And the Money Kept Rolling in (And Out): Wall Street, the Imf, And the Bankrupting of Argentina: Wall Street, the IMF and the Bankrupting of Argentina

In turn, the national debt would rise from 35 percent of GDP in 2003 to 50 percent of GDP in 2013—the highest since the mid-1950s, when the United States was still paying down the debt it incurred to fight World War II. The projected red ink and increased debt would be even greater in the years thereafter, when the baby-boom generation reaches reti

"A better approach would recognize that default is a natural feature of the market mechanism, not something to be avoided at all costs. But it would seek to limit the costs of sovereign defaults when they do occur."

The best proposal might be the development of a market for new types of bonds that work more like equity than debt. These securities, called growth-linked bonds, would pay interest that rises or falls depending on a country's GDP. Instead of being forced to shell out interest payments based on a prefixed schedule, a government would be allowed to p

In magnitudes that Argentines could only dream of, the U.S. government has been spending more than it raises in taxes, and American consumers and businesses have been importing more goods than they have been exporting, with borrowing from foreigners covering much of the gaps. The record budget deficit of about $413 billion for 2004, and the record

the ability of portfolio investors to move money unfettered across national borders is a matter of controversy among economists, much more so than is the freedom of trade in goods. With regard to this aspect of global capitalism, the Argentine crisis underlines the need for major repair. It points inexorably to the conclusion that government effort

If the lessons of Argentina's crisis lead to substantial revisions in the rules of global finance, the suffering of the Argentine people will not have been entirely in vain. Timidity and inaction by the international community, on the other hand, would add insult to the Argentines' injury. That, of course, is the least important of many good reason

It could happen here. Americans who give Argentina's story fair consideration and conclude otherwise are deluding themselves. The risks are much lower for the United States than they were for Argentina, but they are unacceptably high.

Perhaps caution about emerging-market debt will return to the financial markets. At the end of 2004, however, the bulls were continuing to run wild; spreads fell back to record lows after having risen at midyear, and borrowing by emerging-market governments and companies was headed for a new annual high. Whatever happens, global investors have once

This analysis does not mean that cross-border flows of capital should be severely stifled, much less eliminated entirely. But within the category of foreign capital, some types pose greater risks than others, much as certain kinds of cholesterol are beneficial for the heart while others clog the arteries. In the "good cholesterol" capital