Argentina's currency crisis and economicdepression have been caused by the bad policiesof its government--not by banks, speculators,the International Monetary Fund (despite thebad advice it has given), or other scapegoats. TheDe la Rúa and Duhalde governments have madeseveral gigantic blunders, namely,
- increasing tax rates,
- freezing bank deposits,
- devaluing the peso, and
- forcibly converting dollar bank deposits andcontracts into pesos ("pesofication").
At present, all property is potentially subjectto government control or confiscation. There islittle reason for anybody to produce, save, orinvest in Argentina. The country is returning tothe failed economic model that caused so muchtrouble in the 1980s and had to be jettisonedfrom 1989 to 1991.
Fixing Argentina's currency and economyrequires reversing those blunders and returningto policies that respect private property andencourage the private saving, investment, andinitiative that create economic growth. The mainsteps necessary in the short term are
- officially dollarize, converting all pesoassets, liabilities, and prices into dollars;
- to the extent possible, reverse the damagedone by pesofication of deposits;
- reconstruct the financial system; and
- drastically reduce tax rates.