The Argentina Solution For Greece

[Nico.S]

The problem with the Grexit model is that, unless the state assumes all private debt and then defaults on it, private actors will effectively be insolvent overnight and bankrupt. I think Greece would look like Argentina after the dictatorship in the 1980s and not Argentina of 2001. In 1980 the Argentine state faced a financial crisis after its last overvalued exchange rate regime, la tablita. Like in the 1990s, the overvalued exchange rate created a current account deficit that created lots of private debt that was completely unsustainable after the devaluation. In order to prevent a total collapse of the financial system, the Argentine state under Cavallo, assumed private debt. Argentina after this faced an entire decade of stagnation that only changed with Menem’s convertibility program that simply re-did the same thing that la tablita did, but for much longer.

I think this example of the 1980s is a more appropriate example for Greece. The 1980s was not a time of a commodity super-cyle like Argentina faced after 2001; therefore, Greece would likely face the same external conditions as Argentina in the 1980s in its largest markets: recession. Either way, I do not think that Greece has a easy road ahead.

 

[EdRooney]

Bradley, I highly urge you to read the Varoufakis blog post above on why he is against Grexit (incidentally written far before he became FinMin for SYRIZA).

Greece has its hands tied in this regard because, since it signed on to the Euro, it basically has no control over monetary policy (interest rates). Monetarists (eg Milton Friedman, Paul Krugman) are always going to argue that the problem can be solved by monetary policy: raising or lowering interest rates. Varoufakis' point is that even if Greece were to have its own central bank, its export mix and trade partners are not suitable for stimulating short to medium term growth. Therefore the solution cannot be through monetary policy but rather through fiscal policy. I.e., money needs to be put into the hands of Greek consumers, as happened in Argentina.

The problem is how do you get from here to there? Argentina (under Duhalde of all people) had guaranteed employment programmes that stimulated aggregate demand. The German government and the Troika* are utterly opposed to such ideas. Instead they are religious zealots regarding deficits, in spite of all evidence.

AKA: The Artist Formerly Known As The Troika

 

[sesamosinsal]

Will read the V blog post later this afternoon.

In the meantime, this is for you, Ed. https://www.youtube.com/watch?v=Afl9WFGJE0M

 

[camberiu]

Keynesian....
Keynesians everywhere in both sides of the discussions. Keynesians defending the Greexit and keynesians against it. Keynesians during the Delarua regime and keynesians now under the Ks.
IMF = Keynesians
Dilma = Keynesian
Obama = Keynesian

http://youtu.be/d0nERTFo-Sk

 

[ghost]

Greece is poster child for the complete deconstruction of the Euro dream.

 

[camberiu]

Greece is poster child for the complete deconstruction of the Euro dream.

The Euro lunacy.
And the Euro is the poster child for the lunacy of central planning.

 

[EdRooney]

Keynesian....
Keynesians everywhere in both sides of the discussions. Keynesians defending the Greexit and keynesians against it. Keynesians during the Delarua regime and keynesians now under the Ks.
IMF = Keynesians
Dilma = Keynesian
Obama = Keynesian

Wait... you brought up the word Keynesian and are the only one to have mentioned it here. Now you're complaining about its ambiguity? Whom are you debating, yourself?

 

[camberiu]

Wait... you brought up the word Keynesian and are the only one to have mentioned it here. Now you're complaining about its ambiguity? Whom are you debating, yourself?

Not complaining about its ambiguity. Complaining about is prevalence. Countries follow the keynesian recipe until they go broke and have to default. And then it is suggested that after they default, they should go back to the keynesian solution of overspending and discouraging savings, which was what caused the country to default in the first place.

 

[EdRooney]

OK but wouldn't that indicate that either:

a ) the people/groups you mentioned have nothing to do with Keynes​

or​

b ) the term "keynesian" has become utterly void of meaning (like the term "peronism")?​

Either way, I still can't figure out why you're debating the term Keynesianism instead of addressing the actual facts that I and others have brought up.


BTW: I totally agree with you that the Euro is utter lunacy. The question is can it be reformulated to benefit people instead of big banks, and if not, how can countries get out with minimal damage.

 

[scotttswan]

http://www.foreignaffairs.com/articles/142828/mark-blyth-and-cornel-ban/austerity-vs-democracy-in-greece

Greece can't do what Argentina did but Germany desperately needs to stop the madness.

The UK too