Politics, paradoxes and self-fulfilling prophesies

The fear of a populist comeback is fast becoming both a vicious circle and a self-fulfilling prophesy.
The fear of a populist comeback is fast becoming both a vicious circle and a self-fulfilling prophesy.

For many months now President Mauricio Macri has been playing with fire – restricting the electoral alternatives to the populism incarnated by his predecessor Senator Cristina Fernández de Kirchner, in order to ensure that continuity is at the very least the lesser evil, while running the calculated risk of spooking the markets (supposedly covered by the insurance policy of the biggest International Monetary Fund loan in history). This strategy somehow managed to survive all last year’s crises, but in the anniversary week of that first run on the currency its basic premises now risk collapsing all along the line, thus making the current turbulence potentially more dangerous.

Perhaps the immediate catalyst of this latest crisis of confidence was something bound to happen sooner or later – a stagflation persisting too long is finally resulting in the first serious opinion polls showing Fernández de Kirchner winning a run-off against Macri beyond the margin of error, thus wrong-footing the spin doctors who took the economic setbacks in their stride while re-election remained in sight.

In theory monetary problems are fixed by monetary solutions but this only works when the causes are also monetary – a purely monetarist policy thus becomes almost worse than useless when the political and psychological factors are so dominant. Throwing money at the problem becomes akin to using water against an oil fire – it should not be forgotten that the 2018 crisis began exactly a year ago last Wednesday, when then-Central Bank governor Federico Sturzenegger deployed over US$1.4 billion to defend the 20-peso mark. The massive IMF package seemed to stop the rot (just like the blindaje mega-swap of some US$40…

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.