Free Markets, Free People

Argentina: A cautionary tale?

Given what has happened over the last few months culminating in yesterday’s bill signing ceremony, and considering all that has happened prior to that (government ownership of car companies, TARP, etc) I sure hope I don’t hear anyone trying to claim “it couldn’t happen here”:

Argentine President Cristina Kirchner announced this week that her government intends to nationalize the country’s private pension system. If Congress approves this property grab, $30 billion in individually held retirement accounts — think 401(k)s — managed by private pension funds will become government property.

Since Congress is made up of a majority of fellow leftist Peronists, passage is almost assured. Kirchner has crafted a rather unique justification for the grab:

Mrs. Kirchner justified the proposed seizure of $30 billion in pension assets by accusing the funds of having instrumented “policies of plunder.”

Of course, since she, her husband and the Peronists have been in power, the results have been far from good, but just like now, it’s the fault of something other than the government:

When the Argentine government ran out of money in 2001, it blamed the market and increased its own role in the economy. Since then it has imposed price controls, defaulted on its debt, seized dollar bank accounts, devalued the currency, nationalized businesses and tried to set confiscatory tax rates with the aim of making society more “fair.” Mrs. Kirchner and her predecessor (and husband) Nestór Kirchner have also preserved the Peronist tradition of big spending.

Some of that seems vaguely familiar. Read both articles – there’s a pattern at work there that should be recognizable elsewhere. Making everything a “crisis”. Picking fights with certain industries. Interesting reading.

Meanwhile, as you might imagine, the threat of taking over the 401(k)s has had an immediate and negative impact:

The 10 pension funds, and many depositors, are threatening lawsuits. The Argentine stock market fell 10% Wednesday, on top of Tuesday’s 10% decline. Because the private pensions are big investors in local capital markets, the proposed nationalization has raised worries the government intends to tap new pension contributions for its own needs rather than invest the money in local stocks and bonds. For fragile local markets, the move compounded the impact of the global financial crisis.

The damage was even worse in Argentina’s local debt markets. Trading volume for a key local bond market, Argentina’s Open Electronic Market, was practically zero on Wednesday compared with a normal day’s turnover of about $1 billion.

Spanish companies with assets in Argentina saw their stocks hit hard amid concerns there might be further nationalizations. Shares of oil company Repsol YPF SA fell 16%, while Spanish banks Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA slid more than 9% each.


On Wednesday, the Toronto credit rating agency DBRS downgraded Argentina’s long-term local currency securities ratings, saying the pension nationalization amounted to “confiscation of personal assets and an infringement of property rights.” The agency said the seizure might allow Argentina to meet “its near-term financing needs more easily,” but criticized “the use of pension-fund assets for financing purposes as damaging to government credibility.”

The why? Well the reason for the grab is Argentina is “facing a $10 billion shortfall in what is due on government debt by the end of 2009.”

$10 billion due on debt? And no money available. Obviously they’re not able, like some countries, to borrow it since they’ve already defaulted once fairly recently. So, as is often the case, the citizen’s assets and priorities take second place to the government – if the government is willing to use its guns (under the very thin veneer of “law”) to take those assets and make those priorities secondary. And, apparently, in Argentina, the government is.

But with our minimal debt, projected 10 year government budget and bond rating problems, that could never happen here, could it?



18 Responses to Argentina: A cautionary tale?

  • Low hanging fruit – you know they’ll get around to looking at all that ‘unused’ money just sitting there ‘going to waste’ and the country facing billions of dollars in deficits – it’s just a question of time before they go with the ‘voluntary’ roll over into some government guaranteed plan, and then the eventual not so voluntary takeover of the funds that don’t ‘patriotically’ get moved into the government guaranteed plan by voluntary means.
    Or maybe they’ll use one of those plans our local liberals are so fond of for ‘recalcitrant’ States that try and claim the Federal government has no right to mandate things not in the Constitution – “withholding of Federal Funding’, or a tax penalty on non government backed plans  (because only the GREEDY RICH will have plans like that anyway!).
    Just a question of time with this Congress, and this President.   The national wealth is theirs to use, ask any progressive do gooder who can better manage your wealth – you, or the government.

  • It is really a misnomer to call anyone a “liberal”, leftist, or progressive anymore.  The truth is that the rational for all those marxist ideas died with the fall of the Berlin Wall.  What we see in Argentina, and in our own country, and in other places is nothing more than naked populist Fascism.
    The Obama team is following a fascist plan:  1) generate crises, define and demonize some official hate groups
    (2) use populist and progressive rhetoric
    (3) Gain the cooperation of some selected big corporations and big labor
    (4) Seize industries and assets for the government
    (5) Use patronage of these assets as a way to stay in power, never mind any damage you do to the country, that is unimportant.

  • If the government can force me to buy a product from a private company based on a tendentious reading of the Commerce Clause, why couldn’t it appropriate my retirement funds? Sure, it would be a “taking” under the 5th Amendment, but they could give me a “bond” worth the same amount. If memory serves, hasn’t some Democratic congressperson already proposed something similar?

  • One of the nation’s largest labor unions, the Service Employees International Union (SEIU), is promoting a plan that will centralize all retirement plans for American workers, including private 401(k) plans, under one new “retirement system” for the United States.
    In effect, government pensions for everyone, not unlike the European system and regardless of personal choice.
    Could it happen here?

  • Mrs. Kirchner justified the proposed seizure of $30 billion in pension assets by accusing the funds of having instrumented “policies of plunder.”

    What a sweet deal the lefties have found for themselves!  Find somebody who has money, claim that they got it dishonestly / unethically (without the pesky bother of having to prove actual illegality in a court of law), and use that as a pretext to take the money away from them.  How can I get in on that scam???

    / sarc

    Seriously, the worst aspect of these sort of thing (including what we’ve seen in our own country) is that the lefties have completely abandoned the rule of law.  The mere accusation of some sort of hazy, poorly-defined wrongdoing is enough to punish people and entities.  And, really, there doesn’t even need to be an accusation that some bad act has been committed: an accusation that people have bad motives (such as greed) is sufficient to punish them.  No need for courts, lawyers, juries, or even a written law: just decide that somebody deserves to be punished and go get a rope.

    Nullum crimen, nulla poena sine praevia lege poenali.

    You’re a bad man!  You’re a very bad man!  I’m gonna make you pay!

    • “How can I get in on that scam”

      Simple. Join the Democratic party or one of its sycophantic  ‘advocacy’ groups.

    • Since when has the left ever been in love with the rule of law?  The Jacobins or the Committee of Public safety?
      Karl Marx? The anarchists who murdered nearly two dozen heads of state in the late nineteenth and early twentieth centuries?
      Was it the weather Underground and Bill Ayers?
      Or maybe it was the Kennedy’s and their mob buddies,  Or maybe Charlie Rangel and Blago?

  • That $30 billion in pension fund assets are not liquid, they are invested in the economy. If Argentina plans to use that money for something else they are going to have to sell those investments, depressing the economy and probably not getting the nominal value for them. Idiocy, but what else can you expect from poiticians?

  • Eminent domain taken to its natural conclusion; everything belongs to the state because anything the state does is, by definition, a public purpose.

  • I have been putting off buying any physical gold or silver…may have to rethink that.

  • It’s just the left moving society forward yet again!

  • Well they’re successfully getting a ton a mileage out of a few threatening phone calls.  That’s all that’s one this morning.
    Taking the focus off what they just did to do a hatchet job on the grassroots opposition.  Who needs thugs when you have a block of the public that swallows what the MSM feeds them.  And allies who I will expect to through the grassroots under the bus readily.  I caught a glimpse of McCain on this morning and I didn’t even need to watch to know what they were hoping to get from him.  I hope he didn’t give it to them.
    What’s happened is only possible because the press has failed to do its job.  Its not like they are under any explicitly written obligations, but I also doubt the Founders expected the level of colluded group think in the press that we have today.

  • Of course it can happen here. You think Pelosi and Obama are happy with anyone having any private funds? If you have your own money you don’t need Nanny Sam to suckle you at the teat from cradle to grave.

  • I think the scarier realization is that one of the ways in which it can “happen here” wouldn’t even require for government to do anything more than tread water.  What is Argentina’s main problem, economically?  That they’ve run out of money, are running out of ways to deal with their debt, and are still unable to keep their heads above water.  Raiding the retirement and investment funds of individual citizens will only push the day of reckoning back a bit, while making that final reckoning work.  It does not make them solvent!  It doesn’t fix the problem, it just draws it out and makes it worse in the end.
    The problem for the USA is not just that the government may take similar steps, it’s that we’re screwed regardless of whether or not they do.  It certainly can happen here, but even if it doesn’t, government has spent its way into a corner, and at some point there must be a reckoning.

    • while making that final reckoning work.
      Correction: “work” should be “worse” in that sentence.