Wednesday, 17 December 2008

Book Review: And The Money Kept Rolling in (And Out) by Paul Blustein

A brilliant book in every way - as exciting as a movie thriller, as intricate as a detective story with multiple intertwined plot lines, as gut-wrenching and sad as a human tragedy that could have been avoided, as fair and detailed as a commission of enquiry into a man-made disaster - this book about Argentina's financial and economic collapse in 2001-2002 is a must-read for anyone interested in the current financial and economic crisis. Though written in 2005 before the crisis started, Blustein takes a few pages to talk about relevance to the USA and states outright: "It could happen here. Americans who give Argentina's story fair consideration and conclude otherwise are deluding themselves." ... or maybe, it's already happening here?

The technical reasons for Argentina's accumulation of a crushing debt load on which it eventually defaulted with dire consequences are fairly straightforward. In his words, "They spent more than they should have, taxed less than they should have and borrowed more than they should have..." while living within the dollar-peso convertibility currency system that required much stricter fiscal discipline.

The individual and collective (both organizational and societal) human reasons that created and exacerbated the technical reasons are the really fascinating elements and this is where Blustein excels at digging them out and presenting them in a gripping story. Self-interest, groupthink, willful blindness, self-deceit, avariciousness, stupidity, panic reactions, vanity, political expediency, official misinformation and spinning, ideology, gamesmanship, it is all there in various people and organizations. The author doesn't pull punches in his criticisms but there aren't many who escape blameless. The IMF, Wall Street investment banks, the US government, the Argentine government, even to some degree the Argentine people, share the burden of responsibility.

The book is not an "anti-" diatribe, whether it be anti-globalization, anti-IMF, anti-privatization, anti-Americanism, anti-capital, anti-bailout or even anti-debt (though it clearly shows that too much debt is a recipe for disaster). He says, "Policies such as open trade, privatization, and deregulation were not responsible for the events that brought Argentina to such a pitiful state."

For those who wonder why our governments are currently so anxiously propping up banks and trying to get credit flowing again, "... The nation's banking system was ceasing to perform its vital role as a provider of credit and dispenser of payments, the result being an accelerated contraction in all sorts of economic activity" and "... the shortage of funds spread through the economy like a debilitating virus". The latter is especially in play at the moment. For example, part of the reason for the 45% drop in GM's sales is lack of credit to buyers wanting to buy vehicles even if they are perfectly qualified good credit risks. And look where GM is today. A company with problems suddenly is a company in crisis with insurmountable problems. Same goes for home buyers, if trying to get a mortgage isn't possible, few can buy, prices decline etc.

The helicoptor departure scene in the prologue, where an IMF banker flies out of the country having informed the President of Argentina that the IMF will no longer provide support, abandoning Argentina to inevitable default and collapse, makes a striking image worthy of a movie. Hollywood, where are you?

My rating: Five out of five stars.

1 comment:

Anonymous said...

Good review. It's not a book I've read, but may be something I look to in the new year for some personal reading material.

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