Similarity Between The Argentine And Spanish Economic Crises

[Joe]

The similarity is that both were/are due to artificially overvalued currencies.

In Argentina in the 2000 crisis, the "Convertibility" regime of 1 to 1 peso for dollars was an artificial, political "project" that was unsustainable. The reason that this was not abandoned until it was way too late to avoid the catastrophe was due to the bouts of hyper-inflation that had occurred in Argentina in the recent past and everyone in Argentina was desperate for anything to avoid that. It's interesting to note that many blame the "Neo-liberals" with the Convertibility regime when any true free market advocate would NEVER favor controls on exchange rates.

In Spain, the current crisis is due to another political "project", the Euro. The Euro first allowed Spain to borrow too much. Interest rates plunged in Spain when the Euro was introduced. And now because Spain cannot devalue because of their commitment to the Euro "project" there is really no hope in sight. A generation of youth will never have the experience of going to work everyday.

Both of Argentina and Spain's crisis were caused by political projects that resulted in an artificially, overvalued currency.

The only difference is that Argentina eventually abandoned the project. Will Spain?

 

[Joe]

WSJ comparing current European crisis to Argentine 2000 crisis: http://online.wsj.com/article_email/SB10001424127887323398204578489261685554102-lMyQjAxMTAzMDEwOTExNDkyWj.html?mod=wsj_valettop_email

 

[PaulBee]

Joe, thanks for the wise observation and for the info ! Let´s hope that Argentina will again be
in good shape before too long.

 

[I_L_Argentina]

The only difference is that Argentina eventually abandoned the project. Will Spain?

Spain abandoning the eurozone, I seriously doubt it, they are too busy with their scandals of corruption.