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 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

During the Asian financial crisis, the IMF would be accused—with considerable justification—of pushing countries such as Thailand and Korea too far in the direction of budgetary austerity, driving economies that were already headed for trouble even deeper into recessions. Paradoxically, in the case of Argentina, its pride and joy, the Fund's pushin

At the same time, however, Argentina's errors were indulged by the policy elites of Washington and the financial elites of Wall Street. The IMF may be fairly accused of what might be called "poster-child syndrome" in the enthusiasm it manifested for the country's adoptions of reforms that the Fund had favored.

But global financial markets were even more grievously at fault in this regard. Private international financiers and bond investors were willing to supply the country with all the capital it required; accordingly, it is far from clear that a more confrontational IMF stance could have changed Argentine policy much in the mid-1990s, when the Fund's p

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 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

Countries often run low on hard currency; in typical cases this is because they have incurred high levels of foreign debt or run large trade deficits. When that happens, they may turn to the IMF for a "program," including loans that can help tide them over so that they can continue importing vital products and keep their economies functio

Dissatisfaction with index-based performance measurement runs high among financial market participants, and people have been aware for some time of its particularly warped results in emerging markets. In November 1998 an article in the Emerging Markets Debt Report said that investors and analysts "generally agree" that the EMBI-Plus "

"exploding debt dynamics." It refers to an ever-increasing debt-to-GDP ratio, with higher interest payments and low growth driving the ratio inexorably upward with the passage of time.