Argentina, which has Latin America’s largest economy after Brazil and Mexico, appears again to be in deep economic trouble.
Inflation is running at 55 percent. The peso lost most of its value in January. The government is asking the U.S. Supreme Court to approve delaying the repayment of a $1.3 billion installment on a loan from creditors, including two U.S. hedge funds, to avoid default.
Argentina has defaulted three times before on major loans, in 1982, 1989, and 2001. Why would anyone lend the country another $140 billion today?
On top of all this, Argentinian President Cristina Fernandez de Kirchner has been in poor health since she suffered a brain injury last year, calling into question her ability to make decisions at a time of economic adversity. Presidential elections are scheduled for next year; she can’t run again because of term limits.
Argentina seems to have an ingrained culture of economic irresponsibility. It spends money it doesn’t have, borrows what it can to make up the difference, and defaults when it feels the need.
The United States exhibits some of the same fiscal habits. Most Americans were rightly glad that Congress raised the debt limit this month. Reasonable Republicans went along with that because they saw the threat of voters’ fury this year if they shut down the government again.
At the same time, America’s national debt stands at a stunning $17.3 trillion. The federal government is still running annual budget deficits, even though Americans may rejoice that the deficits are shrinking a little.
The United States has low inflation, although the real cost of living is rising, not falling. America’s debt to foreign lenders stands at nearly $6 trillion, a third of it to China and Japan.
Argentina will probably get bailed out again. The rescue should be accompanied by harsh words about fiscal responsibility. American politicians should also be obliged to read those words.