Argentina's Fiscal Crisis
The country of Argentina is in the middle of a fiscal crisis. Its citizens have rioted causing the elected president Fernando de la Rua to resign and be replaced by an appointed president Adolfo Rodriguez Saa. Its citizens now don't like the appointed president. This type of situation occurs in countries that look for short term solutions to long term problems. President Adolfo Rodriguez Saa has set aside payment on its long term debt of $132 billion.
Argentina will not find any loans from the IMF or the World Bank after defaulting on its existing debt. Stopping payment on debt plays well with the local population, but takes away any chance to keep its fiscal problems in check with additional long term loans. Its citizens complain about only being able to withdraw $250 a week from their bank accounts as being a form of theft. The reason withdrawals are being limited is because unrestricted withdrawals would result in runs on the major banks eliminating liquidity and causing many of them to fail. Banks do not store depositors cash in a vault, but lend up to 80% of it to stay in business. Expecting every depositors cash to be available whenever they want to withdraw it is not practical nor an expected business practice. President Adolfo Rodriguez Saa plans to start circulating a third currency the argentino?!? With no backing of the currency. Exactly who does this fool think will accept the argentino in payment with no backing and no fixed exchange rate? As on citizen said, why not cut newspapers into pieces and use that as currency! The existing currencies are the dollar and the peso pegged to the dollar. With unemployment at 20% and middle class citizens unable to buy food to eat, a much different solution is needed.
The Argentine government should re-schedule its debt to re-open the coiffers of the IMF and World Banks. It should send any argentinos to Milton Bradley to be used in playing monopoly. It needs to provide a support system to its citizens to provide food for those who cannot afford it, and begin working on expanding exports to increase its manufacturing base to provide jobs for its citizens. The IMF will require government belt tightening to insure that Argentina can resume repayment of existing loans and any new loans. The government must also do a better job of explaining to its citizens why bank withdrawals have been limited and why government austerity measures will have to be put in place if the Argentine government and the country of Argentina is to survive this crisis.
12/30/01 ( 353 )
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