Imagine if you could not get your savings because the banks were closed, and, once the banks opened, your dollars had fallen in value by more than half. Imagine...

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

by Paul Blustein

Public Affairs, 278 pp., $27.50

Imagine if you could not get your savings because the banks were closed, and, once the banks opened, your dollars had fallen in value by more than half. Imagine your mortgage in a foreign currency that suddenly cost twice as much as the money you earned. Imagine people all around you losing their jobs and unemployment rising to Great Depression levels. All that happened in Argentina three years ago, and they are the events around which this book is built.

“And the Money Kept Rolling In (And Out)” is a reporter’s book, with the pluses and minuses that come with it. Paul Blustein, who writes for The Washington Post, has interviewed dozens of people in the International Monetary Fund, at the U.S. Treasury, in the Argentine finance ministry and in the Wall Street bond houses. He is at his best telling the story of the various IMF bailouts of Argentina, the internal arguments about whether to do it, and the mission in which the IMF finally said no.

Writing a book allows a news reporter to include his opinions, which he is not normally supposed to do. Blustein thinks he is being bold here, particularly in his criticisms of Wall Street and the IMF, though really his opinions are within careful limits. His conclusion, “Argentina was badly served by the global institutions on which it had come to depend,” is true but hardly pushing the envelope.

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Basically the story is this: After six decades of serious inflation, the Argentine government in 1991 promised to get totally clean. It pegged the peso to the U.S. dollar, promising to pay one dollar for one peso, now and forever, to all holders, public or private. The United States has not had a currency rule that strict since 1933, when the Treasury last backed the U.S. dollar in gold coin.

Argentina’s idea was to offer sound money around which its people could invest and plan. It worked. Growth accelerated. Inflation ended. But financial discipline was needed to sustain the dollar peg, and the Argentine politicians fell short.

They went partway and basked in praise from America for their efforts. If they borrowed too much — Argentina’s debt rose from 29 percent of gross domestic product to 41 percent from 1993 to 1998 — they were promising to moderate their appetites real soon. Except that they didn’t.

Much of the value of Blustein’s account is in showing how slow the institutions of global capitalism were in ringing the alarm. The bond market was bewitched by Argentina for far too long, even after investors had been burned in Thailand, South Korea and Russia. Wall Street deserves the knocks Blustein delivers, and probably more. The Street’s customers were none too sharp, either. Inside the IMF, warning bells rang three years before the crash, but decision-makers ignored them.

In the final round of bailouts, when disaster was all but certain, decisions to try one more loan were made by IMF officials in Washington who did not want to look cheap and politicians in Argentina who did not want to lose their jobs. Blustein is indignant at these bigwigs for rolling the dice on bad odds, all on the credit of the Argentine people. (He is less indignant about the pillage of foreign bondholders.)

At the end of the book he suggests several reforms, such as making it more difficult for the IMF to make big emergency loans and adopting some sort of Chapter 11 for sovereign borrowers, a system for partial default.

Though his book focuses mostly on Americans, he takes pains to say at the beginning of the book, “Argentina was not a wholly innocent victim — far from it. Democratically elected and appointed Argentine officials made the decisions that led the country down the road to economic disaster.” At the end of the book he says this again, noting that through most of the story, Argentine officials “were leading the Fund around by the nose.”

These statements are meant to make up for the book’s obvious weakness — that it focuses on Wall Street and the IMF more than on Argentina, and that it has little historical background. Blustein is a Washington Post reporter, not a historian, and it shows. He zips through Argentina’s 20th-century economic and political history in about three pages. It is not enough to understand the Argentine half of the story — or of the blame.

Bruce Ramsey is a Seattle Times

editorial writer.