Capital controls explained: Argentina edition

Jack be nimble, Jack be quick, Jack jump over the fiat stick.

http://www.sovereignman.com/trends/capital-controls-explained-argentina-edition-17111/?inf_contact_key=62fa706d16de8e6c2dab4f0ff73788fac94bd731297c5260c8f9a1f35a7293e3

Preparing for Economic Collapse

http://www.peakprosperity.com/blog/preparing-economic-collapse/57744

This is what crisis feels like

Here's a pretext, in case some of you doubters don't believe a currency collapse can happen here in the US.  Argentina was the most economically developed (if unstable) country in South America.  Rhodesia (now Zimbabwe) was the second most developed economy in Africa (behind South Africa).

And if you really want to take it further, the US itself has experienced two currency collapses in its history:  after the Revolutionary War and after the Civil War, both due to high indebtedness and the resultant destruction of its currency.

Sovereign defaults have occurred throughout history.  What's so special about the next one?  Because the country possessing the global reserve currency has never defaulted before.  The problem lays in the fact that every country in the world possesses USDollars (black market or otherwise), and when the dollar does collapse, the interconnected global financial system would descend into meltdown in cascading manner.  There will be few safe havens to hide out in. 

http://www.sovereignman.com/trends/this-is-what-crisis-feels-like-a-personal-story-12018/

On December 1, 2001, Argentina’s economy was in trouble. Unemployment was high, debt was high, and recession had taken hold. But life was somewhat ‘normal’.

Basic services still functioned. And no one had to really worry about… food. Or water. Then it all changed. Literally within a day. 

On December 2nd, our bankrupt government imposed measures that essentially froze everyone’s bank accounts. You can just imagine– one day having access to your funds, and the next day being completely cut off.

Within a matter of days, people were out in the streets doing battle with the police. The government soon defaulted on its debt, and the currency went into freefall.

Life becomes hell because you do not know whether you are going to be able to put food on the table the next day. 

And in such a state of despair, you’re not in a position to make good decisions. It’s all about survival.

Of course, we kept thinking, “why didn’t we see this coming? Why didn’t we do something sooner?”

If only we had moved some money out of the country before, or taken steps to safeguard his pension, life would have turned out much differently.

It’s like that old saying– better to be a year (or decade) too early than a day too late. Because one should never underestimate the speed with which things can unravel.

Argentina Freezes Supermarket Prices To Halt Soaring Inflation; Chaos To Follow

http://www.zerohedge.com/news/2013-02-04/argentina-freezes-supermarket-prices-halt-soaring-inflation-chaos-follow

Argentina: Troops deployed after looting at ski resort

Overwhelming debt levels = currency collapse = economic collapse = unemployment = people starving = social unrest = looting

http://www.bbc.co.uk/news/world-latin-america-20805042

IMF to Put Argentina on Path to Censure Over Inflation Data

This is an example of two wrongs not making things right.

1) the Argentinian government is accused by the IMF of fudging their official inflation data.  Ummm, that's what governments do--lie about inflation--ALL governments, some better than others.

2) the IMF is just a cabal of banks, more interested in returns on sovereign debt they own--than the sovereignty of said countries (see Greece).  They want to maintain the status quo--the illusion of "riskless" returns on sovereign bonds which, in reality, are fraught with risk.

In essence, you have two corrupt organizations taking swipes at each other, with the less powerful one (Argentina) taking it in the shorts when it comes to raising capital in global markets.

The take away message is the US is Argentina on steroids, with debt levels orders of magnitude larger than any other country--in the history of mankind.

http://www.bloomberg.com/news/2012-09-18/imf-to-put-argentina-on-path-toward-censure-over-economic-data.html

Preparing for Economic Collapse

http://www.chrismartenson.com/blog/preparing-economic-collapse/57744

Pension funds seized in Argentina

Ambrose Evans-Pritchard asks, "who's next?"

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/5504137/Argentina_seizes_pension_funds_to_pay_debts_Whos_next/

Argentina's central banker

Didn't Federal Reserve Chairman Ben Bernanke and Time's Man of the Year attend Harvard?

http://www.zerohedge.com/article/argentina-central-bank-mutiny-costs-local-bernanke-equivalent-his-job-criminal-charges

Countries in default--a blueprint for the US?

Countries which have defaulted on their bond obligations: first Russia in 1998, then Argentina in 2001, Iceland last November, Ecuador last December, and Ukraine on the brink.

More emerging countries are at risk. What's important to note is that in each case, the local currency was debased due to exorbitant printing of said currency. This was done in response to governments looking to print their way out of a huge deficit problem. This monetary and fiscal easing caused hyperinflation, which then caused interest rates to soar. This further exacerbated the ballooning debt, and eventually, the countries could not meet their debt covenants. This caused the country to shut down, as the government IOU's were now worthless, and credit disappeared.

The US Treasury and Federal Reserve Bank are essentially implementing these same policies of easy money and quantitative easing--only on a much grander scale. Exactly how they expect a different outcome for the US is beyond me.