advice at every turn. The end result was that Argentina bounced back, while Turkey is still in financial crisis. Turkey’s reliance on foreign investment has made it highly susceptible to the global economic downturn. Argentina chose instead to direct its investment inward, developing its domestic economy.

snip

If the creditors are really interested in having their debts repaid, they will see the wisdom of letting the debtor nation build up its producing economy to give it something to pay with. If the creditors are not really interested in repayment but are using the debt as a tool to exploit the debtor country and strip it of its assets, the creditors’ bluff needs to be called.

[99Forever]

1. K&R

[exboyfil]

2. Did Argentina repay the money?

I always say that if you want to go to an all cash basis, you have one default in you (assuming that other countries' gunboats don't arrive).

[eridani]

7. They repaid the principal

They just said "Fuck the interest."

[chaska]

3. I guess the point is that countries default all the time....

Even in recent times there have been dozens of defaults. and usually happens, at least as far as I know, is a rather brief period of hardship, then prosperity returns. And the debt is forgotten.

I think the world would benefit if we all just defaulted. Everybody loses, everybody gains.

There are some very interesting points here, some inarguable hard truths that will have to be faced.

I say screw finance, who cares about the banks. People first, bankers can go fuck themselves.

Yes, I know I'm oversimplifying, but at bottom.....

[girl gone mad]

4. Here is another good article on Argentina's default:

From 2011..

The Verboten Story of Argentina’s Post-Default Economic Success

Even notice nothing is ever said in the mainstream media about Argentina’s economy, save that it had a big default? You’d never know the following about Argentina:

From 2002 onward, Argentina grown nearly twice as fast as Brazil, and has sported one of the highest growth rates in the world.

Its success is not dependent on a commodities boom

It has increased social spending from 10.3% of GDP to 14.2% of GDP

Inequality has fallen. Poverty and extreme poverty have fallen by roughly 2/3

What is particularly striking is how quickly Argentina’s economy rebounded after its default. From a paper by Mark Weisbrot, Rebecca Ray, Juan A. Montecino, and Sara Kozameh (hat tip reader Thomas Ross):

In December of 2001, the government defaulted on its debt, and a few weeks later it abandoned the currency peg to the dollar. The default and devaluation contributed to a severe financial crisis and a sharp economic contraction, with GDP shrinking by about 5 percent in the first quarter of 2002 and nearly 11% for the full year. However, recovery began after that one quarter of contraction, and continued until the world economic slowdown and recession of 2008-2009. The economy then rebounded, and the IMF now projects growth of 8 percent for 2011.

Argentina’s real GDP reached its pre-recession level after three years of growth, in the first quarter of 2005. Looking at twenty-year trend growth, it reached its trend GDP in the first quarter of 2007.

http://www.nakedcapitalism.com/2011/10/the-verboten-story-of-argentinas-economic-success.html

For monetarily non-sovereign nations such as Greece and Spain, default then some level of restoration of currency sovereignty (preceded by capital controls and followed by devaluation) probably represent the best path to escape crisis.

[chaska]

8. Thanks. I'll read it tonight.

[Egalitarian Thug]

5. The IMF exists to bankrupt and thereby control nations, not to help them.

If it weren't for the huge graft it pays to leaders, it couldn't exist. They're the thugs that follow the so-called World Bank to close the deals that funnel billions in corporate welfare to mostly American corporations. The nation is just a convenient vehicle.

[byeya]

6. Weisbrot regularly appears in the Progressive Populist a biweekly

news magazine that gathers progressive columnists together in one place. I've always found him very informative.