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

For all the differences between the rules and practices affecting rich countries like the United States as opposed to emerging markets, some unsettling resemblances to the U.S. situation are evident in the story of Argentina's rise and fall. Most remarkable is the manner in which the flow of foreign capital into the United States has rendered its p

"The lesson is, we must pay attention to bubbles," the minister replied. "With stocks, or companies, or countries, all are part of the same phenomenon. Probably Argentina is the best example of a country." For developing nations, he added, "the worst period is when financial markets have the most liquidity. This is when cou

Why did this happen? Amid all the forces that were still pumping money into Argentina—the generally positive assessments of Wall Street analysts, the obligations of index-bound money managers to apportion much of their portfolios to Argentine bonds, the desire of European retail investors to diversify out of their own governments' low-yielding pape

The Argentine story underlines the limitations of the free-market approach promoted by Washington, and much other experience from the developing world has shown that these sorts of policies are not growth elixirs. They may spur supercharged expansions for a period of time, but in many cases performance tends to flag after a while, for reasons that

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

Argentines in the mid-1990s—leaders and citizens alike—wanted to hold fast to convertibility for a good while longer, with considerable justification. To that end, they should have squarely faced the fact that their fiscal policy was not sufficiently prudent.

Suing a foreign government is usually unrewarding, because the government's overseas assets are generally modest in size, or completely protected from litigation in the case of embassies and other diplomatic facilities. But as Porzecanski noted, in one recent case an aggressive legal strategy had paid off for Elliott Associates, a New York–based &q

A new low came on July 10. At its bond auction that day, the government was forced to offer record yields of 14 percent to attract buyers of three-month bills. Paying such high rates to borrow for such a short period was the death knell of many a debtor nation. Even Argentine banks, which had been pressured by the government in recent months to buy

the economy was continuing to contract. At the same time, a nasty dispute erupted over demands by the provincial governors for money they said the federal government owed them to cover their June bills, which included obligations such as school lunches for children. Public workers demanding unpaid wages, and jobless people seeking work, were taking