As the world braces itself for the inevitable Greek default, and investors look nervously at potentially exposed banks, perhaps it’s worth recalling Argentina’s implosion a decade ago. Here is what the Spectator made of it at the time:
The missionary Bishop Heber wrote a hymn about Ceylon: ‘Where every prospect pleases And only man is vile.’ On being told that this was unfair to his converts, he corrected ‘Ceylon’ in the second edition to ‘Java’, but his point stands: there is no prospect, however pleasing, that is beyond the power of human and governmental incompetence to mess it up. We have seen the Heber factor at work in our own green and pleasant land, we can see it today in Japan, where the government seems to have run out of ideas, good or bad, but for a proven test for the bishop to preach from, there is nothing to beat Argentina. Writing off $1.1 billion, which is more than three times its investment there, HSBC is only the latest bank to have learned this the hard way. Barings were there first. This was once the world’s tenth largest economy, as prosperous as France or Canada, self-sufficient in fuel and food and wine, unravaged by warfare – so what got into it? The Heber factor.
Twenty years ago, Argentina was one of the world’s big four debtors. Ten years ago its inflation rate touched 5,000 per cent.
A new regime sought to cure that by making the peso as good as a dollar, or trying to, but the act proved too hard to sustain. Roque Maccarone, the central bank’s aptly-named governor, had to preside over the biggest default in history, with countless savers and pensioners among the losers locked out of their money. Now they are being encouraged to blame the gringos – foreign banks (such as HSBC) and the International Monetary Fund, which always serves as the scapegoat of last resort.