Davos Newbies Home

Nabobs  

Bill Safire is raging. The current trampling on constitutional rights in the US has done the impossible: united the arch-rightist (Safire) and the storied liberal (Anthony Lewis) on the same side of an issue. But I fear that no one in power in Washington cares, since the president is cheered to the rafters no matter what he does at the moment.

And a wonderful flourish from Safire, that I’m surprised made it through the editors at The Times: “Our Constitution would be set aside by Cicero’s ancient inter arma silent leges – in time of war, the law falls silent.”

Don’t cry for me 

While much of the world has been focused on a country beginning with A in central Asia, the economic world has looked on with some horror at the collapse of Argentina. Argentina is so safely out of the way geographically, that an eccentric millionaire who used to come to Davos moved there in the early ’90s because he had calculated it was the safest place to be in case of a nuclear holocaust.

At the moment, that looks like the only thing Argentina is safe from. A reasonably large economy (at least among what used to be called emerging markets) has effectively gone into default. This is despite the increasingly frenzied efforts of economy minister Domingo Cavallo, who was hailed in 1991 when he “cured” Argentina’s rampant inflation with his Convertability Plan (which pegged the peso to the dollar – a straitjacket that is now part of the problem). Cavallo spent the major part of the ’90s – after he and former president Carlos Menem fell out – touring the world and telling other emerging market nations how to solve their problems.

(Incidentally, as most of the world has left terrible inflation behind, there’s little need for one of my favourite jokes from the period. I heard it at various times to Israel, Argentina and Russia, all of which had bouts with hyperinflation at some point. “Why is it cheaper to take a taxi than a bus in Buenos Aires [Tel Avis/Moscow]?… Because in a taxi you pay when you get out.” Boom boom.)

The best economic analysis I’ve seen of where Argentina goes from here comes, predictably, from Martin Wolf. From a number of unpalatable options, he reckons devaluation is the best course. The worst analysis came this week from Cavallo, who blamed foreign economists for his problems.

The Financial Times, which finds any excuse to put a picture of a beautiful woman in pages that are generally filled with balding, middle aged men, found another angle on the country’s crisis: despite the implosion of the economy, sales of beauty products and even activity by Buenos Aires’s many cosmetic surgeons is booming. To illustrate the national obsession with looks, the FT choose a picture of the ageing Menem and his newish bride, a young, former Miss Universe from Chile (the website included no pictures). I remember when Menem, like Cavallo, was a regular in Davos. His entourage reputedly included two hairdressers. And it certainly included his mistress of the moment, who happily posed for the paparazzi in front of the Belvedere Hotel. A truly different country.

MBA 

Dave Winer kindly remembers one of my phrases. He’s thinking of engaging in some MBA: managing by being away. I heartily recommend it. What’s it like in Italy? I’d give a lot to be strolling through Anacapri this evening, heading for my favourite restaurant, La Rondinella.

3 thoughts on “Davos Newbies Home

  1. Eric Mauro

    Hi Lance, Cavallo has a point, this doesn’t seem to have much to do with his actions. He’s just doing what people told him to. You make it sound like they’re in all this trouble because /argentines are hot latin lovers.

    Reply
  2. Lance Knobel

    Eric,
    I hope I didn’t give that impression. They’re in trouble for a bunch of reasons: profligate spending by uncontrollable regions, the strength of the dollar versus the devalued Brazilian real, etc. I agree that it isn’t all Cavallo’s fault – he went into a near-impossible situation. But he’s an arrogant sod, and the remark that it’s Michael Mussa and Ricardo Haussmann’s fault was nonsensical.

    Reply
  3. Eric Mauro

    OK Fair enough.

    But the currency board was from Steve Hanke, and the austerity plan was from the IMF’s economists.

    And ultimately, the dollar’s outsized strength is from Greenspan’s domestic monetary policy.

    So he may have a point. Even if he doesn’t know what’s happening, somewhere he must understand that something that worked great from 1991 to 1997 just doesn’t break down on its own.

    Reply

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