Argentina: Cui Bono?

 So, I'm not opposed to "bail-outs" on principle. I have no wish to punish the innocent Argentine public for the sins and mismanagement of its leaders. Nor is it absurd to want to forestall chaos in one corner of the global financial market in order to prevent contagion elsewhere. 

What I am opposed to, though, is using taxpayer dollars for the sole purpose of saving the bacon of a handful of rich investors who happen to have a personal connection to the Treasury Secretary. 

Yet, that appears to be what the government is actually doing. The New York Times this week marshaled a compelling set of evidence to indicate that some of the hedge fund managers with the most to lose in Argentina also have suspiciously close ties with Scott Bessent. 

This is what makes the whole scenario reek of the Wood's Patent affair that Swift wrote about in his Drapier's Letters. That too was a "currency swap" of a kind, according to which Wood received a privileged license to exchange debased currency for gold and silver from Ireland. 

And, as Swift strongly insinuates in the letters, Wood secured this patent through the special intervention of the King's mistress. 

So too, it increasingly appears that a small number of finance bros with a hefty stake in the Argentine economy have also been whispering in Scott Bessent's ear. 

And lo—a plan immediately emerges to exchange U.S. dollars for... dreck. For IOUs that aren't worth the paper they're printed on. In effect, we are giving up "good money" for "trash"—as Swift wrote of Wood's Patent in the eighteenth century. 

It is ironic that Trump has spent so much time railing against the U.S. "trade imbalance"—which essentially stems from the strength of the U.S. dollar. Since the dollar is considered the ultimate safe asset (or was, until recently), countries around the world prefer to hold value in the form of U.S. currency. 

Trump apparently is now happy to have Argentina do the same. So I'm not sure how he squares that one.

But consistency has never been a barrier with him when it comes to enriching his cronies and rewarding far-right elected officials in South America who are willing to kiss up to him. 

Never mind that the deal is bad for American farmers—who were sold out by Argentina's government as soon as they got the bailout they were seeking. 

Never mind that it's a bad deal for U.S. taxpayers, who are seeing 20 billion of their dollars disappear in exchange for "trash," as we have seen above. 

It appears that the sole concern of this administration will always be to reward and enrich loyalists—both in foreign governments and in the financial markets. 

This is essentially the same galling phenomenon that J.A. Hobson wrote about in his 1902 book Imperialism. British investors, he wrote, would undertake patently risky investments in developing markets—for which they reaped outsized rewards, precisely because of these known risks. 

And then, when the investment inevitably went south—they would call in the coercive arm of the state to rescue the value of their investments. 

And so—they reaped both the advantage of usurious rates of interest, from putting money into high-risk investments—and at the same time ensured that when the consequences of their folly caught up with them, they could use government intervention to rescue the principal as well. 

As Hobson puts it: "Can anything be more palpably unfair?"

He writes:

The essentially illicit nature of this use of the public resources of the nation to safeguard and improve private investments should be clearly recognised. If I put my savings in a home investment, I take into consideration all the chances and changes to which the business is liable, including the possibilities of political changes of tariff, taxation or industrial legislation which may affect its profits. In the case of such investment, I am quite aware that I have no right to call upon the public to protect me firom loss or depreciation of my capital due to any of these causes. The political conditions of my country are taken into calculation at the time of my investment. [...] But, if I invest either in the public funds or in some private industrial venture in a foreign country for the benefit of my private purse, getting specially favourable terms to cover risks arising from the political insecurity of the country or the deficiencies of its Government, I am entitled to call upon my Government to use its political and military force to secure me against those very risks which I have already discounted in the terms of my investment. 

Is that not precisely what is happening here? A number of hedge fund bros close to Scott Bessent opted to invest in Argentina, knowing the risks involved, and reaping outsized rewards from the risk. 

But now that the Argentine economy is on the brink of collapse, they call in the U.S. taxpayer to rescue them from the penalty of their own folly. 

It's heads-I-win-tails-you-lose. It is, in fact, a direct transfer of 20 billion U.S. taxpayer dollars directly into the pockets of a handful of well-connected rich guys. 

It's plutocracy, in short. And what we need is a William Jennings Bryan for our time, who is willing to "scourge the elephant plutocrats"—as Vachel Lindsay put it—and resist the march of Whiggish paternalism that steps in to save the rich and the powerful from the results of their own folly.