The Way of All Cash

u201CAll progress is based upon a universal innate desire on the part of every organism to live beyond its income.u201D

~ Samuel Butler, Notebooks, 1912

January 22, 1944, in Luna Park, Buenos Aires, is a memorable time in the history of humbug. It marks the occasion on which Juan Pern met Evita.

We have, of course, already introduced you to Madame Eva. Therefore, today our burden will be to discover the man who was her husband, the man widely credited with having wrecked the Argentine economy for 40 years. We do this partly out of curiosity, and partly out of a keen instinct for self-preservation. There are two things the Argentines know more about than anyone else. One is polo; American polo teams routinely hire Argentine ringers to boost their scores. The other thing Argentines know is financial crises. What the Argentines don’t know about financial crises is probably not worth knowing. Is there any crisis involving man, paper, or a central bank that the Argentines have not survived? American economists routinely give advice to central bankers on the Pampas. Today, with the United States facing what could be the greatest financial crisis the world has ever seen, we look beyond the Rio Plata to see what we can learn.

When Eva met General Pern, he was already 50 years old, which is to say, he was old enough to know better, but young enough to disregard what he knew. While he cooed with Evita on the Calle Posadas, his soldiers goose-stepped down the Avenida de Mayo chanting u201CDeath to Jews.u201D Juan was not only sympathetic to the Nazis and Mussolini’s fascists, he was envious of them. Argentina stayed out of Word War II and even looked the other way when German submarines occasionally holed up in remote harbors in Patagonia.

u201CThey have chosen to dally with evil,u201D declared Churchill of the Argentinians, u201Cbut not only with evil but with the losing side.u201D Two months before the action was over, the Argentines corrected their mistake, declaring war on the nearly defeated Axis powers. But that didn’t stop the dallying. When the war was over, Pern provided blank passports to war criminals, in exchange for cash.

Any hack can tell the truth, but it takes a politician of genius to tell a good lie. He can be elected by the people or impose himself on them. His provenance hardly matters. In a trade that deals in lies, what really matters is the quality of them.

At the turn of the century, the three most promising regions of the world were the United States, Argentina, and Russia. All three were large countries, each with large and growing populations. Each country had an enormous agricultural capacity. And all three of these countries were industrializing at a rapid pace. Each was a u201Cnew worldu201D in its own way, and each seemed to be racing the others to lead the rest of the world into the new century.

We know what went wrong in Russia. The place was taken over by Bolsheviks with lies as absurd as they were murderous. But what happened on the pampas? We have read many accounts; no one seems to know for sure. We don’t know either, but we offer a theory anyway: Pern refused to die.

At the opening of the 20th century, Argentine farmers enjoyed a land of milk and honey — with rising farm prices! Argentines were getting rich, shipping agricultural products to Europe. They built palaces out on their farms, complete with opera houses and polo fields. And in the capital, they laid out broad avenues, with beautiful parks and monuments. They put up some of the handsomest buildings in the world. They came to Europe as tourists and stayed in the best hotels. Argentines were wealthy and everyone knew it. Their wealth was growing fast. Between the turn of the century and the beginning of the Great War, capital accumulated at the rate of 9% per year, while population grew at only half that rate.

At least, at first, it also seemed that Argentina was spared the cultural decline of Europe. European civilization, having peaked before the First World War, had thereafter come to be dominated by vulgar bunkum. A cheap rot-encrusted everything — art, manners, architecture, politics. Interventionists, meddlers, world improvers — that is to say, accomplished liars — had taken over at all the world’s major popular assemblies and hijacked its leading central banks. But Argentina almost escaped unscathed. Its armies never got into either world war. It never suffered a great depression in the u201830s. Life in Buenos Aires was safe and civilized even while European cities were being blown up and its peoples being exterminated. But then, suddenly, the people of the pampas too caught the populist bug. And unlike Europeans or North Americans, they were never able to shake it off.

Juan Pern ruled Argentina tentatively before 1946 and then conclusively between 1946 and 1955. We like to look at a photo of him, decked out in a white cap like a ship’s captain, garlanded with a blue and white sash, trimmed with enough gold filigree to support a central bank. In his prime, he would have made a splendid corpse. Had he been strung up like his hero, Benito Mussolini, he might have done less damage, too. Argentina might have been occupied and reconstructed and might have taken off with a burst of post-war dynamism, like Japan or Germany. Instead, after Evita died of cancer, Pern took a 13-year-old mistress and dodged a military coup by running abroad, first to Paraguay, then on to Nicaragua, Venezuela, the Dominican Republic, and finally, Spain.

In short, wherever his money and strongman credentials would take him. And then, when the policies he began worked their way through to their inevitable conclusion — that is to say, when Argentina was all but broke — they called him back to Buenos Aires in 1973…to do more damage. A pitched battle was even fought at Ezeiza Airport on his behalf. The populace couldn’t seem to get enough of the man…or his women. When he died in 1974, his last wife, Isabel, continued making things worse in his name and with his style, until at last in 1976, the military decided it had had enough.

Finally, the Perns were finished. The handsome general and his pushy wives were gone. But Pernism continued…and continues to this day.

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.