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View Diary: Don't Cry for Greece, Argentina (87 comments)

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  •  Some good points and (5+ / 0-)
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    taonow, ybruti, erush1345, Uncle Cosmo, Matt Z

    some similarities. But also, some big differences.

    Argentina is a huge exporter of agricultural products and has an abundance of natural resources. Greece, not so much. Argentina has a trade surplus, Greece a trade deficit. If Greece dumped the Euro and went to the drachma, they still need to import/buy food from other Euro countries and those countries will insist on payment in Euros. While Greece is a relatively poor country today, under the new drachma, it would be catastrophically poor. Be careful what you wish for.

    At default, Argentina's fiscal deficit was 3.2% of GDP and its debt 150% of GDP, Greece's fiscal deficit was 10.5% of GDP and its debt was 54% of GDP.

    And, as you point out, default is never a clean slate. Argentina, to this very day, is shut out from the global credit markets. Debtors will eventually be paid, albeit on Argentina's terms. However, lets not kid ourselves that its the "big French and German banks" that will get hurt. In Argentina's case, a huge amount of the debt was funded by Italian, Japanese and American pension funds who lost 2/3 of their investment. That isn't big banks losing money, thats American workers.

    •  Argintina is an exporter now, but then... (2+ / 0-)
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      Euroliberal, Calgacus

      Remember, when they defaulted they were in the midst of food riots. People were quite literally starving to death. (Documented cases.) Trade was completely shut down in the short term. It was painful--very painful.

      The question is whether decades of austerity would be less painful--or even work. And will it prevent losses to the pension funds? Every place that has already been tried (South America) it has only deepened the economic woes.

      Like I said above, default is not a magic wand--it will not resolve all the pain. It is the better of the two options, though, and it is likely to actually work, where austerity is likely to fail.

      De air is de air. What can be done?

      by TPau on Fri Nov 18, 2011 at 12:57:29 AM PST

      [ Parent ]

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