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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. 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 billion in early 2001) but this becomes relative when these huge sums only serve to magnify a relatively tiny market out of all proportion, feeding fuel to the flames. Ditto for absurdly high interest rates topping 70 percent to defend the currency – in the long term these serve to liberate an economy from dependence on the dollar (at least based on the precedent of Brazil) but in the short they swell both ends of stagflation by feeding obscene financial bicycles while strangling a credit already at rock-bottom levels (18 percent of the economy as against a regional average of 45 percent). Meanwhile, we have the supreme paradox of a market-friendly government being torpedoed by the markets with international financial dailies muttering about the “brink of default.” The official explanation of this paradox is fear of a populist comeback – a fear which is fast becoming both a vicious circle and a self-fulfilling prophesy because the more these market panics at the prospect of a Fernández de Kirchner victory derail the economy, the likelier that triumph becomes. Macri could thus be forgiven were he to conclude bitterly about the markets: With friends like that, who needs enemies? And yet the government badly needs to introduce some self-criticism into its approach alongside self-pity. The market reaction is not as counterproductively irrational as it might seem. There is not only a “Cristina factor” but also a “Macri factor” – whatever the dangers of populism, Macri’s economic record in three of his four years has not been so dazzling as to inspire much confidence.
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