CRASH2: South America going further south as Argentina gets the green light from Lagarde.

WHAT ON EARTH COULD GO WRONG?

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I mentioned at the start of the week about the high likelihood of Brazil’s imminent economic numbers being pretty awful. But Argentina beat them to it yesterday by asking the International Monetary Fund to speed up disbursement of a $50 billion loan programme. Dollar denominated debt being their problem, los wannabe Malvinianos have decided to grab some more of it. Oh dear.

Below I present IMF Managing Director Christine Cerveau Avian de Lagarde’s response of last night in full, with the more profoundly insane bits highlighted:

“President Macri and I had a productive conversation today. He indicated his desire to work toward strengthening the policies underpinning the Stand-By Arrangement with the IMF. 

“In consideration of the more adverse international market conditions, which had not been fully anticipated in the original program with Argentina, the authorities will be working to revise the government’s economic plan with a focus on better insulating Argentina from the recent shifts in global financial markets, including through stronger monetary and fiscal policies and a deepening of efforts to support the most vulnerable in society. 

“I stressed my support for Argentina’s policy efforts and our readiness to assist the government in developing its revised policy plans. I have instructed IMF staff to work with the Argentine authorities to strengthen the Fund-supported arrangement and to reexamine the phasing of the financial program. I have agreed that we would aim to reach a rapid conclusion of these discussions to present to our Executive Board for approval. 

“I am confident that the strong commitment and determination of the Argentine authorities will be critical in steering Argentina through the current difficult circumstances and will ultimately strengthen the economy for the benefit of all Argentines.”

I would have fun asking the Argentine government and the IMF exactly why the adverse economic conditions were not anticipated. But the fun would be shortlived, as with the process of teaching a pig to sing: probably close to a million forecasters, commentators, bloggers, financial hacks, bond dealers and currency speculators said that the sole certain outcome of the Fed trying to normalise an abnormally perverted global rates construct would be a crisis in Third World debt.

But fear not Goucho guys, because Fifi Lafarge the Fisco Kid is going to insulate your cavity walls with Miracle Monetoneolibtos, which will as always deepen the wealth of the poor by persuading them to engage in Operation Diaspora….and strengthen the economy for everyone. That is, everyone working in the Carpetbag space. But don’t take my word for it: ask the Greeks, Italians and Spaniards how it works. Garbage-can foraging can be fun: you read it here first.

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Mind you, those who fancy themselves as Diasporistas need to get their arses into gear double-quick, on account of the growing South American tendency to man the borders with army regiments. Brazil itself is leading the way in this growth sector, having sent its grunts to keep order near its border with Venezuela, following violent clashes between local residents and thousands of Venezuelans fleeing economic chaos in their country. Speaking for myself, I saw Venezuela as a pretty clear “sign” – as indeed did El President Michel Temer, who signed the border-army decree mucho pronto – and then followed it with an absolute cracker of virtue signalling by swearing blind that “We are doing this solely to ensure the safety of the immigrants”.

The economy of Brazil can ill afford a dose of immigration: its economy grew 1.2% in Q1 2018, but this was half the rate recorded in the last quarter of 2017. The flight to less risky assets has led to a strong depreciation in the Real, the political situation is complex with an unpredictable Election result in the offing, the fiscal deficit is high and growing, business confidence monitors showed a steep fall during August, inflation is on the rise and unemployment stands at 12%.

Sounds to me like a job for Fed Ratesriseman and International Monetary Fundwoman.

Mexica diaspora into the US having been slashed by the Memorial Obama-Trump Wall project, the country has a President-elect Andres Manuel Lopez Obrado who, despite his public air of confidence, probably doesn’t know what to do next. Q1 gdp this year was less than inspiring, and the shrinkage announced in Q2 four days ago was double the forecast level. Obrado looks set to cancel a whole list of infrastructural investments, and Service sectors including commercial activity, transportation, financial and media grew just 0.2% from the previous three months – compared to a 1% expansion in the first quarter. Oil production fell sharply, while Industrial sectors including mining, construction and manufacturing declined 0.3%. Agriculture, livestock and fishing industries shrank 2.1%. Good news is hard to find.

But that hasn’t stopped the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) issuing a new annual report last night insisting that overall average growth in the region maintains a positive trend, with Central America notching up 3.4% as a growth rate.

The press conference didn’t dwell too long on the South American outlook. Oh for the life veiwed from behind rose-tinted glasses. Oh for some sign of sanity on Wall Street and at the Fed.