海角大神

We can learn a lot from the Argentines. When it comes to messing up an economy, they鈥檙e Numero Uno. They鈥檙e Olympians of financial legerdemain and masters of the old false shuffle.

In 2001, the country was deeply in debt. The government was out of money. And the currency was losing value fast. What did the Argentines do?

First, they broke their promise to investors and savers, cutting the peso loose from the dollar. Then, they seized control of banks and bank accounts. People had been saving money in US dollar accounts in order to avoid problems with the peso. But the Argentine feds forcibly converted their accounts to pesos, just as the peso was losing 2/3rds of its value.

The next thing was to take the reserves in the central bank and use them to pay current expenses 鈥� which caused the head of the bank to resign in protest.

And finally, a few years later, they took over private pension funds 鈥� to protect them for the pensioners, of course. What are they used for? To fund the country鈥檚 deficits!

But the Argentine feds are not just scalawags, they鈥檙e the pacesetters for the rest of the developed world.

贬别谤别鈥檚 The Financial Times with a warning:

Watch out as sovereigns eye company cash piles
聽By David Bowers

Much has been written about how the developed world must tackle its structural budget deficits. But the link that remains to be properly recognised is that the counterparts to those 鈥榰nsustainable鈥� public-sector budget deficits are equally 鈥榰nsustainable鈥� corporate-sector surpluses.

The conventional wisdom believes that the current sovereign debt crisis is the result of governments having been too profligate. But it is not that governments have been spending 鈥榯oo much鈥� that is the problem; it is that corporates have been spending 鈥榯oo little鈥�. Moreover, because this corporate saving is the main counterpart to the government鈥檚 borrowing, until companies start to spend again, the burden of fiscal adjustment will have to fall on cutbacks in public services and higher personal taxation. It is time to shift the debate away from talking about the fiscal position, and focus instead on whether it is a shift in corporate behaviour that is responsible for the fiscal mess in the developed world.

It is very unusual for the corporate sectors to run sustained financial surpluses. Look back at the UK and the US for more than half a century and the corporate sector has tended to be a net borrower, not a net saver.

What has prompted the recent move into financial surplus has been the decision by companies to step away from investment. Investment-to-gross domestic product ratios in the developed world are now close to the lowest levels seen in 60 years. Corporates appear to have decided to run themselves for cash, and not for growth. It is this profound shift in corporate behaviour that policymakers and politicians have been slow to spot. Until this behaviour changes 鈥� or is changed 鈥� it will be very hard to improve the fiscal arithmetic.

In the Reagan-Thatcher era, politicians cut taxes so that companies would come to their country, invest, create jobs鈥�so that those politicians could, in turn, be re-elected. It does not work like that anymore; globalisation has seen to that. The reality is that public services used by the 鈥�99 per cent鈥� are taking the strain, while attractive corporate tax regimes are protected. Just as the trade-union barons of the 鈥�70s failed to see the writing on the wall, so the global captains of industry may suffer a similar fate unless they put their cash to work in the countries in which they are domiciled.

The Argentines are the pacesetters for all modern governments. And The Financial Times is their newspaper of reference. It鈥檚 what the policy makers read. And the bankers.

Here, The Financial Times makes it clear what the policy makers should think: that corporations are to blame for current financial problems. They haven鈥檛 invested their money the way they should. If they鈥檇 invested more, instead of paying dividends and bonuses to rich people, we鈥檇 have more jobs鈥�more spending and more growth.

Surely the feds can help them find ways to 鈥渋nvest鈥� their money鈥�

鈥淚 love the US鈥�but it does seem to be going in a bad direction,鈥� said a friend in Miami.

鈥淵ou look around here and everything looks good. The grass and trees are all manicured. People are prosperous. But you go inland and it鈥檚 a different story. A lot of people in Florida don鈥檛 have two dimes. That鈥檚 why you see so many old people working. They鈥檙e taking tickets at the amusement parks. They鈥檙e working the cruise ships. They鈥檙e parking cars. They don鈥檛 have any money. They have to work to make ends meet.

鈥淎nd the real estate market here is a disaster. People tell you it鈥檚 bottoming out. I don鈥檛 see it. What I see are few transactions鈥�the market is very soft. People keep thinking they鈥檙e going to buy at the bottom. They buy鈥�and then the bottom sinks some more.

鈥淭his is a consumer society down here. People live in suburbs鈥�almost the whole state is suburb. They go to work. They come home. They go out to eat. They go out to shop.

鈥淎t any hour of the day, you鈥檒l see work vans in about half the driveways. Someone鈥檚 cutting a lawn or fixing a cable TV. Nobody does these things for himself. That鈥檚 the way people live down here. They call someone. It鈥檚 money in and money out鈥�all the time. Nobody鈥檚 got any savings鈥�or any time. It鈥檚 go鈥�go鈥�go鈥�You go to work. Then you go shopping.

鈥淎nd it can鈥檛 stop. If it just slows down a little, the state goes into a slump. Everybody is checking his cellphone or iPhone or email all the time. He can鈥檛 stop either. It鈥檚 go, go, go鈥�.

鈥淣obody can take the time to think or even to wonder. That鈥檚 why a real depression now would be much worse than the Great Depression of the 鈥�30s. Nobody can sit still. They can鈥檛 wait for it to pass. They can鈥檛 stop to breathe鈥�or think鈥�or wait for all the problems to clear up. They can鈥檛 relax and wait for an uneconomic upturn. They have to work.

鈥淭hey鈥檝e got to have money coming in鈥�and money going out.

鈥淵ou know, I鈥檝e been reading your Daily Reckoning for years. And the one lesson I take from it is that you have to have some savings鈥�so you鈥檙e not forced to run on the treadmill all the time. You need some money and some time. Otherwise, you鈥檙e never going to figure out what is going on. And you鈥檙e not going to have a clue of how to make any money. You just go from day to day鈥�from job to job鈥�from one shop to the next mall鈥�from bill to bill鈥�

鈥淪cientists have done some studies on how the brain works. They found that most of what we do is reactive鈥� Like someone throws a ball at you鈥�you reach out and catch it. Quick response.

鈥淏ut there are some things where the brain needs time. Some kinds of deep thought require, well, reflection. And nobody has time for reflection when they are on the computer or the iPhone鈥�or rushing to get something done鈥�

鈥淎nd nobody can stop to think when they are having trouble paying their bills. That鈥檚 why you need savings. That鈥檚 why you need to have a garden, too. Nobody鈥檚 got a garden down here in South Florida. We have to go to the supermarket to buy our food.

鈥淥f course, that鈥檚 part of the problem. If you have to work to prepare your food, you get better food鈥�and you don鈥檛 get fat. But now you have to work to not get fat. Otherwise, food is just another distraction鈥�like the iPhone or the Internet. You eat because it鈥檚 easier than thinking. It saves you from having to figure things out.

鈥淵ou work. You drive. You shop. You check email. You call people. You eat. Money in. Money out. There鈥檚 no stopping it. No hesitating. No time to think. No time just to let things be.鈥�

Regards,

Bill Bonner
听蹿辞谤 The Daily Reckoning