The Argentina Solution For Greece

My knowledge of geography is much better than my knowledge of economics, but it seems to me the major difference is that Greece can't plant millions of hectares of soybeans to help drag it out of economic abyss.
My knowledge of geography is much better than my knowledge of economics, but it seems to me the major difference is that Greece can't plant millions of hectares of soybeans to help drag it out of economic abyss.

No, but Greece has tourism. To go to a local currency allow them to be cheap again and the recovery can be outstanding: Germans buying and building real state, on vacation, spending on restaurants, and so on.
Greece has no soybean but Greece has Europe ;).
 
Sleslie I think you may be on the right track, but the data clearly shows that commodity exports only represented 12% of Argentina's GDP growth from 2002-2012. Rather it was the development of internal markets that got Argentina out of crisis, and is what is lacking in Greece, geography notwithstanding.

The current government's commitment to sustaining internal demand is one that I have to admire given the deflationary tendencies we're seeing elsewhere. Of course, these policies have undoubtedly contributed to really high inflation that the government must reduce in the near term.

Money Velocity in the US is at historical lows:

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If you're a business owner, which economy are you going to choose? Certainly not a dead one...
 
No, but Greece has tourism. To go to a local currency allow them to be cheap again and the recovery can be outstanding: Germans buying and building real state, on vacation, spending on restaurants, and so on.
Greece has no soybean but Greece has Europe ;).

But Greece has had tourism. It's not some vast, untapped, undiscovered resource.
 
Default is an appropriate solution if you put the house in order afterwards. But to default and simply go back to the old bad habits, that is just being politically disingenuous. And that is what Argentina did.

This is true. The current administration has essentially engaged in pegging the currency in a loose fashion.

Still, manipulated markets these days are the status-quo. You won't have true price discovery in a world where interest rates are manipulated by Central Banks.
 
Sleslie, to answer to your question about internal markets:

look at the examples backwards: when there is no internal market, it means that vast sections of the population are de facto excluded from economic activity: no jobs, no consumption, no growth... What Argentina (and other countries like South Korea, Malaysia, Brazil, and even the US in the 19th century) did was bring these excluded people into the economy to make it grow. This does not mean no imports/exports, it means optimising the internal population by boosting per capital wealth. Examples in the 10 million population range include Hong Kong, Sweden, Austria...

And yes 12% isn't small potatoes but it is not even one sixth of what the rest of the recovery was, so why do the commodities get all the sexy press?

And in response to Johnny regarding the Corralito:

if you read the links in the OP, both camps of economists address the subsequent Greek corralito. The pro-Grexit camp says it will be painful just as in Argentina, but as with Arg it will be short and lead to vast growth. The anti-Grexit camp says a Greek corralito would be much messier, since whereas Argentines had dollars that were immediately converted into pesos, there are no Drachmas. So for example, what do you do with contracts denominated in Euros? Messy.

Furthermore the first phase of a Corralito would be capital controls, but at this point they are inevitable in Greece. The ECB has already imposed effective capital controls by cutting Greek banks' liquidity (thanks Frau Merkl!), and no country has ever come out of such a mess without capital controls (Cyprus in the worst case, Malaysia in the best case). So in a sense the corralito has already begun in slow motion.
 
The only economics lessons Argentina can teach are cautionary tales. That said, a Grexit is a very good idea.
 
Default is an appropriate solution if you put the house in order afterwards. But to default and simply go back to the old bad habits, that is just being politically disingenuous. And that is what Argentina did.

I'm not really sure what you mean by bad habits here, but we may be in agreement.

Argentina from 1976-2001 consistently followed the "bad habits" recommended to it by the IMF and World Bank, cutting social spending, privatising state assets, making labour "flexible"... all of which predictably led to stunted growth. As we're seeing now all over Europe, austerity kills growth and then forces countries to the IMF loan window (that's a feature, not a bug).

Since then Argentina (whether by choice or by force) has been running current accounts that are far better than what the IMF was demanding of the Alfonsín, Menem and De la Rúa administrations. If it were to reverse that course, and again start implementing austerity (eg, as Brazil is doing now) then, yes I agree that would be unvirtuous backsliding.
 
[background=rgb(252, 252, 252)]Since then Argentina (whether by choice or by force) has been running current accounts that are far better than what the IMF was demanding of the Alfonsín, Menem and De la Rúa administrations. If it were to reverse that course, and again start implementing austerity (eg, as Brazil is doing now) then, yes I agree that would be unvirtuous backsliding. [/background]

Yep, you are a Keynesian. I guess we will agree to disagree.
 
Germany wanting Greece to become austere. That will never happen, the Griegos knows how to use the "Russian cards" cleverly.
First, the Griego has to get paid from the Germans for WW II damages done to them then bring in the Russos to build a base there.
At the end, Germany will pardon off existing debt and re-loan them more Euros..Clever, cunning, those Greeks...New con-game on the horizon, we all going to enjoy watching the game unfold...
 
The Ks, by keeping interest rates artificially low and fixing the exchange rate, have created distortions much like the Menemistas did, which they have managed through corralito-esque controls on trade, on currency trading, etc.

I am not sure I agree with the idea 100%, but in theory, current accounts and trade balances could be controlled by raising interest rates. It's not exactly politically popular, but by not doing it, the inevitable is only delayed, it seems.

Either way, the current account and trade surpluses are important and a major difference from the Menem years.
 
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