Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Is the United States the Next Argentina?

Politics / US Debt May 23, 2013 - 12:46 PM GMT

By: Money_Morning


Garrett Baldwin writes: Drive the streets of Buenos Aires, and you will see regal architecture that rivals wealthy European enclaves in Monaco or London.

And along tree-lined walkways, you will witness monuments that speak of the legacy of Argentina's finest moments.

But all of it is just a façade-a reminder of what used to be.

Despite having one of the most educated and entrepreneurial populations in the world, an abundance of natural resources, and a dynamic agricultural sector, Argentina has been in steep decline now for eighty years.

And things are only getting worse.

Without a doubt there's a lesson here-- even though I recognize U.S. businesses have it comparatively easy when it comes to government mismanagement.

Even still, after spending the week immersed in Argentina's business culture, it's hard to argue the U.S. isn't on the same unsustainable path.

With the U.S. debt and obligations reaching new heights, new arbitrary regulations making it increasingly harder to conduct business, and examples of ruthless big government gone array in the AP and IRS targeting scandals, the parallels are too great to ignore.

This is far different from the recent comparisons to Greece--and actually much worse.

The truth is the United States is in danger of becoming the next Argentina.

Here's why: It's about business, always business.

The Cornerstone of Every Nation

A nation's success and the strength of its middle class rests on the ability of its people to have the freedom to conduct trade and business. It also relies on a political structure that ensures long-term sustainability.

From my trip there, I can tell you the business and political climate in Argentina is utterly dismal.

For a week, I drove through the heart of Mendoza wine country, dined with Board of Trade members who ship their grains, and circled through the public markets along the Buenos Aires parks.
Given the nation's beauty and reputation as a global destination, you wouldn't know it unless you sat down and spoke with individual business people. After hundreds of conversations, not one person I spoke to championed the Argentine government's positions on improving the business climate.

This is what happens when solutions to problems created by government action is always to add more government regulation or to centralize power.

It is also what happens when the populist government has focused exclusively on a social justice platform that emphasizes benefits to the 40% of its citizens who live in poverty.

In fact, on three occasions, I was told that advocates of President Cristina Fernández would offer a pair of shoes to voters in the slums. Voters would receive one shoe before the vote, and the other when they returned and showed their ballot.

When you hear these stories, you realize that elections are not so much about fixing problems as they are about the ascension to power that politicians seek.

Argentina's core problems stem from a financial crisis in 2002, where the country effectively defaulted on its sovereign debts. Widespread panic, rioting, a devaluation of the peso against the U.S. has led to a staggering erosion of wealth across the nation. Unemployment had soared to 25%, and 60% of the country fell below the poverty level. Horrific tales of scavenging and bartering became the norm.

But 10 years later, the business climate still remains stagnate in the face of trying to keep food and product costs down and things "more fair.”

Overregulation, steep export taxes, and import bans have led to a stifling effect. Policy decisions have made it impossible to conduct business, have facilitated the destruction of its middle class, led to rampant black markets, and incentivize the offshoring of capital by the wealthiest members of society.

And while the entrepreneurial spirit of Argentina is very alive and well, the government has done everything it can to tie one arm behind business leaders' backs, while chopping the other off at the elbow.

For example, take the flight we took from Mendoza to Buenos Aires.

Our regional flight was on LAN, a Chilean carrier and competitor to the government-owned Aerolíneas Argentinas. Our midday flight was delayed by a half-hour, but not because of the rainclouds circling above Buenos Aires. It was well known by my co-passengers that the Argentine government has ordered its flight towers to delay rival airlines flights in order to raise Aerolineas' on-time arrival score in comparison to companies like LAN.

Not only was that delay induced to enrage customers, but we also faced another 30-minute delay with our baggage, which was strange considering that all of the bags were off of our plane before we were (for some reason it took an extra 20 minutes to get access to a staircase to deplane).

So it shouldn't surprise anyone that LAN pulled out of the Argentine market this week. This will only drive price increases and provide fewer options for travelers. It will also do little to improve the on-time arrival scores of a poorly run state enterprise.

Why should any of this concern Americans?...

Here' s one of the connections: During the 2009 healthcare debate, we heard quite a bit from the Left about how the U.S. needed a public-option to compete against private healthcare companies.

But the reality is that private companies can never compete with politically advantaged, crony companies or options that have no true interest in market competition. A public option would make it virtually impossible for the private market to function properly.

And over time, you will witness a downward trend where private firms go out of business, and the politically advantaged companies rise but ultimately begin to fail overtime due to a lack of competition and market accountability.

The United States already operates the V.A. healthcare system with a pathetic track-record (as repeatedly noted by Jon Stewart and the Daily Show). We also see the U.S. Post Office, the de facto version of a shipping public option. Just think about how it bleeds cash, can't break union influence, and fails to provide quality or value in its services.

Meanwhile, private companies UPS and FedEx operate efficiently, despite persistent regulations to protect the U.S. Postal Service. And these aren't the only parallels

A Myriad of Problems

In fact, Argentina's state-run airline was just the first of many logistical problems that I witnessed.

The biggest problem that I saw facing Argentinean businesses in agricultural production was the lack of a railway system. Argentina does not just lack proper rail infrastructure to ship goods from remote farming regions to its ports. It pretty much does not have any access to ship goods from anywhere by any other method but trucks.

This is because the trucking union has such an influence on the Argentine government, that they have effectively blocked any future train infrastructure. Instead of shipping goods in a more cost-effective manner, trucks dominate the logistical network, which is more costly, less environmentally sound, and leads to serious bottlenecks in logistical operations.

Cronyism has stifled market opportunities to improve its logistical network, which will only lead to long-term shortfalls as the agro-sector attempts to compete with its neighboring rival in Brazil that is solving its infrastructure problems as I write this.

Argentina is also crippled by its own trade policies. The nation has extremely high business taxes, including a massive VAT and export tax on raw commodities.

In an effort to keep food costs down across the country, the nation has made it financially unfavorable to export grains by producers. As a result, investments into the agricultural sector remains stagnate.

And, again, while the country is doing its best to suppress rising food costs, the nation is about to find itself uncompetitive as neighbor Brazil creates a more favorable environment to international investment, infrastructure development, and more liquid financial markets.

But it's the last problem facing the Argentinean economy that is the most troubling.

And we'll cover that portion tomorrow in Part Two of this examination into the Argentine Crisis and how to profit from two successful global investment strategies.

Source :

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules