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Argentina Crisis

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I’ve been doing a bit of research into this, I remember at the time seeing TV footage of people trying to smash their way into banks. I always assumed that it was caused by a banking crisis and that the scenes on TV were the aftermath of a bank run.

However, from what I can gather the crisis was more about politics than banking. I have found various references to bank runs but nothing significant. It appears that those who were in the top 5% of society did move some of their money out of the country which led to others queuing to get their money out of the banks. The government imposed a “Corralito” which limited the amount people could withdraw from the bank. Now, that sounds serious but from what I can gather their was no real breakdown in the banking system itself.

There’s some pretty disturbing footage on you tube, most of which seems to centre on the 19th & 20th of December 2001, horrible scenes (35 people dead), but the anger seems to be directed at the government, there’s a lot of talk about unemployment and even hunger but nothing about banks.

I thought that this was a banking crisis, but from what I can gather it was more about the people complaining about how the government had mismanaged the economy. It did lead to isolated runs on banks (and measures taken to stop runs), but nothing to suggest that the banks themselves were insolvent .

Anyone?

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Guest mattsta1964
I’ve been doing a bit of research into this, I remember at the time seeing TV footage of people trying to smash their way into banks. I always assumed that it was caused by a banking crisis and that the scenes on TV were the aftermath of a bank run.

However, from what I can gather the crisis was more about politics than banking. I have found various references to bank runs but nothing significant. It appears that those who were in the top 5% of society did move some of their money out of the country which led to others queuing to get their money out of the banks. The government imposed a “Corralito” which limited the amount people could withdraw from the bank. Now, that sounds serious but from what I can gather their was no real breakdown in the banking system itself.

There’s some pretty disturbing footage on you tube, most of which seems to centre on the 19th & 20th of December 2001, horrible scenes (35 people dead), but the anger seems to be directed at the government, there’s a lot of talk about unemployment and even hunger but nothing about banks.

I thought that this was a banking crisis, but from what I can gather it was more about the people complaining about how the government had mismanaged the economy. It did lead to isolated runs on banks (and measures taken to stop runs), but nothing to suggest that the banks themselves were insolvent .

Anyone?

Seems to me the banking system is kidding itself that insolvency can be postponed indefinitely by bailing out the system, ie central banks come to the rescue again.....and again....and again.

Alot of the punters with inside knowledge of the banking system are saying, very clearly, the situation is unprecedented. Noting on this scale has ever happened before.

Of course, the is no limit to how much money they (the central banks) can create out of this air. They can replace all the destroyed capital indefinitely with new money, but I fear the end consequence will be the same. Creating new money will still destroy the value of money in circulation and thus it is a race to self destruction. Hasn't this always been the case with fiat currency? The outcome is inevitable. Whatever Bernanke, the ECB or the BoE do, the outcome is guaranteed. Money will become worthless.

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Seems to me the banking system is kidding itself that insolvency can be postponed indefinitely by bailing out the system, ie central banks come to the rescue again.....and again....and again.

Alot of the punters with inside knowledge of the banking system are saying, very clearly, the situation is unprecedented. Noting on this scale has ever happened before.

Of course, the is no limit to how much money they (the central banks) can create out of this air. They can replace all the destroyed capital indefinitely with new money, but I fear the end consequence will be the same. Creating new money will still destroy the value of money in circulation and thus it is a race to self destruction. Hasn't this always been the case with fiat currency? The outcome is inevitable. Whatever Bernanke, the ECB or the BoE do, the outcome is guaranteed. Money will become worthless.

…. But what about Argentina, the banks didn’t collapse, they weren’t insolvent. It’s just that the people had had enough of the government….. unemployment ect.

or have i got it wrong?

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The Argentina crisis in 2001 are not very similar. They had pegged their currency to the dollar, and experienced deflation at first, when they tried hold the peg, until they ran out of dollars in their reserve, because people were asking for the dollar, until they ran out, and made the choice to inflate. Just like a gold standard, but only based on dollar instead. They did not have hyperinflation, but very high inflation in a short period or a devaluation, after first having deflation when defending the dollar peg. Even in that inflationary environment, there was a shortage of cash.

I think what triggered the crisis were a recession in the US in 2001 that made the dollar gain strength, making it impossible to hold the peg.

The reason they had this peg in a first place, were a response to the inflation they experienced in the nineties.

I find the crisis in the US different because they have not pegged their currency to anyone, nor do they have a foreign debt in another currency than their own.

Edited by carseller

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I would imagine they wanted their money to buy dollars or gold, anything other than their own falling currency.

The reason they got into trouble in the first place was that the peso was locked to the dollar by law, and convertible on demand. This meant that they couldn't re-balance their economy by devaluing, and were forced to service a foreign debt that was effectively denominated in dollars. Third-world economy with hard-currency (then!) debts ... not a good combination IMO. The reason for locking the peso to the dollar? To head off domestic inflationary expectations that had developed due to bitter experience.

Of course, nothing of the kind could possibly happen in the eurozone, where the economies are all first-world, and fully converged :lol::ph34r:

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I’ve been doing a bit of research into this, I remember at the time seeing TV footage of people trying to smash their way into banks. I always assumed that it was caused by a banking crisis and that the scenes on TV were the aftermath of a bank run.

However, from what I can gather the crisis was more about politics than banking. I have found various references to bank runs but nothing significant. It appears that those who were in the top 5% of society did move some of their money out of the country which led to others queuing to get their money out of the banks. The government imposed a “Corralito” which limited the amount people could withdraw from the bank. Now, that sounds serious but from what I can gather their was no real breakdown in the banking system itself.

There’s some pretty disturbing footage on you tube, most of which seems to centre on the 19th & 20th of December 2001, horrible scenes (35 people dead), but the anger seems to be directed at the government, there’s a lot of talk about unemployment and even hunger but nothing about banks.

I thought that this was a banking crisis, but from what I can gather it was more about the people complaining about how the government had mismanaged the economy. It did lead to isolated runs on banks (and measures taken to stop runs), but nothing to suggest that the banks themselves were insolvent .

They weren't insolvent because they refused to give them their deposits back in US Dollars. What happened I believe is that the Real was tied through an exchange rate mechanism to the US Dollar. 1 US Dollar = 1 Argentinian Real. Now Argentinians took out US Dollar mortgages because the interest rates were so much lower. People had Real Accounts and US Dollar Accounts.

The exchange rate mechanism failed as did our own ERM. The value of the Real dropped through the floor. People wanted thier Dollar deposits back because each Dollar was then worth many multiples of Real. At this point the Banks lied stating that these Dollar accounts were Real accounts, the people were thus robbed.

Worse still the banks did not deny that they held depositors savings and still don't, they simply refused to give them back stating that they will be returned when economic conditions improve.

These banks are HSBC and LLoyds, not foreign versions of NR. For some reason they appeared to become stand alone organisations within Argentina unable 'for some reason' to transfer adequate funds to cover their commitments from places like HSBC Hong Kong, 'for some reason'.

American Banks then quite literally repossessed huge Argentinian corporations and auctioned them off to themselves to pay off debts owed to them. As a result the US now owns Argentina and it is said that Patogonia is effectively a US state.

And what did US corporations do with Patagonia, experiments with GM crops, what did they get, blind fish and mad rabbits apparently.

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Ah, so it was more a run on the currency (from within), than on the banks themselves.

I genuinely didn’t know (hence the research) I thought it was a northern rock x100.

Thanks.

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IIRC the main reason people (middle class) went mental with banks was that they had a lot of their savings in US dollars accounts. When the crisis erupted the government simply took those savings to beef up its dwindling dollar reserves. People attacked the banks to get their money back.

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Guest Mr Parry
I’ve been doing a bit of research into this, I remember at the time seeing TV footage of people trying to smash their way into banks. I always assumed that it was caused by a banking crisis and that the scenes on TV were the aftermath of a bank run.

However, from what I can gather the crisis was more about politics than banking. I have found various references to bank runs but nothing significant. It appears that those who were in the top 5% of society did move some of their money out of the country which led to others queuing to get their money out of the banks. The government imposed a “Corralito” which limited the amount people could withdraw from the bank. Now, that sounds serious but from what I can gather their was no real breakdown in the banking system itself.

There’s some pretty disturbing footage on you tube, most of which seems to centre on the 19th & 20th of December 2001, horrible scenes (35 people dead), but the anger seems to be directed at the government, there’s a lot of talk about unemployment and even hunger but nothing about banks.

I thought that this was a banking crisis, but from what I can gather it was more about the people complaining about how the government had mismanaged the economy. It did lead to isolated runs on banks (and measures taken to stop runs), but nothing to suggest that the banks themselves were insolvent .

Anyone?

Did you notice which banks they were? From memory of fottage I believe they were not necessarily dodgy Argie banks, but a scene from a British highstreet . . . HSBC, Lloyd's etc?

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