There’s socialism and then there’s socialism
Megan McArdle alerts us to the doings down Buenos Aires way: Hemmed in by the global financial squeeze and commodities slump, Argentina’s leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation’s private pension system. The government proposed to nationalize the private pensions, ...
Megan McArdle alerts us to the doings down Buenos Aires way: Hemmed in by the global financial squeeze and commodities slump, Argentina's leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation's private pension system. The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade.... Argentine President Cristina Kirchner said the move to take over the private pension system was aimed at protecting investors from losses resulting from global market turmoil. Funds in the system, which is parallel to a government pension system, are administered by financial firms. The private system has about $30 billion in assets and generates about $5 billion in new contributions each year. While no one knows for sure what the government would do with the private system, economists said nationalization would let the government raid new pension contributions to cover short-term debts due in coming years. Argentina's financing needs are growing quickly as the global financial squeeze pushes down prices of its commodity exports, such as soybeans. Coupled with unchecked government spending, the commodity downturn has carved a gap of around $10 billion to $11 billion in what Argentina must pay on its debt between now and the end of 2009, according to economists. The payments are from debt restructured after a 2001 default and new debt issued locally.... President Kirchner painted the move as an attempt to help workers weather the financial crisis. The value of private retirement accounts in Argentina has probably fallen in recent months due to a declining stock market, economists say. President Kirchner said in a speech: "The main member countries of the [Group of Eight] are adopting a policy of protection of the banks and, in our case, we are protecting the workers and retirees." Buenos Aires economist Aldo Abram, among many other economists, wasn't buying that argument. "They were in a tight situation and this was an accessible source of funds," he said. The United States government is very, very fortunate to be borrowing in its own currency.
Megan McArdle alerts us to the doings down Buenos Aires way:
Hemmed in by the global financial squeeze and commodities slump, Argentina’s leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation’s private pension system. The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade…. Argentine President Cristina Kirchner said the move to take over the private pension system was aimed at protecting investors from losses resulting from global market turmoil. Funds in the system, which is parallel to a government pension system, are administered by financial firms. The private system has about $30 billion in assets and generates about $5 billion in new contributions each year. While no one knows for sure what the government would do with the private system, economists said nationalization would let the government raid new pension contributions to cover short-term debts due in coming years. Argentina’s financing needs are growing quickly as the global financial squeeze pushes down prices of its commodity exports, such as soybeans. Coupled with unchecked government spending, the commodity downturn has carved a gap of around $10 billion to $11 billion in what Argentina must pay on its debt between now and the end of 2009, according to economists. The payments are from debt restructured after a 2001 default and new debt issued locally…. President Kirchner painted the move as an attempt to help workers weather the financial crisis. The value of private retirement accounts in Argentina has probably fallen in recent months due to a declining stock market, economists say. President Kirchner said in a speech: “The main member countries of the [Group of Eight] are adopting a policy of protection of the banks and, in our case, we are protecting the workers and retirees.” Buenos Aires economist Aldo Abram, among many other economists, wasn’t buying that argument. “They were in a tight situation and this was an accessible source of funds,” he said.
The United States government is very, very fortunate to be borrowing in its own currency.
Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner
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