One of the things you learn over time if you're paying attention is centralized governments--especially heavily statist ones--have an inbuilt penchant for producing tears. In most cases delayed tears.
As many of you know Argentina just held an important election to toss out one tear manufacturer in what hopefully for the Argentinian people won't be another. Argentina might be the global capitol of tears. It's a distinction that few claim to want, but many continue to vie for. Greece and some other parts of the EU should come to mind.
In a recent article former Pimco guru Mohmed El-Erian writes:
Last
week, the government of newly elected Argentine President Mauricio
Macri launched a bold plan to revitalize a bruised and beleaguered
economy plagued by high inflation. At a time of daunting crisis
conditions, one should not underestimate the importance of this move not
just for Argentina, but also for other countries, where leaders are
watching closely for clues about how to deal with their own economic
woes.
Thanks to years of
economic mismanagement, Argentina’s economy has been badly
underperforming for decades. Previous governments sought to avoid
difficult policy choices and obfuscate fundamental issues by
implementing inefficient controls that grossly misallocated resources
and undermined Argentina’s ability to generate the foreign-exchange
earnings needed to cover its import bill, resulting in domestic
shortages. The recent drop in commodity prices has exacerbated the
situation, depleting what little growth dynamism the economy had left,
while fueling inflation, deepening poverty, and spreading economic
insecurity and financial instability.
You have to chuckle, perhaps even give El-Erian points for politeness. Describing Argentina's long standing economic woes as mismanaged is stand-up comic material. Bruised and beleaguered are other interesting choices. But oh well. Here are some points he offers to correct the problems.
The other thing is, any scent of a meaningful move toward less statism could spell investing opportunities. There are caveats, however, so keep your eyes focused. That way you might avoid getting caught up in any future tears because if past is prologue.......
In
theory, governments in such a situation have five basic options to
contain crisis conditions, pending the effects of measures to
reinvigorate growth and employment engines.
· Run down the financial reserves and wealth that were accumulated when the economy was doing better.
· Borrow from foreign and domestic lenders.
· Cut public-sector spending directly, while creating incentives to induce lower private-sector expenditure.
· Generate revenues through higher taxes and fees, and earn more from abroad.
· Use
the price mechanism to accelerate adjustments throughout the economy,
as well as in trade and financial interactions with other countries. More:
No comments:
Post a Comment