In another superb article from Bill Bonner, the author compares the feasting and celebrations of carnival compared to the austerity and fasting of lent. There’s an interesting observation about human preference for feast and not fast, that links nicely into today’s world of debt and financial irresponsibility. Read on for a ripping narrative on Argentina and the global economic persective.
If only Keynes had gone to Carnival!
Buenos Aires is hot and humid. We wilt. We slow down. We find it hard to breathe. It’s like Maryland in the summer time
But the humid weather doesn’t stop the partying.
We arrived at 2AM. A drum band was performing…amid shrieks of laughter…about a block away. It’s Carnival time in South America, a rush of late night revelry before the party stops for Lent. Yesterday was a holiday; so is today.
The origin of the word ‘carnival’ means ‘take out the meat.’ Christians are supposed to give up meat for the 40 days preceding the crucifixion and resurrection of Christ, from Ash Wednesday to Easter Sunday. Fat Tuesday, or Mardi Gras, gives them a last chance to let loose…to eat and drink heartily…before the Lenten fast begins.
Pleasure is a greater temptation than pain, for most people. And the feast of Carnival was always much more agreeable than the abstinence and prayer of Lent that came after it. So it won’t surprise you, Dear Reader, that people have tended to enjoy the debauch of Mardi Gras and forget the penance altogether.
Everybody wants the resurrection; nobody wants the crucifixion. Everybody wants recovery; nobody wants de-leveraging. Everybody wants to be born, but nobody wants to die.
John Maynard Keynes should have noticed. His idea was that the feds would run surpluses in the fat years and deficits in the lean years. But it ran onto the jagged shoals of human nature…the same animal spirits that animated the crowds outside our window last night. It doesn’t take much self-discipline to run a deficit or to celebrate Carnival. Running a surplus…or fasting…is another matter. Carnival is easy. Lent is hard.
So, when the crisis of ’07-’09 came, the feds had no money saved to counteract it. All they could do was to borrow…and make it worse.
“It was so much more tranquil in Nicaragua,” Elizabeth remarked. “All we heard was the crashing surf at night. It was peaceful. There’s nothing very restful about a steel drum band.”
We left Baltimore about 10 days ago. We’ve stopped in Miami…Managua…San Jose and Panama City. Now, we’re on the Rio Plata…in the Palermo Soho section of Buenos Aires.
“Did you see the Dollar Sniffers at the airport?” asked a friend.
“The dogs. The police have trained dogs to be able to detect dollars in your luggage.”
“Why would they do that?”
We’ve heard about the ‘risk off’ trades in Europe and America. Fearful investors forsake their Portuguese bonds and Chinese stocks for the relative safety of US dollars. But here, the safety of the dollar is a more tangible and more immediate concern.
“People are getting nervous again. The inflation rate is increasing. Nobody knows for sure. The government lies. And they threaten to put you in jail if you publish an alternative number.
“So people watch the prices for pizza and hamburgers. There’s a pizza chain that sells the cheapest pizzas in Argentina, called ‘Uggi’. It’s so cheap you have to pay extra if you want a cardboard box. They put their prices right on the front of the store. So you can see immediately how much prices are going up. I think they’re going up at about a 25% rate. More than 3 times faster than the government claims.
“We used to watch the price of a Big Mac combo, too. But the government put pressure on McDonald’s to hold down the price…in exchange for some tax benefit or something.
“The Argentine economy is really very robust. It has to be. People have to find ways around all these stupid laws. They pass a law to prevent you from importing something because they want to ‘protect’ some local industry that the politicians have an interest in. Or they pass a law to prevent you from exporting something because they want to force you to sell it to local people at a low price.
“Those dollar-sniffing dogs, for example, are another way they try to keep people from protecting themselves from the government’s inflation. They don’t want people to convert their pesos into dollars…and then take them out of the country.
“They also make it hard for you to spend money. You have to show where you got the money. Otherwise, the seller is likely to denounce you to the police. So people are careful. They don’t want to buy. They don’t want to spend. What a way to run an economy!
“I’ve got a friend who sells Harley Davidsons. He has customers who want to buy them, but he can’t get them. Because the government is trying to favor some other industry. And then they stopped you from importing tires…so you couldn’t get tires for your car. That’s why you see so many trucks with bald tires. It’s dangerous. But it’s just what you get when you start monkeying with an economy.
“That’s why I like living down here. It’s like an economic freak show. You get to see experiments…and the kind of grotesque results they produce. It also shows why Hayek was right. The free market is the only way you can get any honest information about what people really want…what they’re willing to pay for…what’s scarce and what’s abundant. Freely-set prices have an ‘information content’ that guides the whole system and ends up making everyone better off.
“When the government interferes, prices lose their information content. They give misinformation instead. And you end up with the kind of mess you have here in Argentina. Which isn’t that different from what you’ve got in Greece.
“It also looks like it is the way the US is going, too.
“You know, 100 years ago, this was as rich as the US…or almost. This city was a rival to New York. Hundreds of thousands of immigrants came in…found jobs…built railroads…opera houses…restaurants…monuments. It looked like Argentina would become one of the world’s leading industrial as well as agricultural powers.
“Instead, the country took a direction that nobody really wanted. I mean, nobody wanted Argentina to be a second-rate economy with a barely-functioning market economy. But that’s what we’ve got. Because, as you would put it, the zombies got control of the government. Most of the voters were here in the city. And the Peron government realized that most of them could be bought…with giveaway programs and government jobs. The people voted for Carnival, you might say. They didn’t vote for Lent.
“And once the system was corrupted — paying off the zombies by imposing more and more restrictions and taxes on the productive economy — there was no way to fix it. There were more zombies than producers. They won every election. They still do.
“The urban masses control the elections. And the urban masses want to be zombies — with public health, pensions, jobs, subsidized gas and electricity, and so forth. Here they even subsidize the price of a steak, by making it hard for ranchers to sell their beef on the open world market.
“And from what I read in the paper, I think America is doing essentially the same thing…
“Also, in fairness I should say that Argentina is still a relatively agreeable place to live. The food’s good. The people are generally very friendly. The weather is usually good too. And it’s fun to watch people doing such wacky things…
“But it’s a lot more fun to watch…obviously…if you have a bank account in Miami.”
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