La Argentina

Argentina is most recently famous for its World Cup athleticism in Brazil, losing only to the German team in the finals. And if you follow financial news, you know that Argentina has dropped the ball once again.

just out of reach

Back in 2001 I was an enlightened undergraduate and Argentina was in a deep economic depression. I was planning to study abroad in Buenos Aires from my home institution, Spelman College. I had been made aware of the dynamic environment on the ground in this south American nation, and having gotten into the routine of reading ten or more international newspapers a day, I was in the know.

Inflation. Street protests. Reneging. Riots. Daily breaking news briefs. Backpedaling governments. All excitement I was more than willing to stand at the tender age of 19.

I had grossly underestimated the gravity of the situation. Spelman hadn't. In the weeks before my departure I was provided a list of schools which still had openings for domestic exchange in the spring semester. Ugh. I mean I learned some important life lessons at Bryn Mawr, but it lacked the sexiness of a foreign nation.

All that to say that Argentina is no spring chicken. It's been to this dog and pony show before. Unable to pay the country's creditors it succumbed for the second time in my lifetime. For a sovereign nation, that's a recipe for even higher borrowing costs, just as would be the case for an individual who neglected to pay his or her debts. It's a lot harder to get cash when you need it in the future.

But individuals have a choice to borrow or not. We can change our lifestyle much easier than a nation can. We can train ourselves to save and pay down debts and refrain from swiping a credit card. But nations are the sum of their citizens and their myriad back habits. It's hard, I mean really hard to stop that train from moving. Ask Greece. Not even a year ago, America stood on the brink of default and devastation. Advanced nations imploding economically under the weight of debt is less an outlier and more the trend.

Keep your eye on who's leading the tango: Argentina says it was in their best decision not to pay the $29 billion it owes to outside investors (it missed a 30-day grace period to pay an interest payment to the tune of $539 million on Wednesday). But optimists suggest that a deal can be reached between bondholders and national leadership.

The 2001 default and this current one are closely intertwined. The hands that lent money then were never made whole and won't give up their claim.

Is the Argentine government to be blamed for this collapse? Are nations - like people -expected to honor contracts to borrow money? Should nations and people be so inclined to borrow in the first place? What's the alternative?

dls