Tuesday, May 17, 2011

The Microeconomics of Devaluation

Going by the Argentinian experience, the micro is even worse than the macro. Here's a flavour:
What people don’t understand is that laws are written by men, not some greater power. As soon as those running the show feel an emergency decree or law is in order, existing laws are simply rewritten. They may even be ignored all together! What do you do if something like that happens? You may complain, you may sue, but you’re not changing the cold hard fact that as of right now that bank door is closed, that ATM has no money in it, and you still have to survive. This is something Argentines have experienced and know very well. Hundreds of thousands of us have banged the doors of our banks, for years, without a penny being returned. You still sued, and waited, and spent the little money you had by hiring a lawyer. You lose, they win…unless you have some of that money at hand before they decide to steal it.

Every single Argentine wishes he could go back in time, close his bank account, and put that money into gold. We would all do that if we had a time machine. Since you can’t guess the future, all you can do is estimate what can happen and play the odds in your favor. 
The government taking over the banks and seizing pension funds? Couldn't happen here, thank goodness.

More - if you have the stomach for it - over at the ever cheerful SHTF blog.

1 comment:

  1. That link you provided is seriously scary. Gold, food, water, guns. The essentials for dealing with the economic collapse and civil chaos that will follow Ireland's default.

    ReplyDelete

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