not exactly. OPEC oil is pegged to a combination of the dollar, supply and demand, and speculation (so it is not much of a "peg") the Yuan peg to the dollar has been loosened somewhat. The Chinese are allowing, under pressure of course, the Yuan to rise very slowly relative to the dollar.
is the US the next Argentina?
- Thread starter zdreg
- Start date
state pensions are going sink the US the same way the provinces sank Argentina because the central government came to rescue of the provinces
http://www.financialsense.com/node/924
http://www.financialsense.com/node/924
there are already shortages in the US
http://www.nytimes.com/2011/12/27/world/europe/greeks-reeling-from-health-care-cutbacks.html?hp
December 26, 2011
Fiscal Crisis Takes Toll on Health of Greeks
By SUZANNE DALEY
PERAMA, Greece â The free clinic here opened about a year ago to serve illegal immigrants. But these days, it is mostly caring for Greeks like Vassiliki Ragamb, who was sitting in the waiting room hoping to get insulin for her young diabetic son.
Four days earlier, she had run out of insulin and, without insurance and unable to pay for more, she had gone from drugstore to drugstore, pleading for at least enough for a few days. It took her three hours to find a pharmacist who was willing to help.
âI tried a lot of them,â she said, gazing at the floor.
Greece used to have an extensive public health care system that pretty much ensured that everybody was covered for everything. But in the last two years, the nationâs creditors have pushed hard for dramatic cost savings to cut back the deficit. These measures are taking a brutal toll on the system and on the countryâs growing numbers of poor and unemployed who cannot afford the new fees and co-payments instituted at public hospitals as part of the far-reaching austerity drive.
At public hospitals, doctors report shortages of all kinds of supplies, from toilet paper to catheters to syringes. Computerized equipment has gone unrepaired and is no longer in use. Nurses are handling four times the patients they should, and wait times for operations â even cancer surgeries â have grown longer.
Access to drugs has also been affected, as some drug manufacturers, owed tens of millions of dollars, are no longer willing to supply Greek hospitals. At the same time pharmacists, afraid that the government might not reimburse them, are asking for cash payments, even from those with insurance.
Many experts say that Greeceâs public health system was bloated and corrupt and in dire need of reform. But they say also that the cuts have been so deep and have come so fast, that they have hit like a tsunami.
In just two years, the government has cut spending on health care to $17 billion from $19.5 billion â a 13 percent decrease. And under its agreement with its creditors, Greece must find even more health care savings next year â as much as $915 million, government officials said.
At the same time, public health facilities have seen a 25 to 30 percent increase in patients because so many Greeks can no longer afford to visit private clinics.
Dr. Olatz Ugarte, an anesthesiologist at the Saint Savvas Cancer Hospital in Athens, said that breast cancer patients often have to wait three months now to have tumors removed. âWaiting that long can be life or death for these patients,â she said.
In a recent letter to the medical journal The Lancet, a team of English researchers warned that a âGreek tragedyâ could be in the making, pointing to rising suicide and H.I.V. rates and deterioration of services at hospitals under financial pressure. âIn an effort to finance debts,â the researchers said, âordinary people are paying the ultimate price: losing access to care and preventive services, facing higher risks of H.I.V. and sexually transmitted diseases, and in the worst case losing their lives.â
At the Perama clinic, which is run by the international nonprofit Doctors of the World, doctors say they are seeing many families that cannot afford bus fare, let alone the new $6.50 fee at public clinics.
Technically, those Greeks who cannot pay are entitled to free care. But the bureaucracy can be overwhelming. Ms. Ragamb, a former hairdresser whose unemployment benefits and health insurance ran out six months ago, said she was still waiting to get the right papers.
The story did not surprise Dr. Liana Mailli, the pediatrician who was seeing Ms. Ragambâs son, Elias. The 3-year-old got a diagnosis of diabetes only a few months ago, after he fell into a coma. Dr. Mailli has heard of such bureaucratic troubles from many patients. Even more often, she said, parents have fallen behind in paying their health insurance contributions, or their employers do not pay and so they are no longer covered.
One development that Dr. Mailli said she found particularly disturbing was that a growing number of children had not had their basic vaccinations.
If nothing is done, she said, polio, diphtheria and whooping cough could all return to Greece. âThis is such a serious thing,â she said. âBut these vaccines are expensive.â
At the start of its debt crisis, Greece was spending about 6 percent of its G.D.P. on health care â about average for Europe. But the system was far from efficient. It includes many small hospitals and a reliance on expensive brand name drugs.
Moreover, there was widespread corruption. Experts say doctors often had lucrative deals with drug manufacturers that led them to vastly overprescribe, and many expected cash payments on the side for timely and attentive care.
Since the debt crisis began in 2009, the government has frozen hiring, cut salaries and focused on tracking prescriptions and new procurement procedures. About 20 doctors have been arrested for corruption.
But little has gone smoothly.
Government officials acknowledge some problems, but say that the system was simply unsustainable. In the next year, they say, adjustments can be made.
âWe have had two years of emphasis on the financial, now we will pass to evaluation,â said Nikos Polyzos, the secretary general of the Health Ministry.
But many doctors say the new emphasis on cutting costs has gone too far. In addition to shortages, they say that the supplies they do have are of poor quality. They complain that bugs have been found in new syringes imported from China, sutures fall apart and generic drugs do not seem to do the job. And the hiring freeze has caused such a shortage of nurses, some doctors said, that procedures frequently have to be postponed.
âThe whole system is a mess right now,â said Dr. Elias Sioras, a cardiologist and a union activist at the Evangelismos Hospital in Athens. âIn a six-hour shift, I am seeing 40 patients, which is ridiculous. It makes my work more difficult, but it is also much worse for the patients. And a lot of things that were covered, especially tests, are not covered anymore and the patients donât have the money to pay.â
Dr. Sioras said that 11,000 patients used to have bypass surgery in public hospitals each year, but that number fell to 9,000 last year. âThe way I see it, at least 2,000 people needed a bypass and didnât get it,â he said. âI have no idea where they are. They could be dead.â
Some experts, including Lykourgos Liaropoulos, a health economist at the University of Athens who helped the government design many of its cost-saving measures, say the hospitals were probably performing too many bypass procedures.
But even he questioned the virtual hiring freeze on nurses. âItâs one of the areas where the troika got it wrong,â he said, referring to the nickname that has been given to Greeceâs three creditors, the International Monetary Fund, the European Commission and the European Central Bank.
Access to drugs has also become a problem for many patients. Some pharmaceutical companies â owed millions, or unhappy with the new, lower rates the government plans to pay â have stopped supplying the hospitals. These include the Swiss pharmaceutical giant Roche, which makes cancer drugs not available elsewhere.
And many pharmacists now demand cash payments from patients, unwilling to take the risk of waiting for reimbursements.
The president of the Athens pharmacistsâ association, Konstantinos Lourantos, said few pharmacists could afford to wait for reimbursements, especially for cancer drugs, which can cost 5,000 euros, or $6,500, a month.
He said he told one client to see if any hospital pharmacies had the drug on hand. But the man later told him he had gone to six hospitals without success. âI have no idea what happened to him,â Mr. Lourantos said.
Dimitris Bounias and Nikolas Leontopoulos contributed reporting.
there are already shortages in the US. this is the path the US is headed towards.
http://www.nytimes.com/2011/12/27/world/europe/greeks-reeling-from-health-care-cutbacks.html?hp
December 26, 2011
Fiscal Crisis Takes Toll on Health of Greeks
By SUZANNE DALEY
PERAMA, Greece â The free clinic here opened about a year ago to serve illegal immigrants. But these days, it is mostly caring for Greeks like Vassiliki Ragamb, who was sitting in the waiting room hoping to get insulin for her young diabetic son.
Four days earlier, she had run out of insulin and, without insurance and unable to pay for more, she had gone from drugstore to drugstore, pleading for at least enough for a few days. It took her three hours to find a pharmacist who was willing to help.
âI tried a lot of them,â she said, gazing at the floor.
Greece used to have an extensive public health care system that pretty much ensured that everybody was covered for everything. But in the last two years, the nationâs creditors have pushed hard for dramatic cost savings to cut back the deficit. These measures are taking a brutal toll on the system and on the countryâs growing numbers of poor and unemployed who cannot afford the new fees and co-payments instituted at public hospitals as part of the far-reaching austerity drive.
At public hospitals, doctors report shortages of all kinds of supplies, from toilet paper to catheters to syringes. Computerized equipment has gone unrepaired and is no longer in use. Nurses are handling four times the patients they should, and wait times for operations â even cancer surgeries â have grown longer.
Access to drugs has also been affected, as some drug manufacturers, owed tens of millions of dollars, are no longer willing to supply Greek hospitals. At the same time pharmacists, afraid that the government might not reimburse them, are asking for cash payments, even from those with insurance.
Many experts say that Greeceâs public health system was bloated and corrupt and in dire need of reform. But they say also that the cuts have been so deep and have come so fast, that they have hit like a tsunami.
In just two years, the government has cut spending on health care to $17 billion from $19.5 billion â a 13 percent decrease. And under its agreement with its creditors, Greece must find even more health care savings next year â as much as $915 million, government officials said.
At the same time, public health facilities have seen a 25 to 30 percent increase in patients because so many Greeks can no longer afford to visit private clinics.
Dr. Olatz Ugarte, an anesthesiologist at the Saint Savvas Cancer Hospital in Athens, said that breast cancer patients often have to wait three months now to have tumors removed. âWaiting that long can be life or death for these patients,â she said.
In a recent letter to the medical journal The Lancet, a team of English researchers warned that a âGreek tragedyâ could be in the making, pointing to rising suicide and H.I.V. rates and deterioration of services at hospitals under financial pressure. âIn an effort to finance debts,â the researchers said, âordinary people are paying the ultimate price: losing access to care and preventive services, facing higher risks of H.I.V. and sexually transmitted diseases, and in the worst case losing their lives.â
At the Perama clinic, which is run by the international nonprofit Doctors of the World, doctors say they are seeing many families that cannot afford bus fare, let alone the new $6.50 fee at public clinics.
Technically, those Greeks who cannot pay are entitled to free care. But the bureaucracy can be overwhelming. Ms. Ragamb, a former hairdresser whose unemployment benefits and health insurance ran out six months ago, said she was still waiting to get the right papers.
The story did not surprise Dr. Liana Mailli, the pediatrician who was seeing Ms. Ragambâs son, Elias. The 3-year-old got a diagnosis of diabetes only a few months ago, after he fell into a coma. Dr. Mailli has heard of such bureaucratic troubles from many patients. Even more often, she said, parents have fallen behind in paying their health insurance contributions, or their employers do not pay and so they are no longer covered.
One development that Dr. Mailli said she found particularly disturbing was that a growing number of children had not had their basic vaccinations.
If nothing is done, she said, polio, diphtheria and whooping cough could all return to Greece. âThis is such a serious thing,â she said. âBut these vaccines are expensive.â
At the start of its debt crisis, Greece was spending about 6 percent of its G.D.P. on health care â about average for Europe. But the system was far from efficient. It includes many small hospitals and a reliance on expensive brand name drugs.
Moreover, there was widespread corruption. Experts say doctors often had lucrative deals with drug manufacturers that led them to vastly overprescribe, and many expected cash payments on the side for timely and attentive care.
Since the debt crisis began in 2009, the government has frozen hiring, cut salaries and focused on tracking prescriptions and new procurement procedures. About 20 doctors have been arrested for corruption.
But little has gone smoothly.
Government officials acknowledge some problems, but say that the system was simply unsustainable. In the next year, they say, adjustments can be made.
âWe have had two years of emphasis on the financial, now we will pass to evaluation,â said Nikos Polyzos, the secretary general of the Health Ministry.
But many doctors say the new emphasis on cutting costs has gone too far. In addition to shortages, they say that the supplies they do have are of poor quality. They complain that bugs have been found in new syringes imported from China, sutures fall apart and generic drugs do not seem to do the job. And the hiring freeze has caused such a shortage of nurses, some doctors said, that procedures frequently have to be postponed.
âThe whole system is a mess right now,â said Dr. Elias Sioras, a cardiologist and a union activist at the Evangelismos Hospital in Athens. âIn a six-hour shift, I am seeing 40 patients, which is ridiculous. It makes my work more difficult, but it is also much worse for the patients. And a lot of things that were covered, especially tests, are not covered anymore and the patients donât have the money to pay.â
Dr. Sioras said that 11,000 patients used to have bypass surgery in public hospitals each year, but that number fell to 9,000 last year. âThe way I see it, at least 2,000 people needed a bypass and didnât get it,â he said. âI have no idea where they are. They could be dead.â
Some experts, including Lykourgos Liaropoulos, a health economist at the University of Athens who helped the government design many of its cost-saving measures, say the hospitals were probably performing too many bypass procedures.
But even he questioned the virtual hiring freeze on nurses. âItâs one of the areas where the troika got it wrong,â he said, referring to the nickname that has been given to Greeceâs three creditors, the International Monetary Fund, the European Commission and the European Central Bank.
Access to drugs has also become a problem for many patients. Some pharmaceutical companies â owed millions, or unhappy with the new, lower rates the government plans to pay â have stopped supplying the hospitals. These include the Swiss pharmaceutical giant Roche, which makes cancer drugs not available elsewhere.
And many pharmacists now demand cash payments from patients, unwilling to take the risk of waiting for reimbursements.
The president of the Athens pharmacistsâ association, Konstantinos Lourantos, said few pharmacists could afford to wait for reimbursements, especially for cancer drugs, which can cost 5,000 euros, or $6,500, a month.
He said he told one client to see if any hospital pharmacies had the drug on hand. But the man later told him he had gone to six hospitals without success. âI have no idea what happened to him,â Mr. Lourantos said.
Dimitris Bounias and Nikolas Leontopoulos contributed reporting.
there are already shortages in the US. this is the path the US is headed towards.
the US as Brazil circa 1985?
http://www.nytimes.com/2012/01/28/w...-past-in-wests-economic-crises.html?ref=world
http://www.nytimes.com/2012/01/28/w...-past-in-wests-economic-crises.html?ref=world
http://thehill.com/blogs/congress-b...ill-state-pension-crisis-be-the-tipping-point
04/05/12 11:05 am
The Supercommittee has come and gone without reaching an agreement on reducing our nationââ¬â¢s debt. Most of the post-mortems focused on who was to blame for the breakdown. If we had been able to slash the projected deficit by trillions of dollars, according to conventional analysis, Washington might have been able to get our debt under control and the United States would be on the path back to a firm fiscal footing.
But the dirty little secret is that it may not have been sufficient to avoid a coming fiscal catastrophe. The thing that pushes the United States over the tipping point just might be the exploding state pension crisis.
This crisis that has been a long time coming and we are just beginning to grasp the magnitude of the state pension debt tsunami thatââ¬â¢s going to hit us within the next decade. Because virtually all states have some type of balanced budget requirement, it has been relatively easy to ignore the fact that unfunded pension obligations have been purposefully left off state balance sheets. In truth, those obligations in most states far exceed the total of outstanding state debt, spending, and tax revenues combined.
Credible estimates of the total amount of unfunded state pension liabilities range from $2.5 trillion to more than $3 trillion. Part of the problem in coming up with an accurate estimate is that budget transparency requirements vary greatly by state, and many governments have become adept at hiding the problem with questionable accounting rules that wouldnââ¬â¢t pass muster in the private sector. As a businessman, I know that a necessary first step in running a successful organization is to be honest in your bookkeeping.
It is clear that many states are now teetering on the brink of bankruptcy as a result of pension promises made to employees, the enormous bill for which is just beginning to come due. The Fiscal Times reported last year on the relative health of statesââ¬â¢ pensions. The strongest systems are found in New York and Wisconsin. New York mandates fully funded pensions and although it is has the second largest system, rightly funds its pension in good economic times and in bad. The weakest systems are those of West Virginia, Oklahoma and Illinois. It is true that in the last two years, 41 states have made some change to their pension plans to reduce the problem of underfunding, but in most cases, much more needs to be done. The truth is that states need to strengthen their systems across the board - even the strongest pension systems should be improved ââ¬â just as New York recently did with its ââ¬ÅTier 6ââ¬Â reform plan.
Thatââ¬â¢s because according to Professor Joshua Rauh of the Kellogg School of Management, even using statesââ¬â¢ excessive investment return assumptions, 17 states will run out of pension funds over the next ten years. Over 40 states will run out within the next 20 years. Inevitably, bankrupt states with huge pension obligations will look to the federal government to make up the difference. Are we prepared to offer a rescue to these states that will make the bailouts of the last few years look insignificant by comparison?
And who, exactly, will be coming to the rescue? The answer is clear: taxpayers in states that donââ¬â¢t have a pension deficit will be on the hook for the irresponsibility of states that unwisely promised overly-generous retirement benefitsââ¬âpromises they now find impossible to keep.
Talk about too big to fail: the pressure to ââ¬Åsave the statesââ¬Â will be enormous, and unless protections are set in place now, it will simply amount to a transfer of wealth from more responsible states like New York to reckless states like Illinois.
The best approach is to implement safeguards now that will improve the future solvency of these pension plans. For example, perhaps a condition for receiving federal funds should be a thorough reform of state accounting practices and a requirement that states meet their constitutional balanced budget requirements by including pension obligations on their current balance sheets. This kind of positive reform will help ensure that the era of federal government bailouts has truly ended and not just begun.
04/05/12 11:05 am
The Supercommittee has come and gone without reaching an agreement on reducing our nationââ¬â¢s debt. Most of the post-mortems focused on who was to blame for the breakdown. If we had been able to slash the projected deficit by trillions of dollars, according to conventional analysis, Washington might have been able to get our debt under control and the United States would be on the path back to a firm fiscal footing.
But the dirty little secret is that it may not have been sufficient to avoid a coming fiscal catastrophe. The thing that pushes the United States over the tipping point just might be the exploding state pension crisis.
This crisis that has been a long time coming and we are just beginning to grasp the magnitude of the state pension debt tsunami thatââ¬â¢s going to hit us within the next decade. Because virtually all states have some type of balanced budget requirement, it has been relatively easy to ignore the fact that unfunded pension obligations have been purposefully left off state balance sheets. In truth, those obligations in most states far exceed the total of outstanding state debt, spending, and tax revenues combined.
Credible estimates of the total amount of unfunded state pension liabilities range from $2.5 trillion to more than $3 trillion. Part of the problem in coming up with an accurate estimate is that budget transparency requirements vary greatly by state, and many governments have become adept at hiding the problem with questionable accounting rules that wouldnââ¬â¢t pass muster in the private sector. As a businessman, I know that a necessary first step in running a successful organization is to be honest in your bookkeeping.
It is clear that many states are now teetering on the brink of bankruptcy as a result of pension promises made to employees, the enormous bill for which is just beginning to come due. The Fiscal Times reported last year on the relative health of statesââ¬â¢ pensions. The strongest systems are found in New York and Wisconsin. New York mandates fully funded pensions and although it is has the second largest system, rightly funds its pension in good economic times and in bad. The weakest systems are those of West Virginia, Oklahoma and Illinois. It is true that in the last two years, 41 states have made some change to their pension plans to reduce the problem of underfunding, but in most cases, much more needs to be done. The truth is that states need to strengthen their systems across the board - even the strongest pension systems should be improved ââ¬â just as New York recently did with its ââ¬ÅTier 6ââ¬Â reform plan.
Thatââ¬â¢s because according to Professor Joshua Rauh of the Kellogg School of Management, even using statesââ¬â¢ excessive investment return assumptions, 17 states will run out of pension funds over the next ten years. Over 40 states will run out within the next 20 years. Inevitably, bankrupt states with huge pension obligations will look to the federal government to make up the difference. Are we prepared to offer a rescue to these states that will make the bailouts of the last few years look insignificant by comparison?
And who, exactly, will be coming to the rescue? The answer is clear: taxpayers in states that donââ¬â¢t have a pension deficit will be on the hook for the irresponsibility of states that unwisely promised overly-generous retirement benefitsââ¬âpromises they now find impossible to keep.
Talk about too big to fail: the pressure to ââ¬Åsave the statesââ¬Â will be enormous, and unless protections are set in place now, it will simply amount to a transfer of wealth from more responsible states like New York to reckless states like Illinois.
The best approach is to implement safeguards now that will improve the future solvency of these pension plans. For example, perhaps a condition for receiving federal funds should be a thorough reform of state accounting practices and a requirement that states meet their constitutional balanced budget requirements by including pension obligations on their current balance sheets. This kind of positive reform will help ensure that the era of federal government bailouts has truly ended and not just begun.
look closely, and the official photograph from last weekendâs Summit of the Americas in Cartagena is unusual. Cristina Fernández, Argentinaâs customarily prominent and coquettish president, is almost out of sight at the back. Soon after the picture was taken, she flew home early.
By all accounts, Ms Fernández was furious. She had failed to muster regional support for her countryâs claim to the Falkland Islands. There was behind-the-scenes talk, too, that Argentina might be kicked out of the Group of 20 leading industrial and developing nations. Back in Buenos Aires, Ms Fernández returned to the attack. Argentina, she told a cheering audience, would renationalise YPF, the Spanish-controlled oil company.
More
On this story
beyondbrics YPF to Brazil - letâs do business
Cristina Fernández picks a fight
Argentina woos Brazil over energy deal
EU to retaliate for Argentinaâs YPF seizure
UK backs Spain over Repsol-YPF seizure
On this topic
John Gapper Argentinaâs oil raid can only end badly
Moisés Naim Siren call of populism seduces yet again
YPF move meets mixed reaction
Profile Axel Kicillof, Argentine deputy economy minister
IN Analysis
Finds that form a bedrock of hope
Germany the miraculous machine
Hong Kong a majority to accommodate
Myanmar Opening up
It was a magisterial display of her political trademarks: virulent nationalism mixed with righteous indignation. Dressed in widowâs weeds and standing in front of a huge image of the national heroine Eva Perón, Ms Fernández projected herself as someone who would protect her country from foreign predators and give back as good as she got. âWe have to have a company that Argentines are proud of again,â she thundered.
The rest of the world sees it differently. To Spain, the former colonial power, whose energy flagship Repsol will have its 57 per cent stake in YPF nationalised, it is a populist move from a protectionist government with scant international credibility. Lady Ashton, foreign policy chief of the European Union, one of Argentinaâs biggest trade partners, has threatened diplomatic reprisals.
Felipe Calderón, Mexicoâs president, said âno one in their right mindâ would now invest in Argentina. Robert Zoellick, the World Bank president, called Argentina an âoutlierâ. Juan Manuel Santos, Colombiaâs president and summit host, said pointedly: âWe donât expropriate.â The only big capital with cause quietly to celebrate the nationalisation is London, as it diminishes the credibility of Argentinaâs Falklands claim.
Becoming an international irrelevance now seems to be Argentinaâs lot. Even in sectors in which it excels, such as farming, companies are heading for the exit. Wesley Batista, head of JBS, the Brazilian food company that is the worldâs biggest beef producer, said last month: âWeâre not going to let ourselves lose money there any longer.â
For many, the nationalisation is the latest lurch downwards in a long decline. A hundred years ago, Argentina was one of the worldâs richest countries, with a gross domestic product per capita comparable with those of Germany or France. Today, despite vast human and natural resources, Argentine per capita income has dropped to half their level.
This diminishing clout explains the countryâs fondness for psychoanalysis â along with tragedy and nostalgia, emotions summoned so well by the tango. âCristina Fernández is not the cause of the problem; rather, she is a symptom,â says an Argentine banker.
Diagnosing the reasons has already filled libraries. The common denominator to most theses is chronic political instability. Liberals blame the 1946-55 government of Juan Domingo Perón for quasi-fascist autarkic statism. Leftists, such as Ms Fernández, blame the 1976-83 military regime, probably South Americaâs most vicious, for running up huge debts. They also see the generalsâ economic world view as having laid the ground for the radical free-market 1990s of Carlos Menemâs presidency when YPF, among many others, was privatised and the country advanced to star pupil status in the eyes of the International Monetary Fund.
The Menem model worked well for many years but culminated in 2001 with a $100bn sovereign default, then the worldâs biggest. In the ensuing national trauma, Néstor Kirchner, Ms Fernándezâs husband, rose from being an obscure Patagonian governor to the presidency. Implementing unconventional policies such as keeping the currency cheap to boost exports and subsidising energy and transport, he transformed Argentina from a failed state.
Buoyed by soaring commodity prices, the economy boasted Chinese-style growth rates. This seemed to confirm the intellectual bankruptcy of the neoliberal economic policies that Kirchner and many Argentines had turned their back on. Much as happened after Russiaâs sovereign default in 1998, there was also a reconfiguration of Argentinaâs business class. In a country long renowned for cronyism, old oligarchs were kicked out and new ones took their place. âNearly all the millionaires in Argentina today made their money since 2001,â says one consultant. âThe older money has either lost theirs or moved their interests abroad.â
Among the new groups invited into the charmed circle of Argentinaâs first family were the Eskenazi clan, who made their name at the helm of Petersen, a construction conglomerate, and by branching out into finance. At Kirchnerâs behest the Eskenazis entered YPF, buying a 25.5 per cent stake in a highly leveraged $3.5bn transaction that used the companyâs unusually high dividend to meet debt payments. Though they paid a high interest rate on their loans, they did not have to stump up cash up front.
What must have seemed like a wily business deal at the time lies at the heart of the troubles today. Ms Fernández charges that YPFâs high pay-outs meant it forsook investment in energy production and exploration that it could otherwise have made. The irony is that the dividend policy was originally her husbandâs idea. Nonetheless, politically all went well for a long while for what increasingly seemed to be an established dynasty.
Ms Fernández succeeded her husband as president in 2007. A surprise nationalisation of private pension funds in 2008 enjoyed widespread popular support, in the same way that many Argentines are now happy to see YPF back in state hands. Ms Fernández was shaken by Kirchnerâs unexpected death in October 2010 but, wasting no opportunity to recall his memory and choke back tears, was re-elected by a landslide. By then, however, the writing was on the wall.
Jorge Luis Borges, the celebrated Argentine writer, is once said to have been asked to go into national politics. âWhatâs the point when things will only get worse?â he shrugged. His friends retorted that things were so bad that there was no space for them to get worse. âBut space is infinite,â Borges replied. Especially, it seems, in Argentina.
the US will be lucky if it only ends up in stagflation instead of runaway inflation.
By all accounts, Ms Fernández was furious. She had failed to muster regional support for her countryâs claim to the Falkland Islands. There was behind-the-scenes talk, too, that Argentina might be kicked out of the Group of 20 leading industrial and developing nations. Back in Buenos Aires, Ms Fernández returned to the attack. Argentina, she told a cheering audience, would renationalise YPF, the Spanish-controlled oil company.
More
On this story
beyondbrics YPF to Brazil - letâs do business
Cristina Fernández picks a fight
Argentina woos Brazil over energy deal
EU to retaliate for Argentinaâs YPF seizure
UK backs Spain over Repsol-YPF seizure
On this topic
John Gapper Argentinaâs oil raid can only end badly
Moisés Naim Siren call of populism seduces yet again
YPF move meets mixed reaction
Profile Axel Kicillof, Argentine deputy economy minister
IN Analysis
Finds that form a bedrock of hope
Germany the miraculous machine
Hong Kong a majority to accommodate
Myanmar Opening up
It was a magisterial display of her political trademarks: virulent nationalism mixed with righteous indignation. Dressed in widowâs weeds and standing in front of a huge image of the national heroine Eva Perón, Ms Fernández projected herself as someone who would protect her country from foreign predators and give back as good as she got. âWe have to have a company that Argentines are proud of again,â she thundered.
The rest of the world sees it differently. To Spain, the former colonial power, whose energy flagship Repsol will have its 57 per cent stake in YPF nationalised, it is a populist move from a protectionist government with scant international credibility. Lady Ashton, foreign policy chief of the European Union, one of Argentinaâs biggest trade partners, has threatened diplomatic reprisals.
Felipe Calderón, Mexicoâs president, said âno one in their right mindâ would now invest in Argentina. Robert Zoellick, the World Bank president, called Argentina an âoutlierâ. Juan Manuel Santos, Colombiaâs president and summit host, said pointedly: âWe donât expropriate.â The only big capital with cause quietly to celebrate the nationalisation is London, as it diminishes the credibility of Argentinaâs Falklands claim.
Becoming an international irrelevance now seems to be Argentinaâs lot. Even in sectors in which it excels, such as farming, companies are heading for the exit. Wesley Batista, head of JBS, the Brazilian food company that is the worldâs biggest beef producer, said last month: âWeâre not going to let ourselves lose money there any longer.â
For many, the nationalisation is the latest lurch downwards in a long decline. A hundred years ago, Argentina was one of the worldâs richest countries, with a gross domestic product per capita comparable with those of Germany or France. Today, despite vast human and natural resources, Argentine per capita income has dropped to half their level.
This diminishing clout explains the countryâs fondness for psychoanalysis â along with tragedy and nostalgia, emotions summoned so well by the tango. âCristina Fernández is not the cause of the problem; rather, she is a symptom,â says an Argentine banker.
Diagnosing the reasons has already filled libraries. The common denominator to most theses is chronic political instability. Liberals blame the 1946-55 government of Juan Domingo Perón for quasi-fascist autarkic statism. Leftists, such as Ms Fernández, blame the 1976-83 military regime, probably South Americaâs most vicious, for running up huge debts. They also see the generalsâ economic world view as having laid the ground for the radical free-market 1990s of Carlos Menemâs presidency when YPF, among many others, was privatised and the country advanced to star pupil status in the eyes of the International Monetary Fund.
The Menem model worked well for many years but culminated in 2001 with a $100bn sovereign default, then the worldâs biggest. In the ensuing national trauma, Néstor Kirchner, Ms Fernándezâs husband, rose from being an obscure Patagonian governor to the presidency. Implementing unconventional policies such as keeping the currency cheap to boost exports and subsidising energy and transport, he transformed Argentina from a failed state.
Buoyed by soaring commodity prices, the economy boasted Chinese-style growth rates. This seemed to confirm the intellectual bankruptcy of the neoliberal economic policies that Kirchner and many Argentines had turned their back on. Much as happened after Russiaâs sovereign default in 1998, there was also a reconfiguration of Argentinaâs business class. In a country long renowned for cronyism, old oligarchs were kicked out and new ones took their place. âNearly all the millionaires in Argentina today made their money since 2001,â says one consultant. âThe older money has either lost theirs or moved their interests abroad.â
Among the new groups invited into the charmed circle of Argentinaâs first family were the Eskenazi clan, who made their name at the helm of Petersen, a construction conglomerate, and by branching out into finance. At Kirchnerâs behest the Eskenazis entered YPF, buying a 25.5 per cent stake in a highly leveraged $3.5bn transaction that used the companyâs unusually high dividend to meet debt payments. Though they paid a high interest rate on their loans, they did not have to stump up cash up front.
What must have seemed like a wily business deal at the time lies at the heart of the troubles today. Ms Fernández charges that YPFâs high pay-outs meant it forsook investment in energy production and exploration that it could otherwise have made. The irony is that the dividend policy was originally her husbandâs idea. Nonetheless, politically all went well for a long while for what increasingly seemed to be an established dynasty.
Ms Fernández succeeded her husband as president in 2007. A surprise nationalisation of private pension funds in 2008 enjoyed widespread popular support, in the same way that many Argentines are now happy to see YPF back in state hands. Ms Fernández was shaken by Kirchnerâs unexpected death in October 2010 but, wasting no opportunity to recall his memory and choke back tears, was re-elected by a landslide. By then, however, the writing was on the wall.
Jorge Luis Borges, the celebrated Argentine writer, is once said to have been asked to go into national politics. âWhatâs the point when things will only get worse?â he shrugged. His friends retorted that things were so bad that there was no space for them to get worse. âBut space is infinite,â Borges replied. Especially, it seems, in Argentina.
the US will be lucky if it only ends up in stagflation instead of runaway inflation.
No. Reserve Currency of the World.EOM.
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Good points;
and we've not had all the people trying to retire @ 55 years like the Wall Street Journal noted Argentina did.
the dollar has been sinking for years. it may be the reserve currency today because there are currently limited alternatives. governments are not looking to add$us. they are trying to let the air out of the balloon slowly in order to protect their dollar holdings and to avoid a deep recession.