Ireland and Iceland: One Letter, Six Months, Three Years On

Reading Paul Krugman’s recent posts (here and here) reminded me that I forgot to write a post about my recent trip to Iceland. I presented at a very interesting conference on sovereign debt organised by Reykjavik University. Here is a link to slides and papers, which were presented on October 7 and 8.

My presentation was titled “One Letter and Six Months? Ireland and Iceland Three Years On”–the slides are here. One issue I discussed was whether Euro membership ultimately helped or hurt Ireland.

Much of the discussion surrounding Iceland in 2008 focused on the fact that they were outside the Eurozone and so could not obtain liquidity support from the ECB. While this was viewed as a negative factor, one could argue today that the (enforced) Icelandic approach avoided the mistakes associated with confusing a solvency crisis with a liquidity crisis. My conclusion: Without a clear policy on bank resolution, the Eurozone is not a good place to have a systemic banking crisis.

66 replies on “Ireland and Iceland: One Letter, Six Months, Three Years On”

@Karl Whelan

“Without a clear policy on bank resolution, the Eurozone is not a good place to have a systemic banking crisis.”

I’m 95% certain that Ajai Chopra would agree with this conclusion.

‘In the Irish case, it has long been clear that the IMF does not think senior bondholders in the banks should be repaid. This was made evident again yesterday when a bemused Mr Chopra passed a question from the press concerning bond holders to his ECB colleague. At the Dublin Economics Workshop in Kenmare last week, Mr Chopra suggested that bank losses should borne “first, by shareholders and holders of equity-like instruments, and second by uninsured creditors, including senior creditors”. He raised his voice on the last three words to send his thinly-disguised message home.’

@Icelandic readers

The Verboten Story of Argentina’s Post-Default Economic Success

Even notice nothing is ever said in the mainstream media about Argentina’s economy, save that it had a big default? You’d never know the following about Argentina:

From 2002 onward, Argentina grown nearly twice as fast as Brazil, and has sported one of the highest growth rates in the world.

Its success is not dependent on a commodities boom

It has increased social spending from 10.3% of GDP to 14.2% of GDP

Inequality has fallen. Poverty and extreme poverty have fallen by roughly 2/3

What is particularly striking is how quickly Argentina’s economy rebounded after its default. From a paper by Mark Weisbrot, Rebecca Ray, Juan A. Montecino, and Sara Kozameh (hat tip reader Thomas Ross):

In December of 2001, the government defaulted on its debt, and a few weeks later it abandoned the currency peg to the dollar. The default and devaluation contributed to a severe financial crisis and a sharp economic contraction, with GDP shrinking by about 5 percent in the first quarter of 2002 and nearly 11% for the full year. However, recovery began after that one quarter of contraction, and continued until the world economic slowdown and recession of 2008-2009. The economy then rebounded, and the IMF now projects growth of 8 percent for 2011.

Argentina’s real GDP reached its pre-recession level after three years of growth, in the first quarter of 2005. Looking at twenty-year trend growth, it reached its trend GDP in the first quarter of 2007.

@ Karl

On slides 17 and 19 you say the issue was perceived to be one of liquidity as opposed to solvency.

No one believed this.

The Eurocrats knew it was a solvency issue when they introduced the ban on short-selling.

The Irish government kept the ban on short-selling because they knew the banks were insolvent.

NAMA was all about solvency – crystallising and socialising the losses. Comical Leni no more believed the lie about it getting banks lending again than he did about Cowen being a true patriot.

It was always a solvency issue.

The difference wasn’t one letter and six months – the difference was the Icelanders didn’t try and introduce “the cheapest bailout in the world… so far”.

Ho hum. And still we have no european bank resolution mechanism, no control of cross-border capital flows, no euro-wide deposit insurance. Meanwhile, the FDIC shut down another four banks in the US this weekend.

Interesting interviews on radio 1 news at 1 – Sunny Kapoor (I think that was his name?) giving it socks about how the banking crisis has been allowed to morph into a sovereign one with the banks both getting off scot free and their problems that became evident more than three years ago still unresolved.

@ Karl Whelan

Very informative slide show, and I heartily encourage people to look through it.

By the expedient of asking my local TDs who represent government parties what was going on I gather that the promissary notes are high on the government agenda. I was pushing them at the time to follow up on the whole structural funds thing.

Anyway – could you by any chance expand a little on this from the slide show?

“One positive: ELA bank debt of nationalised banks (and perhaps some debt from ECB open market operations, also actually owed to the CBI) could be written off.”

If it were written off, who would take the hit? Or this this a possible case of the ECB and/or CBI controlling its own balance sheet and just, umm, putting a line through the column? The debt would just vanish?

What is it you have in mind?

@ Gavin

Busy this afternoon — will discuss this at greater length later.

But a quick answer to “The debt would just vanish?” is “Basically, yes”.


“Finance ministers – including George Osborne, the Chancellor – expressed frustration on Saturday that their emergency meeting could take no decisions of substance until Mrs Merkel and Mr Sarkozy had buried the hatchet.”

I suppose a lot will depend on where Angela buries it..”…

Excellent slides. Conference seems to have had a very interesting line-up.
Love the way they’re really focused – they’re wondering about Euro membership and discuss it like this. It’s the right way to do things.
We’re not very good at debate here. I remember how Iceland was used as a scare in 2008. Just as in some ways Greece is now.
Wish we could stop being giddy about this. We need to start having conferences like this here to dispassionately debate the merits of continued Euro membership.
Will UCD organize it – don’t think so


Just watched the press conf on France24 – Angela & Nikki

106 billion to recap EU banks. Both in favour financial transaction tax – all to be revealed at 6.00 pm on Wed … (3 Anglo/INB_asses to sort out vichy_banking system!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Maeve McMahon, France24 reporter, literally screaming in frustration after this particular press conf … and .. er.. Nikki now using Ireland as a paragon of crisis management …. should all be on the wires about now … only chuckle when Angela was asked what she said/did to Silvio last night … she was much too wise to rise to that bait …

In terms of confidence building: -1 out of 5 at me charitable best.

Intuitive; Ireland and Portugal can suffer on …….. serfs can suck diesel…….. time to promote Katie Taylor to the negotiating team as The Real Minister for Europe (5 golds in a row is sufficient for me) – doubt Nikki would last a round ..

Nothing on the wires yet.
It seems tempers are fraying…best call it off until Wednesday, Nicky has to feed the baby.

Krugman doesn’t think much of the banking solution supposedly agreed by the finance ministers….
“October 23, 2011, 10:05 AM
Deck Chairs, Titanic
OK, yes, European banks do need more capital. But their problems are a symptom of the underlying sovereign debt problem, which can only be resolved, if at all, with ECB lending AND a commitment to reflate. Without that, the losses on sovereign debt will blow right through any amount of newly raised bank capital.

So when I read

Europe’s big banks will be forced to find €108bn ($150bn) of fresh capital over the next six to nine months under a deal to strengthen the banking system agreed by European Union finance ministers.
I think, this is a band-aid — and one that’s going to be applied gradually, over six to nine months! — when the patient is at risk of dying in a few weeks from damage to his internal organs.

@ Ceterisparibus

One has to hand to him in the brass neck department. Herewith another link which is of interest as it sums up a view that is increasingly prevalent in France. The analysis is good until one comes to the conclusion where the item goes completely off the rails. It is not all the fault of the Germans! How a country such as France could introduce a 35 hour week, for example, is beyond comprehension. At least the author of this aberration (Aubry) is not the presidential candidate of the Socialists next year. (Google translate does a very good job of the text).

@ Ceterisparibus

By the way, I thought RTE’s coverage of European issues today (Marian Finucane, Week at One) was rather good. On the subject of the role that the ECB can play, I hope that all followers of this blog are dedicated purchasers of the Sunday Times and especially have read the article by David Smith “Ireland’s inflation tells a different story from UK’s”.

“Since August 2007, and the start of the global financial crisis, consumer prices in Britain have risen 15.5%. Average earnings have risen by only 8.8%, hence the squeeze.

In Ireland, consumer prices have risen 0.7% over these four years”.

The author goes on to explain the downside of the Irish figures but he clearly does not believe in the comment which I heard on Marian Finucane that inflation in the UK would begin to fall next year.

In fact, the depressing lesson is the inability of countries – including Germany – to actually learn from their mistakes. The odd thing is that, courtesy of the Troika, Ireland may on this occasion prove to be the exception.


The Boe has opted for possible stagflation as a risk in order to definitely avoid debt deflation.

All commodity markets apart from gold and heating oil appear to have rolled over from their QE / technical trading driven rally a couple of months ago. If the Boe are correct, and I suspect they are more right than wrong, what do you think are the implications for GDP deflators in countries under ECB stewardship?


“…, the Eurozone is not a good place to have a systemic banking crisis.”

Even though I often express concerns about your car repayments 🙂 IMHO your conclusion is spot on. (BTW good slides. While most of us were in the middle of all this “maelstrom” your presentation helps to summarise the chronology of events and also remind us that other countries, having their own problems, also benefit from a chronological summary)

If we look at similar countries to us which have had a banking crisis (Sweden, Denmark, Finland, and Iceland) none of them were in the EuroZone when they tackled and solved their Banking crises. Finland is the only country of those four who joined the EuroZone and that was after they had solved their banking crisis.

At this point please allow me to make a humble suggestion:

There are currently a lot of mixed signals coming out of Brussels including a last ditch attempt at “can kicking” towards wednesday which will probably roll on to next Sunday. However we have important polling this coming Friday so perhaps it might be a good idea to resist the temptation to open a thread on EU and EZ issues until the polls close on Friday evening.

By doing that we can concentrate on our own democracy and be more informed about the proposals which emerge out of Brussels which will allow us to have a good debate and let our Irish leaders make decisions based on the what they think is the best thing to do for Ireland.

I am sure all of us no matter what political views we hold agree that we do not want to feel we are being rushed into something (ie Treaty changes) and most certainly do not want to be debating on mere speculation.

We must remember that last November we had a seriously ill Finance Minister (RIP) and a Foreign Minister who had a terrible personal family tragedy in the days prior to the bailout/stitchup. Both of these Ministers were reporting to a boss who on at least one memorable occasion suffered from (what I believe was described as) congestion and had at least two senior cabinet colleagues who appear to have been kept in the dark about events.

I am sure by nest Friday evening, after polls close, we will all have had time to form (or acquire) opinions on economic developments.


@David O’Donnell

(Captions) – “You call that a banking problem? You’re having a larf!”

I’m pleased to see our dear leaders were getting on with it though (IT – “European Union leaders wrangled for hours over procedure and made little apparent progress in forging a strategy to overcome the crisis”)

So I suppose Enda could have been laughing because Silvio was saying, “point of order Mr Chairman.”

Some people question the wisdom of France adopting a 35 hr. week (since abandoned). Individual German companies have dealt with periods high unemployment by adopting a short work week for all employees rather than by laying workers off. The 13th month bonus system is also a very good insurance plan for German employers, no profit no bonus. Other countries have variations on the theme, quite popular is Govts’ providing unemployment benefits covering the hours lost during periods of short time when the unemployment rate is over 8% + or -.

Given the conditions prevailing when France introduced its 35 hr week I would say it fits within the norm. They did continue it a bit too long, if they made a mistake it was by not putting conditions on it such as a sunset clause. France is big on one rule fits all under the trinity liberte, egalite, fraternite (fadaize the last vowel in each word when pronpouncing) pour tous (for all). By all they literally mean all citizens as opposed to Ireland where we have these things sliced and diced very finely. Its the culchur!


“…and let our Irish leaders make decisions based on what they think is the best thing to do for Ireland”.

By which I mean “make decisions” in the weeks and months following this weekś meetings after our leaders have had a chance to listen to the mood in the Ireland.

IMHO the last thing most of us want are more hasty decisions which have long term national importance.

Wage deflation & consumer inflation are essentially the same phenomena although it affects different people.
We are witnessing a slow heat death in Europe as its austerity surplus is transfered to the reserve currency national user, dollar tied China & the petro states.
Inflation as measured using a static Euro against a basket of goods is flawed – especially in a envoirment of falling wages both before & after tax deductions.
Europe is in deep trouble if it remains attached to the dollarized world.


The polls are next Thursday – and the turkeys are voting for XMas again … methinks your FF shirt tails might be hanging out … pls tuck them in 😆

As for Brussels – IMHO – they have shackled the hands of the only possible well armed soldier who could decisively lead the EZ out of its present sh1te behind his/her back i.e. the ECB.

It was really uplifting to hear An Taoiseach and Minister Noonan on CNN, Bloomberg, France24, SkyNewz, Fox Newz and CNBC vigorously challenging and unequivocally refuting the spin from Le Petit General Sarkozy on how Ireland is out of its ‘krisis’ … and placing the so-called Irish bankrupcy in 2008 firmly in the domain of the vichy_banking system. That 80 billion write off that K Whelan noted in Iceland might begin to look appealing if we become peripheral collateral damage …

A question for Eoin Bond, Grumpy or others….

According to the report above (reuters) only two options remain on the table.
1. A partial guarantee on new purchases of Italian and Spanish bonds
2. A SPV vehicle to raise more money from wealth funds with the IMF

My question is…if new bonds issued by both countries have a guarantee on say the first 20% of losses, what happens to the old bonds and how would they be traded…maybe a sticker with potentially toxic on them?

As regards the begging bowl approach on option 2, is it not the case that emerging market wealth funds are unlikely to fall for this latest wheeze. As Hogan said ..we have been there before, maybe not on an institutional basis but the Greeks tried it and failed and a number of other countries tried the same approach.

“If the Boe are correct, and I suspect they are more right than wrong, what do you think are the implications for GDP deflators in countries under ECB stewardship?”
I suspect they are too, but I also think their situation is different. They have no option but stagflation, the ECB really have no option (now that the Fed has also chosen stagflation) of debt deflation. Both are means to the same end, neither really works.

In one of them, prices rise more than salaries so living standards drop (and competitiveness increases). The other is called stagflation.

@PR Guy

It’s worth highlighting that zereohedge post

“A drive to lift bank capital across Europe by up to 110 billion euros ($153 billion) is expected to include the roughly 46 billion euros already pledged to Ireland, Greece and Portugal to help their lenders, EU sources told Reuters….Another official confirmed the intention to count money already earmarked for banks in Ireland, Greece and Portugal in any recapitalisation plan. “The problem with shock and awe numbers is that it implies that the money is there,” said one official, reflecting on ministers’ reluctance to set public goals for recapitalisation. “But governments don’t have the money.”.

Methinks the dreaded Markets won’t like that. So after all the talk we are back to square one!!!

@ grumpy.

You lost me there! As a non-economist, I have simply noted the constant decline of the UK as a manufacturing power (i.e. making things that people want to buy) and its reliance on services – notably financial services – to make up the balance with regard to its commercial exchanges with the rest of the world. I have also noted that the UK has a perennial tendency to try and inflate itself out of trouble when consumer confidence begins to lag. When combined with a policy of benign neglect as far as Sterling is concerned, when the currency falls, import prices go up and exports become less competitive. It seemed to me, therefore, that as night follows day, inflation in the UK would take off. This now appears to be happening despite the soothing words of Mervyn King.

That Ireland’s competitive position vis-a-vis the country’s biggest trading partner is improving at a rate of knots for reasons unrelated to the stagnant state of the Irish domestic economy seems to me to be matter for some satisfaction. Given the personal and family links between the two countries, the ordinary punter, on both sides of the Irish sea, can hardly fail to notice.

There is another aspect which is of great interest and it is the deal that has been struck today with regard to future treaty changes. Van Rompuy made a particular issue of this in his remarks, no doubt to help protect Cameron from his own euro sceptic wing who are being made subject to a three-line whip to try and restore some semblance of unity on European issues in the Conservative Party. It seems to me that the conduct of European policy as viewed from Dublin and London is going to provide an interesting spectacle over the next few months.

If the treaty change deed is to be done, contrary to popular belief, it will have to be done quickly. The state the UK economy is in next year will have a big bearing, I would think, on the attitudes of the UK. But the two countries, apart from having different currencies, will be pursuing entirely different economic philosophies, the UK by choice, Ireland perhaps not.

@Mickey Hickey

The 35 hour week, as far as I know, has been adapted but not abolished. What is worrying, as I am sure you are well aware, is the possible totally out-of-date thinking underpinning it cf. courtesy Wikipedia.

“Historically, the term “lump of labour” originated to rebut the idea that reducing the number of hours employees are allowed to labour during the working day would lead to a reduction in unemployment. In modern times, economists often use the term in other contexts – often to highlight errors of reasoning when ceteris paribus assumptions are counterfactual. The term has also been used to describe the commonly held beliefs that increasing labour productivity and immigration cause unemployment. Whereas some argue that immigrants displace domestic workers, others believe this to be a fallacy, arguing that such a view relies on a belief that the number of jobs in the economy is fixed, whereas in reality immigration increases the size of the economy, thus creating more jobs”.

You can guess which side of the argument that I am on and, to be fair, this is one coomin feature we have with the UK: a total belief in the benefits of the single market (except among those, of course, in the “sheltered sectors” where a shake-up is hopefully, courtesy of the Troika, imminent).

“So after all the talk we are back to square one!!!”
Not quite. We’ve just got 34.5 bn off our national debt…


“Both are means to the same end, neither really works.”

There is a bit of a difference in that even if wages increase more slowly than cpi etc, they will still be increasing compared to outstanding debt.


First there is a question of whether some existing bonds may be deemed to be in default. They would have to navigate this unambiguously.

Second, you are not removing all the tail risk from objective estimates of appropriate yield for the new bonds, you are removing a ‘likely’ modest loss possibility, so the new bonds trade at lower yields than the existing ones. If the market is convinced any default would be small, then the bonds might trade tight to bunds. If they start to think the default might be significantly above the guarantee, then there would be a significant widening. You would also presumably get some correlation between core and periphery at that point.

There is a tradition of going off to find slightly naive SWFs etc when the locals don’t want to know and flattering them into taking part in fund raisings – think EuroDisney etc. sometimes they make money – like with Barclays, but one would suspect there would be potential political obstacles given the discrepancies between EZ incomes and those in the potential bailor countries.

Two not-so-good things to consider about the Icelandic economy:

1. The Icelandic króna has halved in value. Nearly everything in Iceland – bar fish – is an import. So, savings and salaries have effectively halved. (source:
2. Iceland’s nominal GDP fall from 2007 (peak) to this year is twice the fall in Ireland. (source: Eurostat tec00001)

Iceland is a beautiful country with welcoming people. Maybe best to visit midsummer.


If only. Instead we have the two stoogies on CNN, CNBC,Sky and others telling the bankers how good we are.
As posted above, we should look carefully at Greece and learn how they reduced the national debt in one fell swoop. And they secure financing ad infinitum.
I thought Paddy was cunning but his Greek cousin is both clever and cunning.

“There is a bit of a difference in that even if wages increase more slowly than cpi etc, they will still be increasing compared to outstanding debt.”
That’s true, but cash for servicing the debt is decreasing relative to the debt, so standard of living is falling further faster.

There is also the risk that an inflation premium will be extracted post the inflation, so the adjustment period could be longer. There’s some analysis to back this up.

@ David O’Donnell

From 2002 onward, Argentina grown nearly twice as fast as Brazil, and has sported one of the highest growth rates in the world.

Its success is not dependent on a commodities boom

The facts suggest otherwise and export taxes e.g 35% on soyabeans, help to fund social spending.

The impressive thing about Argentina is the range of its soft and hard commodities.

Among the top ten export items, cars are the only category that are not directly commodity related.

Sixty per cent of car production is exported mainly to Brazil.

Soyabeans account for 25% of exports and the world price of soyabean oil has risen 240% since 2011. Adding oil & gas, petrochemicals, steel, copper, gold (3% of total exports), wheat, corn and meats comprise about 56% of exports.

Commodity price charts show steep rises to mid-2008, then dips but substantial gains on 2001; metals up 330%; crude 305% and food 115%.

Argentina had a 3.2% fiscal deficit when it defaulted.

@ Michael Hennigan,

“The facts suggest otherwise and export taxes e.g 35% on soyabeans, help to fund social spending.”

Are you sure about that?

I’d read the article, but had to go back to be sure. Now, I didn’t read the paper, but I find Yves Smith to be a fairly trustworthy source. Here’s how she read the paper.

“It can be seen that the role of exports is not very large during the expansion of 2002-2008. It peaks at 1.8 percentage points of GDP in 2005 and 2010, and amounts to a cumulative 7.6 percentage points, or about 12 percent of the growth during the expansion. The story for net exports is even worse, with net exports (exports minus imports) showing a negative cumulative contribution over the period. The recovery is driven by consumption and investment (fixed capital formation), which account for 45.4 and 26.4 percentage points of growth, respectively.”

@ PR Guy

Very good, that Münchau piece. does rose Kennedy have a black dress ? Does he have a black suit?

I wonder how much choice the Germans will have in the end. The baby has to be recapped somehow and if they won’t do it the IMF will. That’ll mean diluting Euro representation at the IMF and the loss of significant influence. Do they really want that ?

FT on Sat reported Greece remaining in the emergency ward until at least 2021 FFS. How long is Ireland going to be in the Eurotel California medical wing?

@ disgruntled observer

Exports as a ratio of GDP are about 25% compared with 10% in Brazil.

Export taxes were abolished in 1991 but were reintroduced after the crash.

Total export tax revenue in 2008 was equal to 16.3% of the value of all Argentine exports including goods not subject to export taxes.

In 2008, export taxes, which predominantly come from agricultural exports, accounted for nearly 13% of total tax collection and for virtually the whole of the Argentine government fiscal surplus (3.1% of GDP).

Rising export earnings were presumably important at a time when the country was locked out of international markets.

@ Michael Hennigan,

Is there anything in what I quoted that was wrong? You’ve thrown me a load of numbers as though they mean something. What matters is the direction they were moving in whilst the expansion was underway.

Since you obviously haven’t bothered reading either the article about the paper or the paper itself, I’ll take the liberty of quoting a piece or two.

“As can be seen in the graphs, exports as a percent of GDP, as measured by dollar value, actually decreased during the recovery. And agricultural exports, as a percent of GDP, fell slightly from 5.0 percent of GDP to 4.7 percent, dipping as low as 3.4 percent in 2006 – again, this is measured by
dollar value, so it reflects the large increases in commodity prices from 2005 to 2008. So agricultural exports are clearly not driving growth; and in fact they are too small a share of GDP to have anywhere near the kind of impact that is often attributed to them.”

I get the feeling that your comment: “Rising export earnings were presumably important at a time when the country was locked out of international markets,” has something to do with the stance you’ve taken.

To this view the authors say:

“Yet in spite of all of these adverse external conditions that Argentina faced during the past nine years, the country experienced this remarkable economic growth. This should give pause to those who argue, as is quite common in the business press, that pursuing policies that please bond markets and international investors, as well as attracting FDI, should be the most important policy priorities for any developing country government. While FDI can clearly play an important role in promoting growth through a variety of mechanisms, and foreign capital in general can, in some circumstances, boost growth by supplementing domestic savings, Argentina’s success suggests that these capital inflows are not necessarily as essential as is commonly believed. And it also suggests that macroeconomic policy may be more important that is generally recognized.”

Here’s the paper itself if you’re interested in reading it.

@David O`Donnell

Thank you. I look forward to a thread opening on the EU/EZ in 72 hours.

Fortunately the label on the part of my shirt tails ,which apparently need tucking in, is not showing as that particular “clothing brand” has never featured anywhere near the top of my “shopping list”.

However my “electoral shopping list” does not contradict the historical facts about the composition of the Government last November or my personal empathy with the terrrible personal tragedies the Finance Minister and Foreign Minister were facing last November. 🙂

You’re welcome. I thought it most apt and we might want to remember what Kurtz ended up quoting…


I wonder how much standard of living in Iceland has dropped since 2008?

I am willing to bet standard of living has not halved as anyone I meet who has either been in Iceland or mingled with Icelandic people (in conferences and seminars etc) leave me with the impression that standard of living has not halved.

Then again maybe they secretly had an extremely high standard of living before 2008 or I am “mingling” with the wron g people. 🙂


Maybe you might shed some light on your observations about standard of living (and purchasing power) among the dottirs and sonns.


Even though I am not a betting person I am even prepared to stretch as far as betting one Transnistrian Ruble on the fact that Icelands standard of living may not have decreased by 50%.

I was considering betting one Euro cent but some people might think I was being unfair on anyone who might accept and (possibly) win the bet and try to cash it in.


Seriously : if you have any observations about the standard of living in Iceland I am sure many of us would like to hear them. As Ossie says maybe it might be good place to take a holiday next summer.

The impression I get of Icelandic people is that they are stalwart, friendly and welcoming people which may possibly have something to do with the mix of Danish and Irish blood in their genes.

@ disgruntled observer

Argentina has an impressive range of resources – – food, oil, gas and steel for its car industry – – and the authors’ scenario appears to be that the international backdrop wasn’t important.

Net exports were not a significant contributor to GDP growth and export earnings were not important for a country that could not raise finance on international markets. Even the loans from Comrade Chávez were at punitive rates.

Of course the export figures do not tell the whole story as the raw US data also underplays the importance for the US.

Apart from the benefit of devaluation and surging international prices, for exporters directly and their staffs, the rising earnings tide of course had an indirect impact on many other sectors of the economy as it was recovering from the crash. Ditto for state revenues.

US export data does not appear significant but the big companies and engines of innovation in the S&P 500 rely on overseas business for almost 50% of revenues. In Apple’s case, it’s above 60%.

Exports make the difference for farming.

Exporters employ only a small percentage of the Irish workforce and therefore are not important!

@ Michael Hennigan,

It undoubtedly is true that Argentina has an impressive range of resources. It is undoubtedly true that they have a high volume of exports, although nothing compared to our official stats, nor China/Germany, etc. It is equally undoubtedly true that it required foreign currency in some form, whether through exports or by official loans (punitive rates attached).

However, I don’t know how you can read, “The story for net exports is even worse, with net exports (exports minus imports) showing a negative cumulative contribution over the period,” and hold the view that you do. Whatever the facts at your disposal suggest, the facts at the disposal of the authors suggest otherwise.

You have me stumped.

@ David O’Donnell,

Nay bother. Thanks for reminding me of it.

There are a few things that must to be kept in mind when discussing Argentina. Argentina is the country that has everything, arable land in abundance, oil, gas, minerals, educated people, excellent infrastructure. They have had a tortured history as they escaped from domination by the landed aristocracy that was a legacy of Spanish Colonialism.

The relationship between the upper classes and lower classes is a complex one due to the fact that they talk alike, look alike and share similar surnames. Since Peron it has been a divided nation but it now looks like Cristina Kirchner has broken the back of the landed oligarchy. The proof was the high export tax on Soya beans which she imposed and made stick. They also move a lot of their liquid assets offshore much like the Irish bank investor advisers were promoting at the height of the boom. Since the bust the advise is valid in the context of flight to safety as opposed to tax evasion.

The introduction of scrip during the 2002 crisis by Juy Juy and Buenos Aires (the province not the capital area) provinces shows that they take things into their own hands and do not sit back and wait for action at the national or international level.
The uproar on the streets and five govts’ in quick succession proves that they are not stoic like the Irish. At one time the Irish immigrants made an impact on Argentina the evidence is still there today in the form of big men on big brass horses in central squares with names such as O’Connor, McKenna, McMahon.

At what point did we go into decline to the point that most people sit around helplessly.

@Mickey Hickey

‘At what point did we go into decline to the point that most people sit around helplessly.

1921 … but imho it really started during the switch from grain to cattle and the clearances in the early 19th century …. the arch-conservative anal-retentives have set the agenda since – and all with vigor and balls simply left …. bit tongue in cheek but probably not too far off …. hence the present supine gullible citizenry that has been socialised into stockholm syndrome to expect being screwed by its masters and to vote for the bagmen of the masters’ …

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