Michael Hudson: Argentina Gets Biggest IMF Loan in History

In this this Left Out podcast of The Hudson Report, a weekly series produced by Left Out with the economist Michael Hudson, Paul Sliker speaks with Hudson about the economic and political implications of the International Monetary Fund’s $50 billion loan to Argentina, which is the largest IMF credit line in history.

Hudson is research professor of Economics at the University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College.

You can find the audio version here:

Left Out, a podcast produced by Paul Sliker, Michael Palmieri, and Dante Dallavalle, creates in-depth conversations with the most interesting political thinkers, heterodox economists, and organizers on the Left.

Every episode covers an economic or political issue that is either being ignored—or hotly debated—that week in the press.

Paul Sliker: Michael Hudson welcome back to the Hudson report.

Michael Hudson: It’s good to be back. Much has happened while I was away for a few weeks.

Paul Sliker: Michael, Argentina recently agreed to a $50 billion loan from the International Monetary Fund. That’s the largest ever in IMF history. It is supposed to run for 36 months. Argentina began talks with the IMF last month, after three central bank rate hikes. Despite pushing borrowing costs above 40%, this failed to stop the fall in the peso, which has now fallen by 25% against the US dollar this year.

This agreement brings back a dark history for most Argentinians regarding the IMF’s role there during their devastating economic crisis in 2001-2002. The IMF imposed severe austerity measures, as usual. That’s its basic anti-labor policy, so Argentina’s decision to return to the IMF has triggered huge national protests over the past few weeks.

Despite this being the biggest loan in IMF history, we don’t really hear anything about it in the US media, except for the typical brief reporting in the financial press. There’s no real political or economic analysis of this especially on the Left, which one would think would be more sympathetic to the Global South, as well as countering IMF austerity philosophy.

Before we get into the current massive deal with the IMF – you are one of the world’s leading experts on IMF and World Bank loans. When you were at Chase Manhattan Bank’s economic research department, your role was a balance of payments specialist, and your task was to establish the payment capacity of Argentina, Brazil and Chile. To give people a general understanding of the historical context leading up to what’s going on today, can you give us some history about the last Argentine economic crisis in the early 2000s, and the IMF’s role at that time?

Michael Hudson: The reason there is so little discussion of Argentine or other Third World debt problems is that hardly anybody studies balance of payments (BOP) any more. There’s no course in balance-of-payments accounting or even in National Income and Product Accounts (NIPA) at any U.S. university. The right-wing Chicago School propagandists keep claiming that if a country’s currency is depreciating, it must be because its prices are going up. But that gets the line of causality inside out. For debtor countries such as Argentina or other Latin American countries, the balance of payments has little to do with domestic prices, domestic wage rates or domestic cost of production. The balance-of payments – and hence, the exchange rate – is swamped by debt service.

Debt service is paid on what’s called Capital Account. Politically, government debt denominated in dollars is run into by these countries to cover their trade deficit that results from structural factors, such as their agreement not to grow their own food but to rely on U.S. grain exports, and to let U.S. investments in their countries avoid paying taxes. These are structural factors, not wage and price factors.

Argentina is the poster child for countries that have totally screwed up their economy. Their predatory right-wing oligarchy has managed to steer their country from the most prosperous in the world in the late 19th century to one of the the poorest and most debt-strapped countries. This is a political problem. But the oligarchy blames labor and says that it has to be paid even less.

In 1990, I helped organize the first Third World bond fund. It was issued by Scudder, Stevens & Clark. At that time in 1989-1990 Argentina was paying 45% per year on dollar bonds. Brazil was paying the same. Now just imagine: 45% a year. That doubles your money in two years! No country can possibly pay that for long. But it was clear that the Argentine dictatorship – bolstered by a US-backed assassination program against labor leaders, land reformers and left-wing professors – would continue paying for at least five years. So that was the fund’s time frame.

Despite these high interest rates, we weren’t able to sell the bond fund to any American or any Europeans. But Merrill Lynch, which underwrote the bond fund, sold all its shares in Latin America. The fund was organized and the Dutch West Indies, so it was an offshore fund. Americans (including myself) were not allowed to buy it.

So who did buy it? The bond buyers turned out to be the wealthiest families in Brazil and in Argentina. I think I’ve discussed this before on your show. Argentina’s foreign debt was owned almost entirely by the domestic Argentine oligarchy – the very richest class. They moved their money out of domestic currency into dollars, buying dollar bonds because they knew that they were going to authorize the high interest being paid – to themselves, masquerading as “Yankee dollars”.

This is the oligarchy that followed the 1973 US-Chilean military coup that assassinated Allende and installed Pinochet. The US mounted a mass assassination and terrorism campaign throughout Latin America. In Argentina it was called the Dirty War. The Americans came in and applied the Chicago School economic principle that you can only have a free market if you’re willing to assassinate labor leaders, land reformers and university professors. Tens of thousands of Argentine reformers were tortured and killed to put the oligarchy in power and slash taxes on high incomes. Their tax laws make Donald Trump look like a moderate. And like most financial elites, they took the money and ran, putting their takings offshore in Argentina dollar bonds. Politically they denounced Yankee bondholders for forcing huge debt payments at 45% a year driving the currency down, but the wealthiest families themselves were the “Yankees” who were actually collecting. The real American Yankees simply didn’t trust the Argentines!

When Scudder went around and talked to US investors in 1990, they said that the Argentinian politicians are crooks, and were not going to invest in a kleptocracy whose intention was to cheat us just like they cheat their own people!

Now, fast forward to 2001. The IMF came in and followed US Defense Dept. and State Department directions to support the oligarchy and its terrorists. The CIA feared that otherwise Argentina might have a democracy as the wave of “free market” assassinations had died down.

The IMF staff saw that it was obvious that Argentina was unable to take on any more debt. Nonetheless, they lent Argentina enough money so that the wealthiest Argentines could have a high enough exchange rate for the Argentine peso to take their money out of the country and move into dollars. It was a huge subsidy for capital flight out of Argentina into dollar-denominated Argentine debt to the IMF and other bondholders.

Any realistic balance-of-payments analysis would show that Argentina can’t pay off this foreign debt. The IMF staff knew that the money was being stolen offshore. It’s as if they lent to Ukraine. That wasn’t a bug, that was a feature. The IMF staff got so upset – downright disgusted with its corrupt anti-labor, pro-bondholder leadership – that for the next decade, the IMF motto was “no more Argentinas.”

Already in 1965 at Chase Manhattan I had done an analysis of Argentina’s balance of payments and hence its ability to pay debt service. My job was to calculate how much foreign currency Argentina could afford to borrow? First, I calculated their export capacity and their import needs. They’d agreed to buy from America and to become dependent. I found that Argentina already was paying all the debt service that it could, so it couldn’t afford to borrow any more. For almost half a century the country had been limping along.

The IMF staff must have made a similar analysis, but its US-appointed board overruled its internal economic staff. It’s as if they operate out of a subbasement in the Pentagon and do whatever they’re told. So the IMF lent the money to support the oligarchy and its capital flight. This was basically what the US/IMF also did in Russia.

When Argentina issued foreign dollar bonds, it signed an agreement whose language was ambiguous, saying that it to treat everybody with parity. As you know, my book Killing the Host has a chapter on Argentina’s foreign debt. The vast majority of bondholders agreed to write down this debt to an amount that realistically could be paid. But a few years ago an almost senile American judge ruled in favor of the hedge funds, saying “parity” meant payment in full, not subject to the agreed-upon writedown. Judge Griesa said that a debt is a debt, even though the majority of Argentines had written it down. So the vulture funds cleaned up.

The result today is that Argentina is as strapped as Puerto Rico, Greece or the Ukraine. It can’t possibly pay its foreign debts, so bondholders are dumping its bonds and the currency is plunging. The reason is not because it’s importing more, and certainly not because its wages are high. They’re very low, because as I said, the police state assassinated the main labor union leaders.

The IMF sets terms on its loans: You cannot give labor unions power, and you have to privatize your industry (that is, sell it off to US and other foreign investors). You have to put the class war back in business with a vengeance. That’s how we got to the situation were the IMF lent enough money so that any wealthy Argentine families can convert their pesos into dollars. This capital flight leaves the economy empty and strapped. That’s the IMF’s “free market” philosophy.

The situation is going to get worse in the coming months, not only for Argentina but for other Latin American countries. The main problem is that in the United States, the Federal Reserve is raising interest rates. It’s worried that there’s full employment, and its job is to keep wages low. The Fed thinks that the way to lower wages in the United States is to raise interest rates to deter new investment and employment, except at minimum wages or “gig” rates.

Raising interest rates for the US economy means that the dollar’s exchange rate will rise against foreign currencies. It’s going to take many more pesos or other third world currencies to service their dollar debt. That means foreign countries are suddenly going to owe more for their foreign currency debt. That’s another reason why private capital is being moved out of Europe, Latin America and Asia into the dollar. Investors can make more money securely by buying U.S. government bonds than they can any other way, because the international financial system is looking very shaky right now.

That’s why we have an inverted yield curve in the United States: short term rates are higher than long-term rates, because “savers” (a.k.a. the One Percent here and abroad) are parking their money in liquid U.S. Treasury IOUs.

If the Federal Reserve actually goes ahead with its policy of raising interest rates, this will force defaults on the part of countries that owe their foreign debts in dollars, because the hard currency is becoming more expensive relative to the soft currency of debtor countries.

Paul Sliker: As you mentioned earlier, it’s just amazing that for the IMF, the term “never again another Argentina” became its motto many years ago, and was actually cited by the European Desk economists who walked out when the IMF made its awful loan to Greece. The IMF acknowledged that Argentina’s debt was not payable. So to be a bit more clear about what you think is going to happen this time around with this massive $50 billion loan agreement, is it simply going to bail out speculators in Argentine bonds?

Michael Hudson: Not only speculators, but the domestic oligarchy of bondholders, landowners and corporate owners. The wealthy Argentinans who deal with foreign banks want to keep their money offshore, in currencies other than the peso. They realize that the game is over and that it’s time to take the money and run.

Paul Sliker: Just to be really clear here in comparison to the 2001-2002 situation, what is this going to do specifically to the Argentinian people as a whole this time around?

Michael Hudson: The same thing that it’s done to the Greek people and the Puerto Rican people. Many will try to emigrate. Some will commit suicide. Lifespans will shorten.

The standard scenario is what happened to Russia under neoliberalism in the 1990s. There is little the Argentine people can do, because the President essentially works for the U.S. commercial banking system and has let the IMF put pressure on Argentina. He has stopped the domestic subsidies for gasoline and the price of oil and gas to domestic producers. Basically he’s taking away social subsidies in general.  It’s a classic neoliberal austerity program.

Argentina is following the Donald Trump program of balancing the budget by cutting back its social programs. So the reason that Argentina should be interesting to your audience is that it looks like the future of the U.S. What is happening to Argentina is what Donald Trump – and before him, President Obama – want to do to the U.S. economy.

Paul Sliker: That’s the question I was just going to ask you. As we’re closing this conversation out, Michael, maybe you can expand on that. I think some people generally know that the central theme of Latin America for decades is that U.S. economic and foreign policy deploys the IMF and World Bank to back creditors, foreign investment, and privatization. But why exactly should people care here in the U.S.? I know you started to explain that. But dig a little deeper for us there.

Michael Hudson: What really is at issue is whether all debts should be paid, or not? I think that there should be an international rule that no country should be obliged to pay its debts to the wealthy One Percent, especially to a creditor class that prefers to hold its domestic wealth offshore in foreign currencies. No country should be obliged to pay its bondholders if the price of paying means austerity, unemployment, shrinking population, emigration, rising suicide rates, abolition of public health standards, and selloffs of the public domain to monopolists. To make matters even worse, the privatizations demanded by the IMF and World Bank, for instance, will sharply raise the prices for what had been public services, transportation, water and sewer, communications, and telephones.

There should be principle that the domestic people should come before foreigners. But the guiding principle of the IMF, World Bank, and the United States is the opposite: namely, that no nation should put its own interests first. Instead, every nation is told to put the interests of international creditors first, even when the cost is impoverishment, dependency, mass poverty and deindustrialization. This is what globalization really means today. It’s an international imposition of class war by the creditor One Percent against labor and the indebted 99 Percent and their governments.

The madness of this was spelled out over 2000 years ago. In Book I of Plato’s Republic you have Socrates arguing against the idea that all debts should be paid. He asks, what if you borrow a weapon from a crazy person, and he asks for it back. Should you give him a weapon if he’s likely to hurt people?

This applies to creditors in general: Should you pay off debts if the creditors are going to use their money to impoverish society and reduce people to debt dependency? That’s what the Republic is all about. We’re still dealing today twenty four hundred years later with the same issue.

The issue is: what should come first: the people’s welfare, or that of creditors?

Paul Sliker: Everyone will be able to learn soon about the history of debt and ancient economic civilizations in Michael’s upcoming book slated for release later this summer. The book is called “…and forgive them their debts: Lending, Foreclosure and Redemption, From Bronze Age Finance to the Jubilee Year.”

I want to let everyone know that we’re sorry we haven’t been able to keep up with our weekly episodes of The Hudson Report. Michael’s been very busy getting everything together with the book I just mentioned, and he’s just got back from a trip to Europe. Now that he’s back, we can get back to our regular weekly schedule. But for now, as always Michael, thank you for joining me on The Hudson Report.

Michael Hudson: It’s always good to be here, Paul.

 

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41 comments

  1. Neil Bryson

    Michael Hudson should be nominated for the Nobel in economics, but that’s not going to happen this week.To state the obvious, Varoufakis, Keen, Black, and Hudson et al have such an important response to neo liberalism that is constantly ignored in the MSM.
    Everyone should be offered proper education in Heterodox economics. I must add that NC is doing great work bringing Hudson into the alternate media, but your work is often directed at a more erudite audience and leaves the economically unwashed feeling left out.
    Would you consider an ongoing basic/ intermediate “translation of terms for the economically emerging” such as myself for your website? Perhaps footnotes for difficult terms and language that the interested public could consume with more dignity. Cheers..
    Love your website.

    Reply
    1. JEHR

      Neil, your suggestion about “translation” is a worthy one, but I have been reading NC for a few years now and it has taken me a long time to digest the information from Hudson, Keen, Black, etc., but it is not so very difficult to understand. These writers approach information at a level that any high school student can understand. If you want more difficult economics, that is available from them too. It takes time to absorb and understand economics but it can be done here at NC without being erudite and without worrying about difficult terms. You can also search online for the meanings of terms you come across.

      Please be patient and try to use the information given here on NC and expand your knowledge gradually with the links given in articles. These authors also write books you can read. Good luck!

      Reply
    2. Crosley Bendix

      Steve Keens’s “Debunking Economics” is a good starting point for people interested in heterodox economics.

      Reply
  2. TG

    Indeed. But don’t forget demographics.

    Yes, at the end of the 19th century Argentina was prosperous. That just won’t do, so the rich used massive waves of immigration to flood the market for labor and drive wages and working conditions down.

    Remember, it’s not so much the number of people that matters, as the rate of increase. But even more important, is whether the government forces the rate of population growth to be larger than that which the people, left to themselves, would have chosen through their personal decisions.

    Always we are told that jamming in more people will create a larger pie for all. Argentina, Mexico, Syria, South Africa, The Ivory Coast… always we are lied to. Finance and debt are important, clearly, but like Keynes, we would do well not to forget the power of physical factors such as population growth.

    Reply
    1. Harrold

      I would argue that waves of European immigration in the late 1800’s lead to the increase in prosperity that Argentina enjoyed.

      Reply
    2. JEHR

      TG, I agree that over population is becoming a problem because of the impact on the environment; however, once people are born and live here on the planet, they should be treated with courtesy that includes accepting refugees and migrants. We have to have regard for human rights even when it is difficult to do so. Just think about how you would feel if you were forcibly removed from your home due to violence or environmental degradation and no one in the world wanted to share their home with you. That’s where empathy comes from and where virtue resides (to say nothing of christian values).

      Reply
  3. Carolinian

    More great stuff from Hudson. Sounds like the vampire blood funnel is sucking the life out of the rest of the world as well as the US. Or perhaps they started overseas and are now moving the same techniques to the home turf.

    The Biblical quote in the title of his forthcoming book is appropriate. Perhaps only religion–another irrational belief system to match our current faith in “markets”–could put the brakes on past finance power excesses. Now that usury is no longer in bad odor all bets are off.

    Reply
  4. divadab

    Sounds familiar – the people sold out by a parasitic and traitorous ruling class. This has been the key element in imperial expansion over the centuries – consider the Highland clearances, where villages which had been continuously inhabited for 5 thousand years were depopulated by their coopted parasitic owners and replaced with profitable sheep. And the Scots made into shock troops for the empire.

    The same rural depopulation process is being imposed in North America – it’s a long-term project that started in the thirties and has now reached the point where rural towns are in steep decline as the population is driven off. People are bugs to the monopoly-capitalist system.

    Reply
    1. Synoia

      The Highland Clearances were a consequence of the Scottish Highlander’s support of Bonnie Prince Charlie’s threat to an insecure Throne.

      The English Civil war had recently ended, and there was no desire in England to be under the thumb of either France, Rome or a Dictator, again.

      If that had not happened, the US would be a solidly Roman Catholic country, with a rule of law very different from the current regime.

      One of the strange effects of actions is that a bad King, Henry VIII, actually paved the way for the change in rule, and possibly the enlightenment, by the dissolution of the Monasteries, and the Split with the Roman Church, which in turn eliminated the Church’s control of the Country by the Bishops and Abbots domination the House of Lords.

      The House of Lords ruled the country up until the 17th Century.

      Reply
  5. rps

    A $50 billion loan from the International Monetary Fund…. Al Capone looks like a choir boy next to the IMF. How much extortion, errr racket protection, uhm IMF’s benev(i)olent shark loan will Argentina have to cough up in present and future collateral? Let me count the ways: all public systems and your little dog too

    Reply
    1. Synoia

      Al Capone looks like a choir boy next to the IMF

      Err, who gave the IMF the $50 Billion? The tooth fairy? (I’ve checked my pockets, it was not me).

      I notice now a significant omission in MMT and its discussion of sovereign currencies, where foreign exchange loans, and the control of countries not sovereign by an outside country sovereign in its own money over its vassals, is not clearly discussed.

      I’d call this “Fee Sovereignty,” just as property ownership is “fee simple.”

      I’d note the anti-tax nuts on the Right never attack the concept of “fee simple” ownership, but always winge over income taxes.

      We need to consider the agent/principal relationship of the IMF, and name the principal.

      If the left want to win, they should “have a dialogue” about “fee simple” ownership of land, as in “You on the Right are right, taxes are an abomination, and we should abolish property taxes. What should we do for City and State maintenance of the commons (roads, etc)?”

      Death by apoplexy seems a fair treatment for the Right.

      One solution is local business only, no subsidies for road building, and everybody walks – no “subsidies” for cars or transcontinental shipping of goods. /s.

      Reply
  6. Jim Haygood

    Now, fast forward to 2001. The IMF came in and followed US Defense Dept. and State Department directions to support the oligarchy and its terrorists. The CIA feared that otherwise Argentina might have a democracy as the wave of “free market” assassinations had died down.

    Can’t believe the eminent Dr Hudson would get his facts so wrong. Argentine democracy was restored in 1983 … eighteen years before 2001. Domestic terrorism was nonexistent by then.

    After Argentina paid off its IMF debt in 2005, its foreign debt was extremely low. Yet inflation roared on. Currency depreciation and the inflation rate are directly linked by maff:

    e = (1 + πh)/(1 + πf) – 1

    where e = expected percentage change in inflation rate; πh = home country inflation; πf = foreign country inflation.

    Over the past 100 years, Argentina has knocked 13 zeroes off its currency. This resulted from populist, Peronist policy. An oligarchy that favored destroying its home currency would be nuts. Rich country oligarchies do not favor such policies, for self-interested reasons.

    Politicized economics is hard to listen to, owing to the deafening sound of ax grinding.

    Reply
    1. Wukchumni

      If a smart Argentinean had only put their pesos into all that glitters around the turn of the century…

      Spot price then:

      2000 = 300 pesos

      Spot price now:

      2018 = 35,000 pesos

      Reply
          1. Alejandro

            Can you own gold and eat it too? Does it still shine in darkness? Does a genie respond, when buffed? Enquiring minds want to know…

            {Barter->money->credit} is a myth that has been thoroughly debunked by historians and anthropologists, with overwhelming documented evidence, in numerous posts on NC. You may consider re-reading, and note the bibliography this time…e.g. :
            https://www.nakedcapitalism.com/2018/04/michael-hudson-origins-money-interest-palatial-credit-not-barter.html

            A gold standard is a euphemism for a fixed exchange rate (see Mosler). Beyond the anecdotes(real or imagined), and without going down the rabbit hole, limiting economic capacity and development, to the amount of a relatively useless metal seems absurd.

            May also be worth noting that even Fritz Machlup, a die-hard Mises disciple, questioned the obsession with gold and fixed exchange rates, and came out in favor of floating exchange rates. As recounted by none other than Uncle Milty himself..
            http://reason.com/archives/1995/06/01/best-of-both-worlds/4

            Reply
            1. Wukchumni

              Hey, I don’t make the rules, and you can’t eat a byte of your investment in the ether, either.

              But both kinds can be converted into dough re mi easy enough, and then go buy yourself some food, or better yet go out for a meal.

              Reply
    2. Synoia

      In you equation, you have ignored the effects of imports, and global trade. If Argentina has become an Autarchy, the “internal inflation,” drive by trade deficits would not have been noticeable.

      As a counter example I refer you to South Africa, which tried to be a autarchy out of necessity, (For example Sasol’s oil from Coal), in the Apartheid era, and then moved to free trade after the fall of that regime. The rand was about at parity with the US dollar, and now is worth about 6 cents US.

      Mr Market does of poor job of managing a country when there is free flow of capital.

      Mr Market is an anarchist.”Free Trade” is an open invitation for Slavery.

      Reply
    3. Alejandro

      Jim reporting from the rabbit hole, where he’s been investigating a lead, of an alleged sighting of the elusive “free” market…

      unpoliticized economics seems like an oxymoron…”cattalactics” seems like a very “scientific” descriptor of a pseudoscience of denial, ie, denial of power relations in the seemingly never-ending class war…

      Your feeble attempt at ‘mathiness’ “analysis” predictably ignores relevant context, e.g., issuer v. user, fixed v. floating, autonomy v. heteronomy in the politics of economic capacity and development etc…

      >” An oligarchy that favored destroying its home currency would be nuts.”

      This is just more “free” market derangement syndrome, that inhibits reading comprehension…
      From the short interview above, please re-read this:

      ” The bond buyers turned out to be the wealthiest families in Brazil and in Argentina. I think I’ve discussed this before on your show. Argentina’s foreign debt was owned almost entirely by the domestic Argentine oligarchy – the very richest class. They moved their money out of domestic currency into dollars, buying dollar bonds because they knew that they were going to authorize the high interest being paid – to themselves, masquerading as “Yankee dollars”.

      Reply
    4. Michael Hudson

      I’m afraid the Argentine oligarchy is still there. Aristotle said that all democracies are really oligarchies, and turn into them increasingly.
      The IMF loan enabled (1) the Argentine oligarchy and (2) foreign investors to transfer their money out of Argentina and get many more dollars than they would have without the IMF loan.
      After squandering the money on this subsidy of capital flight, the Argentine currency resumed its plunge. So NOW, Argentina owes much MORE of its output (denominated in pesos) than it would have if it had imposed capital controls and taxed the oligarchy (and foreign investors operating out of tax-avoidance enclaves).

      Reply
      1. Synoia

        Aristotle said that all democracies are really oligarchies, and turn into them increasingly.

        Aristotle was being nice. My experience is that become Oligarchies immediately, because the elected are remote from their constituents.

        I do wonder if the Swiss model changes this, or is it just a more local set of oligarchs?

        Reply
  7. Jim Haygood

    Taking away social subsidies in general [is] a classic neoliberal austerity program.

    Before the subsidies were taken away, the gas bill in my house in a well-heeled neighborhood in Buenos Aires ran about US$3 per month. Electric power was about the same.

    A result of making energy nearly free is zero incentive for conservation. Thirty years after double-pane windows became standard in the rich world, they existed in Argentina only as luxury items marketed for noise suppression. Why would anyone spend thousands of dollars for costly windows imported from Europe, just to save maybe 50 cents a month on natural gas and electricity?

    By the way, how are those social subsidies working out in Venezuela, where one dollar buys 150,000 gallons of 95-octane gasoline, and electric power is so cheap that hot-climate Venezuela has become a global center for cryptocurrency mining? Again, utterly ungreen, and in the long term, socially destructive.

    Ideological economics produces nonsensical real world results.

    Reply
    1. Synoia

      Ah, Venezuela. No mention of the US’ illegal sanctions regime. As per usual in a discussion of that country.

      Reply
      1. Wukchumni

        My brother in law’s sister went to Venezuela in the late 1970’s as a teacher, for her pay was almost double that of what she could earn in the states, and then along came Black Friday on February 1983, and she was out of there within 6 months.

        This has been going on a long time, hyperinflation.

        I’ve mentioned this before, but a 1965 1 bolivar coin contains about 1/8th of an ounce of pure silver, and in order to be able to acquire one now, I think it would cost around a billion bolivars. (the math is so absurd when you figure in the bolivar fuerte, etc)

        In contrast here, a 1964 quarter that contains about 1/6th of an ounce of pure silver, will currently buy you a gallon of gas @ melt value, and oddly the same quarter in 1964 would’ve bought you a gallon of gas as well.

        Reply
    2. Synoia

      In the US and Canada, the Federal Governments “recycle” money for states or provinces with surpluses to states or provinces with deficits.

      The EU does not, because the Germans and Dutch do have the idea of “That’s my Money.”

      On this planet, the net of trade deficits and surpluses, is by definition zero, because we have not yet found any extraterrestrial customers.

      Thus the MMT equation Private Sector Profit = Government Deficit becomes the rule, because trade on the planet is a zero sum game.

      Please explain in your system of “free trade” economics how the reconciliation of trade surpluses and defects is managed, at the extremes, without wars, impoverishment or complete loss of the ability to govern a country?

      Wars = Eliminating your customers
      Impoverishment = Eliminating your customers
      Anarchy = Eliminating your Customers

      Do you see a very bad outcome here?

      Reply
    3. Susan the other

      No lowly social ideologue can hold a candle to the commanding heights of a naked currency ideologue.

      Reply
  8. Erica C

    This is an amazing interview and the only piece I’ve stumbled upon that explains holistically what’s going on right now in Argentina. Everyone should check out the rest of the Left Out’s episodes – to my knowledge they’re the only show on the left in the U.S. that digs deeply into domestic/global macroeconomic issues and makes complex subjects accessible to all listeners. The rest of the them just scratch the surface.

    Reply
  9. HotFlash

    The intro to a youtube presentation of John Perkins’ Confessions of an Economic Hitman begins with a quote from John Adams: “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.”

    Whether it is student loans, insane (but oh-so-easy to obtain) house mortgages or the good old-fashi0ned ‘company store’, debt is about extracting wealth and controlling people. And bonus! If you have the means of enforcement, wage-slavery and debt-peonage are scalable! As Smedley Butler will be happy to tell you.

    Reply
    1. Wukchumni

      I read that book about a decade ago, thinking it was more fantasy than reality, but now i’m not so sure.

      Reply
  10. Jim E

    “Economics: The User’s Guide” by Ha-Joon Chang, a Cambridge economist, is a good introduction for those interested.

    Reply
  11. jsn

    These issues try my faith in humanity, “But it was clear that the Argentine dictatorship – bolstered by a US-backed assassination program against labor leaders, land reformers and left-wing professors – would continue paying for at least five years. So that was the fund’s time frame.”

    What was the story all the people involved in this were telling themselves? Some of them must have really understood what they were doing, David Rockefeller I presume, how many of the individual bankers involved with a deal like this really understood what they were doing?

    Reply
    1. jsn

      That quote made me so mad I posted before finishing the article. Thank you Michael Hudson for spelling this all out. Sooner or latter the truth will come out about who was making those decisions in the “subbasement in the Pentagon”.

      Reply
  12. Scott1

    I wanted to say a few things but my computer is screwed up.
    I offer my deepest respect for Michael Hudson & Yves Smith.

    How to change the goals of the IMF becomes the goal.
    What organized group of people can make that happen?
    At one point they were supposed to be changing.

    It becomes clear that Institutions such as the IMF must be abolished,
    since they simply don’t change & reform is a pipe dream.

    This is why I am for the abolishing of ICE. It’s mission is to
    operate a reign of terror within the US. Changing that is a pipe dream.

    Changing the goal of the IMF is the same sort of pipe dream. At least in my humble judgement.
    Thanks

    P.S. I still hope to make happen a MSM TV Event: Econ Wars Domestic & Foreign. Change what is seen on the TV & you change what people believe. Human beings are walking ideas. This is why Dictators imprison enslave & murder people for “Thought Crimes”. Recent Congressional interview of Peter Stovak (sp?) was a Thought Crime prosecution.

    Reply
  13. Mel

    So who did buy it? The bond buyers turned out to be the wealthiest families in Brazil and in Argentina. …

    Huh. I think I see a strong parallel with the kind of looting associated with a Leveraged Buy-Out.

    Reply
  14. tawal

    Where does the IMF get $50 billion US dollars to lend? Does it create it electronically? If so, what stops the Argentinian Treasury from doing the same, thereby paying off the “debt” at any time? Therefore, why have the debt in the first place?

    Reply
    1. Mel

      I would suppose that the IMF has a U.S. dollar account at a Federal Reserve Bank, with a balance keyed in through an agreement with the FED. This would constitute the IMF’s reserve, which it would use to cover the debtor’s spending.
      I could be wrong.

      Reply
      1. tawal

        Thanks Mel. What stops Argentina, or you and me, from having an account at the FED. Why is the IMF worthy, and not others?

        Reply
        1. Mel

          I can only think that we’re not Important People, you and me. At Wolf Street, I was pointed to this informative, but eye-glazing, document about accounts at the FED. What we’re talking about is under the heading “Foreign Official Deposits”

          Reply
  15. tawal

    Thanks for indulging my late posts Mel. Seems to me that Argentina’s central bank should have (if they don’t already) an account with the FED. Canada does. Why some countries do, (and companies, see eg. Harley Davidson) and others don’t smacks of hypocrisy.
    Blessings, tawal

    Reply

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