Free Markets, Free People
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?
Surely there’s one of the famous self-help series by that name. If so, could someone do us all a favor and send copies to Barack Obama and Hillary Clinton?
Argentina was celebrating a diplomatic coup yesterday in its attempt to force Britain to accept talks on the future of the Falkland Islands, after a two-hour meeting in Buenos Aires between Hillary Clinton and President Cristina Fernández de Kirchner.
Responding to a request from Mrs Kirchner for “friendly mediation” between Britain and Argentina, Mrs Clinton, the US Secretary of State, said she agreed that talks were a sensible way forward and offered “to encourage both countries to sit down”.
Uh, sit down for what? Britain claimed the Falklands in 1833 after British settlers settled there during the decade. The islands lay 300 miles off the Argentine coast. In 1982, it had to fend off an attack by Argentina in a bid to take them over. Now 3 British oil companies plan to put an offshore oil rig 100 miles north of the islands.
Somehow Argentina, who should have gotten the message in 1982, is still under the mistaken impression it has some say over what goes on there:
“What they are doing is illegitimate,” said Jorge Taiana, the foreign minister. “It’s a violation of our sovereignty. We will do everything possible to defend and preserve our rights.”
Riiiight. Like they did in ’82. Look, internationally, this is pretty much settled business. Other than Argentina, no one questions which country has sovereign control in the Falklands. And certainly not those who lives there. The 3,000 island dwellers all consider themselves, and have always considered themselves, a part of the British Commonwealth.
Territorial waters, as defined by 1982 United Nations Convention on the Law of the Sea extend 12 miles. Then there is a 12 mile “contiguous zone” in which a state has limited powers. A state also enjoys a 200 mile “exclusive economic zone” which includes “control of all economic resources within its exclusive economic zone, including fishing, mining, oil exploration, and any pollution of those resources.” That zone includes the territorial and contiguous zone as well.
As the cite points out:
Before 1982, coastal nations arbitrarily extended their territorial waters in an effort to control activities which are now regulated by the exclusive economic zone, such as offshore oil exploration or fishing rights (see Cod Wars). Indeed, the exclusive economic zone is still popularly, though erroneously, called a coastal nation’s territorial waters.
With the Falklands being 300 miles off the coast and the rig a 100 miles north of the islands, there is obviously nothing to the dubious claim of Argentine sovereignty (again remember, other than claim the islands, Argentina never settled them or has occupied them).
Enter Hillary Clinton – someone whose job it is to know all of this.
Her intervention defied Britain’s longstanding position that there should be no negotiations unless the islands’ 3,000 inhabitants asked for them. It was hailed in Buenos Aires as a major diplomatic victory, but condemned in the Falklands.
Britain insisted there was no need for mediation as long as the islanders wanted to remain British. “We don’t think that’s necessary,” a Downing Street spokesman said.
She gave no sign of backing the British position on negotiations, saying instead: “We would like to see Argentina and the UK sit down and resolve the issues between them in a peaceful and productive way. We want very much to encourage both countries to sit down. We cannot make either one do so. We think it is the right way to proceed, so we will be saying this publicly.”
Simply amazing. Our longest standing ally thrown under the bus to solicit warm fuzzies in South America that, as have been proven with others like Hugo Chavez, have the half-life of a Mayfly.
There will be a price to pay in the future for this as anyone who has watched international relations for any time knows. Britain will extract a pound of flesh. In the meantime, other than empty words meant to please those who will remain deeply skeptical of the US, all that’s been accomplished is the abandonment of an ally. Essentially all Clinton has done is give false hope to Argentina and royally pissed off a solid ally.
Too bad the book in question isn’t available for Ms. Clinton. And apparently she’s also forgotten the old saying about “remaining silent and being thought a fool rather than speaking out and removing all doubt.”
UPDATE: Ralph Peters provides the back story.
He took off a few hours ago from the US in – wait for it – a Venezuelan plane. Naturally the UN has actually gotten off of its rear-end and taken what, for it, is “action”. The UN General Assembly President Miguel D’Escoto Brockmann and a number of journalists are accompanying former Honduran president Mel Zelaya.
Honduras, naturally, has said Zelaya isn’t welcome and has stated they will arrest him should he try to reenter the country. The OAS, in the meantime, has suspended Honduras from the organization.
The interim government (which some news organizations are characterizing as a “military government”) pleads for the rest of the world to back off and let Honduras work this out.
But, with apparently everything under control and in tip top shape in their respective countries, the presidents of Argentina, Ecuador and Paraguay, along with the head of the OAS have time to fly to El Salvador to “monitor events.”
Meanwhile it is reported that Nicaragua is moving troops toward the Honduran border. All of this tacitly green-lighted by the Obama administration’s stance.
The Venezuelan plane carrying deposed president Mel Zelaya landed in El Salvador, according to Honduran daily El Heraldo. Venezuelan chancellor Nicolás Maduro verified that the airplane was Venezuelan and identified it as YV-1496.
But that’s not meddling – no siree.
Honduras has reported it will not allow the landing of the Venezuelan aircraft carrying Zelaya in Honduras. My guess is they’ll now try to drive into Honduras from El Salvador.
That’s Glenn Garvin of the Maimi Herald’s question:
For weeks, Zelaya — an erratic leftist who styles himself after his good pal Hugo Chávez of Venezuela — has been engaged in a naked and illegal power grab, trying to rewrite the Honduran constitution to allow him to run for reelection in November.
First Zelaya scheduled a national vote on a constitutional convention. After the Honduran supreme court ruled that only the country’s congress could call such an election, Zelaya ordered the army to help him stage it anyway. (It would be ”non-binding,” he said.) When the head of the armed forces, acting on orders from the supreme court, refused, Zelaya fired him, then led a mob to break into a military base where the ballots were stored.
His actions have been repudiated by the country’s supreme court, its congress, its attorney-general, its chief human-rights advocate, all its major churches, its main business association, his own political party (which recently began debating an inquiry into Zelaya’s sanity) and most Hondurans: Recent polls have shown his approval rating down below 30 percent.
In fact, about the only people who didn’t condemn Zelaya’s political gangsterism were the foreign leaders and diplomats who now primly lecture Hondurans about the importance of constitutional law. They’re also strangely silent about the vicious stream of threats against Honduras spewing from Chávez since Zelaya was deposed.
Warning that he’s already put his military on alert, Chávez on Monday flat-out threatened war against Honduras if Roberto Micheletti, named by the country’s congress as interim president until elections in November, takes office.
I think Garvin’s question is a good one. If you have someone who continues to pursue activities which are clearly not constitutional, and instead is doing everything within his power to subvert said constitution, what do you do?
Well perhaps have the military arrest him and throw him out of the country is not the first action which comes to mind, granted. However, in Honduras, unlike here, the military does have a law enforcement function. That may not be ideal (because of exactly the perception it leaves) but that’s the case. Perhaps, in retrospect, the best thing that could have been done is have civilian law enforcement arrest Zelaya, keep him in the country and put him on trial. Bottom line – it seems his removal was justified based on his actions.
What the world seems to be objecting too most is the method of his removal while ignoring the reasons.
And then, as Garvin points out, we have the thug in Venezuela threatening Honduras while everyone remains silent:
”If they swear him in we’ll overthrow him,” Chávez blustered. “Mark my words. Thugetti — as I’m going to refer to him from now on — you better pack your bags, because you’re either going to jail or you’re going into exile.”
No one denouncing the coup seems to be bothered by Chavez’s threats. In fact, it could be argued that the reaction of the US has green-lighted Chavez and his followers to intervene in some way, to include militarily. Not that Chavez or the Venezuelan military are competent enough to actually do that, but it certainly wouldn’t surprise me now if they tried.
Zelaya was trying to follow Chavez’s template and somehow manage a constitutional change to a permanent presidency through bypassing the constitutionally mandated process and claiming a popular mandate instead. Even his own party didn’t support his attempt and the congress, dominated by that party, passed a law making what Zelaya was attempting illegal. Zelaya attempted it anyway, making what Zelaya was doing a criminal offense. The Supreme Court of Honduras ruled against Zelaya. The Attorney General apparently enforced the law.
Here, we’d call that the “checks and balances” working. There, the result is apparently a “coup”.
The point? In reality, this is not at all a cut-and-dried “military coup” as it is being portrayed. It wasn’t a disgruntled group of military officers who decided to take the law into their own hands and to change the government because they don’t like the form or direction in which it was heading. Instead a rather broad based coalition of politicians, to include those in his party, and other institutions such as the congress (legislative branch) and Supreme Court (judicial branch), found his criminal behavior to be unacceptable and decided to take what they considered to be legal action to prevent a rogue politician from any further attempts at violating the law.
They removed him from office.
And, unlike its reaction to the brutality on display in Iran, the world had an immediate knee-jerk fit.
We now have Venezuela threatening Honduras without a peep from the OAS or the US. We have the OAS now giving Honduras 3 days to reinstall Zelaya or else (what the “else” is is anyone’s guess). We have the president of Argentina sticking her nose into the affair. And we have the showdown tomorrow as Zelaya, in the company of the UN, OAS and Argentine president, reentering Honduras in a bid to retake office. Honduras has said Zelaya will be arrested if he reenters.
Why was there such a rush on the part of the US to denounce this? If sitting back for 10 days and assessing the situation in Iran before speaking was such a good idea as the administration claims, why wasn’t the same true in Honduras? As the facts come out, it seems that it isn’t what it is being characterized as.
If all of the world’s concern is focused on the “democratic process”, where was that concern last week as the now ex leader of Honduras tried to subvert the constitution and claim a mandate by means it prohibited?
Nowhere to be heard. The world was quite content, it seems, to let another declared leftist permanently install himself as a virtual dictator in a Latin American country. But let that country try to enforce it’s constitution, and all hell breaks loose.