Argentina President Cristina Kirchner has attempted to seize control of the central bank. Kirchner fired central banker Martín Redrado for his refusal to hand over $6.6 billion in bank reserves. The matter is now headed for the Argentinean courts.
Please consider the Constitutional Showdown in Argentina.
Argentine President Cristina Kirchner’s firing of the country’s central bank president last Wednesday has provoked a constitutional crisis, not unlike the one that rocked Honduras last summer.
Mrs. Kirchner’s insistence that the central bank’s assets should be at her disposal is noteworthy. It reflects a primitive view, not unknown even in the U.S., that the role of a central bank is to print money for the government’s use. Yet it is nonetheless surprising that even after the nation has suffered so much inflationary agony, it is still possible for an Argentine politician to pursue this line of reasoning without risk of being tarred and feathered.
Already unpopular for her authoritarian style, Mrs. Kirchner would seem to be skating on precariously thin ice. One opposition senator has pledged that if Mrs. Kirchner does not back down, he will begin impeachment proceedings.
The president says she wants the money to pay back foreign creditors. She could pay them with funds that are already at the treasury, but she has other ideas for that money.
Argentina Set For Inflationary Explosion
Argentina is already suffering from a 17% reported rate of inflation. Rest assured if 17% is the reported rate, the real rate is likely much higher.
Kirchner not only wants the $6.6 billion in bank reserves, she also wants “easy money”, otherwise known as lower interest rates. If Kirchner gets her way, and perhaps even if she doesn’t, Argentina is going to explode.
In South America, Venezuela is already in the process of blowing up. Please see Chavez Threatens to Seize Businesses, Devalues Currency by 50%; Chavez vs. Obama, Parallels Greater Than You Think! for details.
Regarding Venezuela, my friend “BC” writes …
While the story got little press in the US (not sure about the EU), the action could be one that starts a cascading effect in Latin America where China is frantically acting to establish relations in order to secure energy and grain supplies.
And water shortages and rising energy costs risk a breakdown of internal distribution systems at the periphery, restrictions to transoceanic transport, increasing scale of mass migration and ethnic-racial conflict, and severe disruptions to trade flows and credits, as well as deteriorating trade and diplomatic relations across regions.
Loans to two countries are now at huge risk. European banks have more exposure than US banks to emerging markets and Latin America.
Mike “Mish” Shedlock
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