An excellent Op-Ed by Mark Weisbrot in the New York Times(May 9).
Excerpt:
“The experience of Argentina at the end of 2001 is instructive. For more than three and a half years Argentina had suffered through one of the deepest recessions of the 20th century. Its peso was pegged to the dollar, which is similar to Greece having the euro as its national currency. The Argentines took loans from the International Monetary Fund, and cut spending as poverty and unemployment soared. It was all in vain as the recession deepened.
Then Argentina defaulted on its foreign debt and cut loose from the dollar. Most economists and the business press predicted that years of disaster would ensue. But the economy shrank for just one more quarter after the devaluation and default; it then grew 63 percent over the next six years. More than 11 million people, in a nation of 39 million, were pulled out of poverty.
Within three years Argentina was back to its pre-recession level of output, despite losing more than twice as much of its gross domestic product as Greece has lost in its current recession.”
Read the whole paper here .
My conclusion: Disequilibrium exchange rates are terrible for your (economic) health.
For an explanation of why economists, bankers and politicians inflict such harm to their countries, have a look at my new book “L’euro: comment s’en débarasser” published by Grasset (Paris) and available in bookstores next week.
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