Hurray for Default!

Good for Argentina for negotiating hard with the IMF over its loans. As I've written before, it's time to stop pretending that countries aren't allowed to default on their loans. Lending to plenty of countries is supposed to be risky, which is why the countries pay a huge risk premium to borrow. Argentina's economic crisis was largely the making of the IMF, who among other things stupidly encouraged them to peg their currency to the dollar maintain their currency peg long after it was clearly unsustainable. That was unsustainable for reasons which have been understood for a long time. Once the inevitable devaluation came, there was no way Argentina could be reasonably expected to pay off their dollar-denominated debt.

Stiff your creditors, I say. And, don't worry, they'll be back to lend you more money in a few years.


...and, no, this isn't an option for the US. The US is not Argentina (yet). US default would completely nuke the international financial markets.

...some people objected to my claim that the IMF encouraged them to peg their currency. That appears to be a correct criticism, though from what I can find out at the moment the currency peg was enacted without IMF protest in the midst of a lot of other neo-liberal reforms which were IMF-encouraged.. The real failure of the IMF was their continued insistence that the peg be maintained, and their foisting of various loans for this purpose onto them. It's important to realize that a lot of the money loaned was simply used to maintain the currency peg. Dollars were loaned to the central bank, which were then simply spent buying pesos that were being traded in for dollars as people awaited the inevitable devaluation/float.