Customer Reviews

And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina

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In his previous book The Chastening, Paul Blustein went on a quest to understand what happened to the Asian economies hit by the currency and financial maelstrom that began with the collapse of the Thai baht in July 1997. Although he did not refrain to point out the costly mistakes that were made in responding to the crises, his purpose was not to distribute blame, but to understand what had happened and to share his sense of awe that such crises might unfold again.

Four years later, Paul Blustein is back at it, but his "indignation quotient", as he states in the introduction, is substantially higher. According to him, the Argentina debacle of 2001-2002 not only illustrates the risks inherent in modern international finance, but it also provides a damning case of personal hubris, unrestrained greed and institutional myopia in which the international community particularly "blew it". Charting the course that started with the adoption of a new currency tightly tied to the dollar in 1991 and with the subsequent growth episode that followed, he describes the mounting imbalances that resulted from the massive capital inflows led by international investors whose irrational exuberance went mostly unchecked by the IMF. This complicity of government officials, Wall Street investors and Washington money watchmen in creating a bubble was further aggravated by the incapacity of policy makers and their international advisers to provide an exit strategy to the convertibility regime and to secure a soft landing or at least minimize the impact of the financial meltdown for the population. Indeed, Blustein makes the case that the protracted rescue effort orchestrated by the IMF and the US Treasury only prolonged Argentina's agony and made the crash all the more devastating in the end.

Blustein bases his case on extensive interviews with all the most important players, including Argentine's Minister of Economy Domingo Cavallo and IMF Managing Director Horst Kohler. He also had access to a trove of documents, including internal memos, confidential reports and notes meetings, and seems to have read them all. At every juncture, he reconstructs the internal debates, spells out the policy choices, and weighs the pros and cons that were advanced by the main institutional actors at the time when the decisions were taken and in retrospect. But Blustein is not just a journalist who writes well, works hard, and knows how to get sources to talk. He also knows the professional literature on financial crises and clearly has a solid understanding of the fundamental debates on the subject. The accusations that he wields to the international financial community are therefore to be taken seriously.

Blustein makes amply clear that Argentina's woes were first and foremost the result of the country leaders' own wrongdoings: they spent more than they should have, taxed less than they should have, and borrowed more than they should have, all the while keeping a currency system that required much stricter fiscal discipline. They failed to see the writing on the wall and clung to the one on one dollar parity until the financial hemorrhage wreaked havoc with the banking system, wiped out people's life savings and inflicted massive damage on the economy.

But the international financial community, especially global investors and, to a lesser extend, IMF and Treasury officials, also share part of the blame. First, Blustein makes the by now familiar case that conflicts of interests and skewed incentives among investment managers propelled an excessive amount of short term capital toward Argentina without due consideration for the risks involved. Particularly infamous is the megaswap deal that Wall Street peddled to the government in June 2001 and that further aggravated the country's debt burden while generating hefty fees for the banks involved.

The IMF, for its part, demonstrated "a failure of intellectual courage," in the words of its former chief economist Michael Mussa. It used Argentina as a poster child when it should have begun to send warning signals to the authorities, based its growth projections on rosy assumptions, clung to a voluntary approach of debt restructuring when it should have facilitated an orderly workout, doubled a losing bet when it extended a second loan package which conditions were clearly not sustainable, failed to provide contingency planning and delayed the day of reckoning when the dollar parity had to be abandoned. At nearly steps of the way, claims Blustein, the crisis could have been mitigated even if it could not have been prevented.

To the credit of the IMF, one must nonetheless recognize that each decision was hotly debated at the time, that all the moves were endorsed if not sometimes dictated by the US and the other G7 countries, and that the institution took the blame and repented openly in a series of evaluation reports.

Especially troubling is Blustein's contention that the rules of the globalization game are rigged and that countries like Argentina are given false hopes that they can join the league of rich industrialized countries only to be denied access at the last moment and be cast back into poverty in a most cruel and painful way. If such a bias exists, then the system is in urgent need of fixing.

I ran a Latin American capital markets desk in NYC during this crazy time in Argentina, so I am intimately familiar with what Paul Blustein has written about. His book is a very fair and balanced account of what, why and how it happened without resorting to sensationalized story telling.

I highly recommend it for anyone who wants to understand what happened in Argentina or the IMF.

After finishing And The Money Rolled In, I recalled the observation that, despite appearances, catastrophes don't happen spontaneously. Instead, they are usually the result of a series of small mistakes that compound to become memorably devastating events. Blustein must have recalled the same observation, because he spends critical time and effort documenting the "small" mistakes behind the Argentine default. In doing so, he exposes the greed, stubbornness, and political cowardice that combined to make this maelstrom as devastating as it was. Blustein also takes great lengths to point out that these emotions are still prevalent in both financial markets and seats of government, thereby making another Argentina-like financial collapse more of an inevitability than a fluke.

This book works on all levels. It's a thorough analysis of (arguably) the largest financial crisis in recent history; a cautionary tale with solutions to avoid a repeat of the crisis; and an accessible, entertaining read. Given these qualities, it's very likely that And The Money Rolled In will join Secrets Of The Temple by William Greider as one of the definitive texts to shed light on the integration between financial markets and government fiscal policy.

This is a very readable, lively presentation of the story of how Argentina overcame decades of monetary mismanagement and put itself on the path to economic growth during the early 1990s only to descend again into economic chaos. We recommend this book to those interested in international finance, although it suffers slightly from a moralistic tone, as author Paul Blustein points an accusing finger at international banks and brokerage firms. One might also have hoped for a bit more insight into what happened to the billions of dollars that flowed into Argentina during its brief boom years. But Blustein's expert analysis (organized around metaphorical references to the musical `Evita') says much about the dark side of globalization and points to some severe, apparently recurring problems in the international financial system. Most instructive is his observation that elements of Argentina's experience are now apparent in the flow of funds to emerging markets newly favored by international investors. Therefore, this book unfortunately may be a harbinger of things to come.

This is a short book, easy to read and boy, does it deliver! An account of Argentina during it's economy's heyday and the fall, this book is a fascinating read. It starts off with a brief review of Argentina during the late 1800s and early 1900s but jumps right on the main topic after that. The author explains in extremely lucid prose (no finance knowledge required whatsoever) how the economy was fueled by international funds and how it went bust. Excellent examples, and written like a thriller ... 5 stars all the way!

The globalization of the world's economy, with all of its implications for wealth and poverty, international security and cultural homogenization, is clearly one of the defining issues of our time. But it is one of the most difficult stories to understand, with so many subplots and cross-currents, actors and institutions. Much of what truly affects the pace and character of globalization occurs behind the scenes and is transparent only to specialists in one field or another. With his books on the International Monetary Fund and its role in the international financial crises of the past decade, Paul Blustein illuminates an important dimension of globalization in an understandable and highly readable manner. His previous book, The Chastening, was concerned primarily with the East Asian financial crisis of the late 1990's; this awkwardly-titled book focuses soley on Argentina's crisis of 2001. It lacks the narrative drama of the The Chastening, but its narrower scope makes it easier to digest. The IMF he portrays is a less assertive institution than its critics might expect. I would think that there are many business professionals, academics, and informed citizens who are not specialists in international finance who would find this book useful and interesting.

This was a very interesting book about the IMF and its dealing with Argentina. Argentina has had a colorful past of financial blunders including one in 1890 which almost brought down Barings Bank when it defaulted on its bond payments. So it was not surprising when Argentina bankrupted again.

Not only does this book have the inner workings of the IMF with regard to Argentina but it also contains some short stories of average people and the catastrophies that befell them because of Argentina's currency devaluation. I found it interesting that because Argentina guaranteed an exchange rate between its currency and the dollar that a lot of people had taken out loans in dollars which proved to be disasterous when the peso was devalued.

All the information about the behind the scenes action of the IMF was very insightful as to the inner workings of global financing of emerging nations. The author did a good job bringing home the facts and helping the reader get to know the players in both the IMF and the Argentine government. In summary this was a good lesson on the economics of what debt can do to a country.

This book examines the economic history of Argentina from the early 20th century to 2004, with an emphasis on the time period from 1989 to 2002. The focus is on the financial sector of the economy, and how actions by the government and international financial institutions first ballooned Argentina's economy over a decade, and then collapsed it in just under 2 years. The point of view is from the top, as the book follows multiple important figures throughout this time, including officials at the IMF, officials in Argentina's government, and financial bigwigs in the US and Europe, both public and private.

The author is quite objective and impartial, and lays blame all around. The IMF gets some blame for not being more forceful in getting Argentina to change its ways. International banks and lenders get blame for contributing willingly to the financial bubble of the country. And the Argentinan government gets blame for refusing to consider floating its currency, devaluing it, or restructuring its debt before it was too late. Unfortunately, it was the citizens, mainly poor and middle class, of Argentina who took it in the pocketbooks. All in all a great book, with equal emphasis on economics, public policy, and historical analysis. I highly recommend this book.

A fast paced enjoyable read. Paul Blustein tells the story of the rise and fall of Argentina's economy in the roiling seas of free trade and free markets of the nineties in the style of a novel. His behind the scenes look at the International Monetary Fund were very elightening and throughly entertaining.

Motives and ambitions of leaders are not always spelled out when reading about the fits and starts of South American economies like Argentina in the North American press, but reading this book sheds bright light on thinking and actions of dicision makers as they explain thier actions.

Entertaining and informing.

This book seeks to understand how and why Argentina sank into financial chaos in the early 2000's. The book looks at the role of the IMF, US treasury, private markets, and the Argentinean government in the overall downfall of the country. The author writes very well about his subject and has a good understanding of international economics. The IMF is not completely vilified as it is in many of the current financial crisis's and although it shares a large amount of the blame the book hands it out equally. There is quite a bit of conspiracy theory and engaging in theories behind the IMF and Wall Street as well as the Bush administration. The author acknowledges in most cases that these are conspiracies but they did not really need to be discussed. The most interesting part of the story has to do with the role that the markets played in Argentina. It is an interesting foreshadow for the future of emerging markets and looking at the self fulfilling prophecies of debt and equity. This book deserves its credit for focusing on real issues without engaging in much ideology or theory. If you want to understand how financial markets are impacting areas overseas this is a great book to start with.