Financial Crisis in Argentina Caused By People Forgetting To Think


Last night, we watched a documentary film about the financial crisis in Argentina. It was the sort of polemic that might have been made by Michael Moore – arguing that Argentina’s financial woes of 2001-2002 were caused by rich international investors and globalised companies, rather than by the Argentines themselves.

What a wonderful medium the documentary is. Show a photo of a poor starving child; then show a photo of a rich, fat man, eating in a fancy restaurant. You have made your argument; and the spectator gets to take your point without ever having to put two and two together. That is the beauty of the documentary; it doesn’t require any thinking on the part of the viewer.

(As an aside, we’re trying our hand at the medium ourselves… we’ve have been working with the makers of the hit documentary, Wordplay…about the NY Times crossword puzzle. “We didn’t think it was possible to find a more boring subject than crosswords,” says the director Patrick Creadon “but now we’re making one about debt.”)

If you really wanted to understand what happened in Argentina…and why a financial crisis struck the country in the early 21st century…you would have to do a lot of thinking. Like the rest of life, the facts are infinitely complex and nuanced. But neither investors, nor voters, nor soldiers can stand ambiguity. They need a simple narrative that turns them into saints, heroes, and geniuses…and leads them right to the gates of Hell.

The neo-Peronist, Carlos Menem – with the help of American economists – had pegged the Argentine peso to the U.S. dollar. This had the expected effect – it stopped inflation. But once the danger of Argentine-style inflation was passed, the coast was clear for the big banks to lend money on a grand scale. Argentina’s foreign debts soared. Meanwhile, the relatively strong new peso made it difficult for Argentina’s exporters to stay in business. Because of the one-to-one exchange rate, Argentine products were expensive to the rest of the world. Industries closed. Unemployment rose.

And then, people took to the streets. They had a narrative of their own. They thought the problems were all caused by a small elite of evil bankers, corrupt politicians, and greedy international businessmen. “Out with them all,” they chanted, banging pots. “Thieves!” they shouted.

All narratives have some truth in them. This one had a measure of it. But whatever truth there is soon becomes lost in the vanity and mindlessness of it all. People come to believe only the most cartoon-like version of the narrative…and forget to think.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.


  1. Hello

    You do not mention which documentary about Argentina you watched, but what you claim rings true of many of them.

    Your explanation of things, however, is also simplistic and off the mark. There is no evidence that the peg of the peso to the dollar harmed exports. Exports rose at a 3% yearly rate during the 1990’s.
    Argentina’s economy didn’t rely heavily on exports anyway (they accounted for about 5% of GDP).

    There were a couple of foreign induced investment crises (Brazil, Russia) that buffetted the argentine economy in the second half of the 1990’s. One of these crises came just before an election. As expected during an economic recession, the incumbents lost.

    The opposition “alliance” was elected in 2000, just when the economy was about to recover (growth had barely turned positive by January 2000). They took office and raised taxes, supposedly to garner international confidence in the “seriousnss” of the government. The economy tailspinned.

    The alliance immediately broke in internecine fights, the vice president resigned and took his supporters away from the government. A weak government of a political party (Radicales) who hasn’t been able to finish a presidential mandate in the last four times they were in office was left in power. They lost control of the country and resigned among riots. Eventually control was
    regained when the candidate defeated by the Alliance, Duhalde, took power. As soon as control was regained, the argentine economy rebounded vigorously, having grown at over 8% per year non-stop in the last four years, in what some dub an economic miracle.
    A more sober look just shows that the foundations laid down in the 1990’s were strong and were just sidetracked in the early 2000’s by politicians.

    There was no economic crisis in Argentina. Just an old fashion political one. But a really bad one.

    Gordon Pasha
    May 30, 2007
  2. Thinking sucks. Listen to your broker. Mutual Funds. Yeah. Growth Funds. Yeah, Yeah. Listen to Congress. Fair Trade. Trade sanctions. Yeah. Price gouging for big oil. Yeah, Yeah. That’s the ticket. Speculate. China stocks. Buy high. Sell higher. Yeah. Soft landing. Yeah, Yeah. Cut interest rates. Yeah. Taste great; less filling. Yeah. Get rich; don’t think.

  3. I find it hilarious that this review was posted only months before the *global* financial crisis started, one that is widely accepted to have been the fault of rich international investors and globalised companies


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