Guest Post: Another Consequence Of Economic Decline

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man

Another Consequence Of Economic Decline

Nearly 10-years ago to the day, the government of Argentina collapsed. Beset by weighty deficit spending and a completely unrealistic currency peg to the US dollar, Argentina became the poster child for the golden rule of economics: ‘that which is unsustainable will not be sustained.’ It’s reversion to the mean.

Within a matter of days, the country had burned through several presidents, the currency collapsed, inflation soared, unemployment shot up, crime rates spiked, and the government defaulted on its debt.

After limping along for most of the last decade with a socialist agenda, the government of Argentina is at it again. The economy is rapidly deteriorating, and street-inflation has surpassed 25%.

Naturally, the administration of President Cristina Fernandez insists that inflation is not a problem, despite the Argentine peso losing 25% of its value against the US dollar over the last three-years (and far more against gold).

Meanwhile, Fernandez has borrowed her plays from Atlas Shrugged. She’s imposed capital controls, raided pension funds, nationalized private property, and taken control of the media… all in a vain attempt to delay the endgame.

A few weeks ago, the government passed a package of new laws, essentially criminalizing public protest under the auspices of combating terrorism. The legislation, snuck in at a midnight session during the holiday period, provides severe punishment for various crimes under a very broad definition of terrorism.

Fernandez herself maintains that the law would -never- be invoked to restrict the legitimate rights of Argentines. This, from a woman who simultaneously passed legislation to seize control of the country’s newspaper industry.

In her latest move, Fernandez has stepped up her saber-rattling over the Falkland Islands, a nearby archipelago that has been a British territory since 1833 (it is now self-governing). You may remember that Argentina invaded the Falklands in 1982 and was subsequently defeated after a bloody conflict with Britain.

It’s a sore subject in Argentina; the government still claims sovereignty over the Falklands (known as Las Malvinas in Argentina), and Fernandez is waving the flag once again.

Last month Argentine naval forces were sent to frustrate commercial fishing around the disputed territory. And in the most recent development, Argentina, Brazil, and Uruguay announced that they were closing their seaports to any ship flying a Falklands flag (all 25 of them…)

Argentina has also mounted pressure on the British government to reopen negotiations over the Falklands’ sovereignty. Thus far, the Brits have refused.

Cristina Fernandez’s BFF Hugo Chavez recently added to tensions by saying, “The English are still threatening Argentina. Things have changed. We are no longer in 1982. If conflict breaks out, be certain Argentina will not be alone, as it was back then.”

At this point, it’s all just tough talk and petty annoyances. But here’s the thing– there are four billion barrels of oil estimated to be within the Falklands’ territorial waters.

Given the utter insanity with which Fernandez governs her country and the desperation in the Argentine economy, one cannot rule out the possibility of her trying to grab Las Malvinas by force. After all, military conflict is the ultimate social distraction.

I’ve often written that economics drives everything. A solid, vibrant, competitive economy lifts an entire nation into prosperity, while deteriorating fundamentals and a socialist agenda create inflation, unemployment, and social turmoil.

War is just another one of those consequences. And given the vast deterioration in the global economy coupled with deeply-seeded conflicts around the world, the Falklands is just one of many that we may have to look forward to in 2012.

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Popo's picture

Well,  at least Argentina has hot chicks.


economics1996's picture

The United States federal government spends 25.3% of the GDP and collects 14.4% in taxes.  We finance 10.9% of our economy through debt, at the federal level.  This does not include state, local, and private debt.  Sound like Argentina?

economics1996's picture

If the asshole pos in the WH would get his dick out of Americas ass we might be able to work for a fucking living.

robobbob's picture

Unlike that third world place, our investments in MIC have paid off beyond calculation.

We went into debt, but leveraged it up enough to buy off most of the world.

at least for now.

Aquiloaster's picture

For work, I have been back and forth to Argentina for over three years now. I am in Argentina for a year. The previous times I was here for 7 weeks a pop. I leave it to the readers of ZH to extrapolate what my experiences mean, but here they are:

1. The exchange rate has remained remarkably constant, hovering between 4 and 5. It has been 4.25 on two of the three occassions I have been here.

2. The cost of living here, in dollars (as I calculate my expenses when I get home) has gone up each time. Now, my apartment in a northern Argentine provincial captial costs about 60% as much in dollars as my aparment in the Philly metro area for the same number of bedrooms etc., but food is currently costing about 110% of what it did in the eastern US.

3. I have been here now for two months, and have not seen a significant change in the costs of food or essentials --specifically beef--the end all and be all of staples here.

Conclusion: Either this article is bunk/fairly ill-informed, or the US has a similar inflation rate right now. Or something else fishy. Probably the latter. Can someone analyze?

economics1996's picture

From a economic perspective the food going past 110% is a red flag.  When inflation hits inelastic items, food (-.2%), energy (-0.06%), go up very rapidly.  Housing (-0.6 to 1.2%) is inelastic but more elastic than food and energy and would climb in price at a slower pace, but not for long. 

If I were you I would be watching the food items, get my money the hell out of there ASAP, and be ready for a rought ride.  Get your lease extended ASAP if you plan on staying there and buy capital purchases NOW.  Automobiles, anything durable.

The most important thing is to have your money out of there and all your capital purchases completed ASAP.

Gromit's picture

Argentina has a dark, dirty secret. They have repudiated Western bankers and their people have prospered. At all costs this truth must not filter through to the other debtor nations so consistent nonsense, "basket case" , "runaway inflation", government by edict" etc etc must be force fed by compliant media. Even the F'ing Economist magazine for Fs sake!

AchtungAffen's picture

Exactly. The moneyed dicks will never forgive us argies for the default Greece should be doing right now.

Oliver Jones's picture

Would this be the same Economist that, in 2011, described protectionism as "impoverishing developing nations"?

The Beano has more credibility.

trav7777's picture

have noted similar trends in other south american countries.

TheGardener's picture

But they only give you a glance from under their sunglasses when you just about passed...

And if you do manage to get one, you will have to meet her friends and familiy and pretend

you`ve know each other for ages... comparable chicks of Italian descent are much more of a bargain in Aussi or the US..

Buck Johnson's picture

They sure do, I lived there for close to 5 years.  But I thank the poster in commenting about this, I totally forgot about Argentina.  I remember Kirchner taking the Pensions but didn't consider that Argentina was going into a default like they had 10 years ago.

Chupacabra-322's picture

@ fightthepower,

Guns Bitches!!!

Don Birnam's picture

Interesting, that the Falklands are mentioned, as the Duke of Cambridge -- the future King, Prince William -- is being posted, long ith his RAF unit, to this disputed archipelago in February.

philipat's picture

Sounds just like NDAA. Do they compare notes?

The Falklands diversion is also directly analogous to Iran/Pakistan. Create a false diversion and get everyone to get all wrapped up in the flag. Pathetic really, not that they do it but that the sheeple still fall for it every time. Argentina OR the US.

sabra1's picture

right on! check out how many reactors are built on fault lines! by the way, i used to love that show Columbo, with that dude, Peter Falkland!

Seize Mars's picture

i used to love that show Columbo, with that dude, Peter Falkland!

I've always wanted a Guy Falklands Mask


trav7777's picture

huh??  Japan is a faultline.  Faults are everywhere.

Please don't tell me you believe they built it there knowing that a quake was inevitable within the next 50,000 years and would kill lots of people.

seek's picture

I'm willing to respect quite a few conspiracy theories, but that one is flat-out looney-toons. It wasn't an accident, alright -- but the cause was a design so crappy one of the engineers resigned, citing a failure mode identical to what happened.  Yet the author of this theory dismisses out of hand that there were any engineering flaws as "The designers of the plant most certainly took all such cases into consideration." A designer did, recognized the design as flawed, and things progressed anyway.

Earthquake magnitues are easily verifiable by virtually any univerity seismology department on the planet, and the theory is arguing the the actual quake 10,000 weaker than stated.

Sorry, doesn't fly. Junk theory. There's a real conspiracy here, alright, but it's TEP and GE covering up a bad design and bad decisionmaking in the name of profit, not some whacked earthquake-didn't-happen, let's cause an intentional meltdown theory.

Buckaroo Banzai's picture

When you purposely build something that's accident-prone, and you put it in a place where accidents are likely to happen, and then an accident happens, and the thing breaks just as smart people expected it would (even though those smart people were "somehow ignored")... well, I guess it's either a really amazing coincidence, or its a conspiracy.

You wacky "Coincidence theorists" drive me nuts.

Evil Bugeyes's picture

Little known fact: Chernobyl and Fukushima were actually built by closet anti-nuclear activists in a deliberate attempt to discredit nuclear power.

trav7777's picture

you seem unable to grasp "specific intent"

Caviar Emptor's picture

All conspiracy theories conveniently ignore the messiness factor of life: mistakes, bonehead stupid decisions, beyond-belief-dumb-as-turnips people, poor timing, poor choice of words, disorganization, fucked up things happening at the worst possible moment, Murphy's Law, bad weather, perfect storms, lousy mainteneance, blatant negligence, ignored warnings, running red lights, and the fact that some people go a little crazy some times

trav7777's picture

I have to ask:  do any of you people have jobs where you have to interact with other people?  Do you not DAILY see this phenomenon in play where groups of people, individually smart enough to do something not stupid, end up doing something VERY stupid while the whole entire group goes along with it?

BigMike's picture

I wish I had a alt-energy powered commune in Chile so I didn't have to worry about this shit all the time.

NEOSERF's picture

Chile has some big faults...why not Honduras or Costa Rica?

kito's picture

HA!!! nice...............

LULZBank's picture

OT but can someone please tell me, why is there VAT on Silver in Europe?

Any way to avoid it?



Saro's picture

Any way to avoid it?


LULZBank's picture


No way Im moving to Chile! I just invested my cash in the 4th Pillar!

Ratscam's picture

if you,re not a US citizen buy ZSIL or JBSIUA at the SWX, it represents physical silver in the nominal amount of 1000 ounces. you only get charged VAT when you demand it physically. Hence you still have governmental risk in a feuderalistic democracy. else pay the 8% VAT and regard it as an insurance premium against the gov risk

smiler03's picture

I'll get junked for this but you could try an ETF, VAT free




debtor of last resort's picture

Coins are for investing or saving and vat free. Bars are for industrial use, according to governments so with vat.

Avoid it? Coin bars from Andorra for example.

JW n FL's picture



debtor of last ...

Coins are for investing or saving and vat free. Bars are for industrial use, according to governments so with vat.

Avoid it? Coin bars from Andorra for example.

As well maybe buy directly from the Perth or Cnadian Mint? will that get around the Tax?

Nice little shop you posted as well. it is interesting (to me) to see what the rest of the World is looking at..

how about the 5 X 9's Maple? maybe a few for the novelty of it?

I tend to see the extra silver / cooper in my Liberty (U.S.) Crowns Coinage as free extra metal.

Once again! Thanks for sharing differnet and interesting!

Cast Iron Skillet's picture

nicht ganz. In Germany you pay a reduced 7% vat rate on silver coins and the full 19% rate on silver bars, while gold coins and bars are vat free. go figure.

css1971's picture

One of the reasons I don't buy physical silver.  Add the volatility, correlation with the stock market and bulk.

In the UK not only is gold VAT free, but "Sterling" coins (Sovereigns, Britannias) are also capital gains tax free.


doggings's picture


OT but can someone please tell me, why is there VAT on Silver in Europe?

Any way to avoid it?


buy it here at spot price and no vat

Irish66's picture

The legislation, snuck in at a midnight session during the holiday period, provides severe punishment for various crimes under a very broad definition of terrorism.

Dr. Engali's picture

Is he writing about the U.S.?

Irish66's picture

I wonder how many other countries did this recently?

Dr. Engali's picture

My guess is that there are plenty of countries following our lead.