by
Bill Bonner Buenos Aires is the most European city in the world, say the locals. "The Mexicans descended from the Aztecs," they say. "The Peruvians descended from the Incas. But the Argentines descended from boats." The Indians found on the Pampas were either killed or died of natural causes. Then, there were some African slaves shipped over in the early days to work on the haciendas who mysteriously disappeared in the 19th century. There is little trace of them around anymore. Buenos Aires is almost 100% European. Many cities in Europe, by contrast, have seen waves of immigrants from Africa and Asia. Walk down any street in London. You will find yourself among Indians, Pakistanis, Arabs, Chinese, Japanese, sub-Saharan Africans and people from all over the rest of the world. Or, take the subway in Paris. Often, coming back from London, we get on the subway at the Gare du Nord and find that we are the only white person in the car. Still, the Argentines are not the same Europeans you find in Amsterdam or Edinburgh. Many of them came from the south of Italy...or the south of Spain...or Sicily...or even Syria. They tend to be dark-haired, with olive skin. Of course, there were many immigrants from England and Germany too – so many Argentines have blond hair and blue eyes. And many speak English better than we do. "Oh yes," said an elegant Anglo-Argentine woman with whom we dined the other night, speaking in very precise, but rather antique English. "My family has been in the Argentine for more than four generations. We have always spoken English at home. But when I went to London a few years ago, I turned on the television and couldn’t understand a word of what they were saying. "Still, we have always thought of ourselves as British. When Britain went to war in World War I and World War II, many people from here went over to fight for Britain. In World War II, for example, my husband volunteered for the British Air Force. We have always been loyal to Britain. "But then, after the war was over, Malvinas Islands came along and a crew from the BBC came to interview me and find out what the Anglo-Argentines thought about the war. I told them that the Argentine had been good to me and to my family. It was not exactly what they wanted to hear. We are English, but we are Argentine too. And this is our country." • You have to keep your eye on the cab drivers. We have been cheated twice. The first time, the driver said his meter was broken. He charged us three times the normal fare. The second time, we gave the driver a 100-peso bill. He did the ol’ switcheroo and held up a 5-peso bill. We were almost positive we had given him 100 pesos...but not sure enough to want to get into a fight about it. • A note from a dear reader: "I’m writing with a question regarding a book I’m currently trying to get through. You’ve probably heard of the author, Jeffrey Sachs. The book is The End of Poverty: Economic Possibilities for Our Time. You guys would probably call Sachs a "world improver," but I’m finding myself drawn to most of his arguments and approaches. "He seems to have had a pretty significant influence, everywhere from Poland to Bolivia to Kenya. I’m trying to read a range of books to self-educate myself on matters of global economics, yours included, but I’m not sufficiently trained in these matters to sort through much of it. If this guy is leading me astray, I’d like to be shaken out of my stupor. "For example, your explanations and support of a gold standard resonate with me, but it seems Sachs has a different take. Here’s a quote from his book: "‘The economic instability that followed World War I led to the Great Depression of the 1930s and then to World War II. The linkages are subtle and debated in detail, but undeniable in basic fact. The overhang of bad debts, shrunken trade within Europe, and over stretched budgets of the European powers meant that inflation, stabilization, and austerity were the order of the day throughout the 1920s. The European countries duly climbed one by one back to the gold standard, viewed at the time as the guarantor of long-term financial stability. Alas, the return to the gold standard did little more than exacerbate the conditions that had prevailed in the 1920s. Most important, the gold standard and its "rules of the game" for monetary management made it difficult, if not impossible, for the major economies to escape from a slide into deep depression in the early 1930s. The Great Depression, in turn, triggered a calamitous spread of trade protectionism and the rise of Nazism in Germany and military rule in Japan.’" We reply: Yes, Mr. Sachs is a world-improver. And like all world-improvers, he is a threat to prosperity and to peace. But since we are not familiar enough with Mr. Sachs’ oeuvre to offer ridicule, we turn to his interpretation of the gold standard. Yes, the facts are as generally accepted. But, the interpretation is defective. It is a little like saying of a former call girl...that she had a hard time earning a living after she gave up doing tricks. Yes, when economies stop inflating, debt becomes harder to deal with. The illusion of prosperity is replaced by the reality of debt deflation. "Dere’s dem dat’s good...an’ dere’s dem dat’s smart," said Uncle Remus. The gold standard is only a monetary form of goodness. It cheats no one. Nor does it give anyone a break...or anyone a special favor. But Jeffrey Sachs, on the other hand, is smart. He thinks "the rules" of the gold standard just get in the way. He can do better, he believes – by imposing his own, very smart policies.
Could the Great Depression have been alleviated by better policies? Probably. But you can always count on the world-improvers to make a mess of things...and then come up with policies that will feel better first and then end up making everything worse.
April 25, 2007 Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis. Copyright © 2007 Bill Bonner |
