'I Want My Money'.(economic collase of Argentina)(Brief Article)

Susana Gimenez stood with angry Argentines outside Congress last week, clutching a homemade sign reading, I WANT MY SAVINGS NOW. Never mind that the money is gone: Argentina has $12 billion in reserves left against outstanding deposits twice that high, which means that Argentines will eventually have to accept a huge loss on their savings. With banks shuttered, President Eduardo Duhalde tried to persuade Congress last week to begin administering the pain by converting cash deposits to bonds payable over 10 years. With the mob at its door, Congress refused. "If they don't have reserves to back their deposits it's not my problem," says Gimenez. "I want my money back."

Millions of Argentines are living this same illusion. They are like passengers on an elevator after the cable snaps, who know something is dangerously wrong, but can't quite believe it will crash. Four months after defaulting on its national debt, Argentina is in free fall, with a shrinking economy bringing in too few export dollars to offer any hope of paying back its huge debts. The peso has fallen 67 percent, gutting Argentine savings and wages and leaving the banking system insolvent. The major foreign banks that dominate the system appear more likely to abandon Argentina than pour more dollars into the country. And Congress's rejection of the painful bond-for-cash deal forced the resignation of Economy Minister Jorge Remes Lenicov, who had brought at least some sense of reality to the waffling Duhalde administration. Before the vote, Duhalde had bluntly warned that Argentina "is out of money."

Can a country actually run out of money? Argentines don't seem to believe it, but the answer is, in a practical sense, yes. Every nation that has fallen into default or forced devaluation in recent years, from the Asian tigers to Russia, has hit a point where it could no longer borrow on international markets, stalling the economy and government operations. With $12 billion in reserves and $140 billion in debt, Argentina is past that point. In fact, by this practical definition, Argentina is perhaps more desperately "out of money" than Russia or the Asians ever were, because its credibility is more seriously tarnished.

Here's why: Argentina made bigger promises. It ended an era of turbulence and launched a brief period of growth in the 1990s by guaranteeing a rare level of currency security. It adopted a fixed- exchange-rate system called a currency board that legally obligated the central bank to back pesos with dollars and gold. Alas, the government kept spending without restraint, and by late last year did not have the dollars to back its pesos. In November, when the government forced ...