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Sunday, March 22, 2009

Argentina's 2001 Economic Collapse

I have been watching a documentary video about the collapse of Argentina's economy in 2001 in an effort to better understand the potential direction that my own country may face in the near future. The film is called "Memoria Del Saqueo". You need to understand that the video does have its own strong socialist editorial perspective and it does seem very one sided. Despite this, its bleak clarity and retrospection of economic chaos is useful in seeing that crazy things are possible in modern societies. I don't know if any of this is making sense.

I remember years ago when I first saw image on the news of supermarket riots where thousands of people were looting for bread and water. I remember the term "hyperinflation" being bandied about by the news. Since Argentina is half a world away, I never learned much about it. However, recently as Ben Bernanke, Hank Paulson and Tim Geithner fired up the dollar printing presses, I've heard the term "hyperinflation" used in conjunction with our own economy. This has led me to begin to look into what happened in Argentina and how to prepare in case it happens here.

The situation became dire long before the complete economic collapse. The 1980's brought hyperinflation and debt. Policy after policy were enacted, none having the long term effect of bringing the economy into a stronger position. This was then followed in the early 1990's with the President Carlos Menem's privatization of the national oil company YPF along with a number of other national industries. From what I can tell, the privatization was done in an effort to get money to pay off Agentina's debts. The privatization also provided billions of dollars in kickbacks and bonuses to politicians and business executives that pushed through the sale of the public industries.

The movie "Memoria Del Saqueo" is very visual in its economic critique. There are images of blocks and blocks filled with unemployed people taking to the streets. There are shots of doctors talking about how 80% of the children they see are malnourished and underfed. There are lots of accusatory shots of shanty towns and garbage piles. The film does a good job of showing the symptoms of a collapsed economic situation. Unfortunately, I think the film lacks any real detail about how it happened and fails to offer any workable solutions. In the end, the film itself collapsed into little more than an emotional socialist plea. Argentina faced a tailspin collapse; I was looking for a more detailed analysis of how the hyperinflation happened and what could have been done. Instead, the video showed angry people marching, upset that the government was raising taxes, cutting programs, and wasn't giving them jobs. I wish that I had been able to find more information in the video. Crazy things can happen in modern societies and I will need to continue to search for answers.

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