<html>
<head>
<meta http-equiv="content-type" content="text/html; charset=utf-8">
</head>
<body text="#000000" bgcolor="#FFFFFF">
<div class="container font-size5 content-width3">
<div class="header reader-header" style="display: block;"
dir="ltr"> <a class="domain reader-domain"
href="https://www.counterpunch.org/2018/07/27/argentinas-new-50-billion-imf-loan-is-designed-to-replay-its-2001-crisis/">counterpunch.org</a>
<h1 class="reader-title">Argentina’s New $50 Billion IMF Loan is
Designed to Repay Its 2001 Crisis</h1>
<span class="post_author_intro">by</span> <span
class="post_author" itemprop="author"><a
href="https://www.counterpunch.org/author/llellelcl3l3l4l/"
rel="nofollow">Michael Hudson - Sharmini Peries</a> - July
27, 2018</span></div>
<hr>
<div class="content">
<div class="moz-reader-content line-height4" dir="ltr"
style="display: block;">
<div id="readability-page-1" class="page">
<div itemprop="articleBody">
<p><em><br>
The recently elected neoliberal government of Mauricio
Macri has decided to seek a $50 billion IMF credit
line, which will only enable more capital flight for
the upper class and greater unpayable debt for the
rest of the population, says the economist Michael
Hudson.</em></p>
<p><em>SHARMINI PERIES: It’s The Real News Network. I’m
Sharmini Peries, coming to you from Baltimore.</em></p>
<p><em>For several months now, Argentines have been taking
to the streets to protest against neoliberal austerity
measures of President Mauricio Macri. The most recent
such protest took place on July 9 on Argentine’s
Independence Day. There have also been three general
strikes thus far. In the two years since he took
office, President Macri has laid off as many as 76,000
public sector workers, and slashed gas and water and
electricity subsidies, leading to a tenfold increase
in prices in some cases.</em></p>
<p><em>The government argues that all this is necessary in
order to stem inflation and the decline of the
currency’s value. Last month, Macri received the
backing of the International Monetary Fund. The IMF
agreed to provide Argentina with a $50 billion loan,
one of the largest in its history. In exchange, the
Macri government will deepen the austerity measures
already in place.</em></p>
<p><em>Joining me now to analyze Argentina’s economic
situation and its new IMF loan is Michael Hudson.
Michael is a distinguished research professor of
economics at the University of Missouri Kansas City.
Welcome back, Michael.</em></p>
<p>MICHAEL HUDSON: Good to be back, Sharmini.</p>
<p><em>SHARMINI PERIES: Michael, why is it that Argentina
needs such a huge credit line from the IMF?</em></p>
<p>MICHAEL HUDSON: For precisely the reason that you
explained. Its neoliberal policy aims at rolling back
the wage increases and employment that Mrs. Kirschner,
the former president, achieved. So it’s part of the
class war to shrink the economy. To lower wages, you
have to cut back business so as to cut back employment.
Like almost all IMF loans, the purpose is to subsidize
capital flight out of Argentina before this austerity
occurs, so that wealthy Argentinians can take their
money and run before the currency collapses.</p>
<p>The loan will indebt Argentina so much that its
currency will continue to go down and down, chronically
wrecking the economy. That’s what the IMF does. That’s
its business plan. It makes a loan to subsidize capital
flight, emptying out the economy of cash, leading the
currency to collapse, as it has recently collapsed. As
soon as the $50 billion was expended, wasted in letting
wealthy Argentinians take their pesos, convert them into
dollars, move them offshore – to the United States, to
England, to the Dutch West Indies, and offshore banking
centers – then they let the currency collapse.</p>
<p>The IMF model’s basic assumption, which it’s announced
for the last 50 years, is that when you depreciate a
currency, what you’re really lowering is the price of
labor. Raw materials and capital have an international
price. But when a currency goes down, it makes imports
much more expensive, and that causes a price umbrella
over the cost of living. Labor has to pay a higher
domestic price for grain, food, oil and gas, andfor
everything else.</p>
<p>So what Macri has done is to agree with the IMF to wage
class war with a vengeance. Devaluation leaves Argentina
so hopelessly indebted that it can’t possibly repay the
IMF loan. So what we’re seeing is a replay of what
happened in 2001.</p>
<p><em>SHARMINI PERIES: Exactly. I was going to ask you,
now, that was only 17 years ago, Michael. Argentinians
do have memory here. They know what happened. They
experienced it as well. Now, that was back in 2001
during the economic crisis when unemployment had
increased so dramatically. That country went through a
series of presidents and went through a series of
crises. And we saw images very similar to what we have
seen in, in Greece not too long ago. Now, tell us more
about that history. What exactly happened during that
crisis, and then eventually how did Nestor Kirschner
relieve the economy and come out of that crisis?</em></p>
<p>MICHAEL HUDSON: Well, the IMF staff said, “Don’t make
the loan. There’s no possible way Argentina can pay it.
It’s all going to be made to the oligarchy for capital
flight. You’re giving the IMF money for crooks, and
you’re expecting the Argentine people to have to pay.”
So Argentina very quickly was left broke.</p>
<p>Although that was 17 years ago, for the last 17 years
the IMF has had a slogan: “No more Argentinas.” In other
words, they said, they were never going to make a loan
that is only given to oligarchs for capital flight.
That’s what happened when it lent to Ukraine, to the
Russian kleptocrats, and to the Greek banks to move
offshore. Yet here again, we’re having a replay.</p>
<p>After Mrs. Kirschner came in, it was obvious to
everybody, as it had been to the IMF staff (many of whom
had resigned) that Argentina couldn’t pay. So about 80
percent of Argentina’s bondholders agreed to write down
the debt to something that <em>could</em>be paid. They
saw that either it’s a total default because they can’t
pay, or they would write it down very substantially to
what could be paid, because the IMF really made an
incompetent – not incompetent, but outright corrupt –
insider deal.</p>
<p>Unfortunately, the oligarchy had a fatal clause put in
the original bond issue, saying that Argentina would
agree to U.S. arbitration under U.S. law if there was
any dispute. Well, after the old Argentine bonds
depreciated in price – the bonds that were not
renegotiated as part of the 80 percent – you had vulture
funds buy them up. Especially Paul Singer, the
Republican campaign donor who tends to buy politicians
along with foreign government bonds. He sued, demanding
100 percent on the dollar, not the 40 cents or whatever
they’d settled for. The case was assigned to the senile,
dying Judge Griesa in New York City. He who said there
was something about a clause that said investors have to
be treated symmetrically. Argentina had said, “That’s
fine, we’ll pay the other 20 percent the same as what
the 80 percent of all agreed to. The majority rules.”
But Griesa said, “No, you have to pay the 80 percent all
the money that the 20 percent demands. That’s symmetry.”
He let the hedge funds win. That set Argentina on the
road to go bankrupt again, wreck the government, and
bring back the oligarchy.</p>
<p>That ruling caused turmoil. The United States State
Department set out to support the oligarchy by doing
everything it could to destabilize Argentina. The
Argentine people voted in a government that was
supported by the United States, hoping it would be nice
to them. I don’t know why foreign countries think that
way, but they thought maybe if they voted neoliberal,
the United States would agree to forgive some of its
debt.</p>
<p>Well, that’s not what neoliberals do. Macri did just
what you said at the beginning of the program. He
announced that he was going to cut employment, stop
inflation by making the working class bear all of the
costs, and would borrow – actually, it was the largest
loan in IMF history – the $50 billion to enable the
Argentine wealthy class to move its money offshore.
That’s what the IMF does.</p>
<p><em>SHARMINI PERIES: Right. So let’s imagine you are
given the opportunity to resolve this issue. How would
you advise the Argentine government in terms of what
can they do to stabilize the economy, given the
circumstances they’re facing right now?</em></p>
<p>MICHAEL HUDSON: Very simple. I’d say that this debt is
an Odious Debt. There is no way Argentina can pay. The
clause that bankrupted it was put in as a result of tens
of thousands of professors, labor leaders, and land
reformers having been assassinated. The United States
financed an assassination team throughout Latin America
after Pinochet in Chile, to support what was basically a
proxy government. The Argentine loan said it would
follow U.S. rules, not Argentine rules. That basically
should disqualify that debt from having to be paid. And
it should say the IMF debt is an odious debt, given
under fraudulent purposes solely for purposes of capital
flight.</p>
<p><em>SHARMINI PERIES: Now, Michael, just one last
question. Did you want to add something to what you
were saying?</em></p>
<p>MICHAEL HUDSON: Well, once it doesn’t pay the foreign
debt, its balance of payments will be more stable. But
creditors have always used violence in order to get
their way. I don’t see how the Argentina situation can
be solved without violence, because the creditors are
using police force and covert assassination. They’re
just as bad as the Dirty War that had that mass
assassination period in the late, into the late 1980s
and early ’90s. There’s obviously going to be not only
the demonstrations that you showed, but an outright war,
because it’s broken out in Argentina more drastically
than anywhere else right now in Latin America, except in
Venezuela.</p>
<p><em>SHARMINI PERIES: Michael, at the moment, the Fed is
gradually increasing interest rates and the dollar is
gaining in value. This is sucking the financial
capital not only in Argentina but in many places
around the world. Also, you know, they’re going to be
soon in crisis as well. What is, what can the
developing economies do?</em></p>
<p>MICHAEL HUDSON: Here’s the problem: When the United
States raises interest rates, that causes foreign money
to flow into the dollar, because the rest of the world,
Europe and other areas are keeping low interest rates.
So as money goes into the dollar, to take advantage of
the rising interest rates, the dollar rises. That makes
it necessary for Argentina or any other country, third
world country, to pay more and more pesos in order to
buy the dollars to pay that foreign debt.</p>
<p>Argentina and other Third World countries have violated
the prime rule of credit: never to denominate debt in
another currency that you can’t print. Now, the dollar
debts become much more expensive in peso terms. As a
result, throughout the world right now, you’re having a
collapse of bond prices of Third World debt. Argentine
bonds, Chilean bonds, African bonds, Near Eastern bonds.
Third World debt bonds are plunging, because the
investors realize that the countries can’t pay. The game
looks like it may be over.</p>
<p>The good side of this is that Argentina now can join
with other Third World countries and say, “We are going
to redenominate the debts in our own currency, or we
just won’t pay, or we will do what the world did in 1931
and announce a moratorium on intergovernmental debts for
German reparations and the World War I Inter-Ally
debts.” An international conference is needed to declare
a moratorium and say, what is the amount that actually <em>can</em>be
paid? The aim would be to write down third world debts
to the amount that should be paid.</p>
<p>The principle that countries have to support is that no
country should be obliged to sacrifice its own economy,
its own employment, and its own independence to pay
foreign creditors. Every country has a right to put its
own citizens first and its own economy first before
foreign creditors, especially when the loans are made
under false pretenses, as the IMF has made pretending to
stabilize the currency instead of subsidizing capital
flight to <em>destabilize </em>the currency.</p>
<p><em>SHARMINI PERIES: All right, Michael. I thank you so
much. And we’ll continue this conversation. There’s so
much more to discuss, and so many countries here in
this situation for that discussion as well. I thank
you so much for joining us today.</em></p>
<p>MICHAEL HUDSON: Thanks. I think it’s going to get
worse, so we’ll have a lot to discuss.</p>
<p><em>This is an edited transcript of an interview on the
<a
href="https://therealnews.com/stories/michael-hudson-argentinas-new-50-billion-imf-loan-is-designed-to-replay-its-2001-crisis">Real
News Network</a>.</em></p>
</div>
</div>
</div>
</div>
<div> </div>
</div>
<div class="moz-signature">-- <br>
Freedom Archives
522 Valencia Street
San Francisco, CA 94110
415 863.9977
<a class="moz-txt-link-freetext" href="https://freedomarchives.org/">https://freedomarchives.org/</a>
</div>
</body>
</html>