Finding Opportunity in an Economic Crisis

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Posted by The Savvy Retiree on March 8, 2016 in Money Saving Strategies, Personal Finances

“Nothing is built on stone; All is built on sand, but we must build as if the sand
were stone”
— Jorge Luis Borges

Today we begin a little foray into the subject of systemic, wide-scale collapse.

The currency…the economy…society at large…

Bank accounts freeze. Welfare systems stop paying out. Food distribution lines are cut. Emergency “services”(police, fire, ambulances) stop answering the phone.

The whole shebang. It could all go…poof!

It has before. Many times and in many places.

But don’t worry.

It’s not as grim as it sounds. At least, not if you don’t want it to be…

In fact, for the eternally optimistic among us—your cheery editor here included—collapse can represent great opportunity.

You might think of it as the “cleaning out” process that helps make way for new and better systems…

As the “creative destruction” to which economist Joseph Schumpeter referred…

The “a-changin'” times to which lyricist Bob Dylan alluded…

And where better to begin a study of wholesale collapse (and what to do about it) than right here, in Argentina!

After all, what the Argentines don’t know about ruining an economy probably isn’t worth knowing.

Meddling… money printing… subsidies and onerous regulation… intrusions into personal freedoms… media censorship… hyperinflation… Peronism… protectionism… Kirchnerism… socialism… militarism… fascism… cronyism… corporatism…

Forget the “The Donald” Trump. Forget the Bernie and Hillary show too.

There’s not a boneheaded plan any of the candidates could come up with that hasn’t been tried here first. And to predictably disastrous effect.

The rest of the world can learn a lot from what goes on down here on the Pampas. Hard won lessons in what not to do.

More about that below. But first, a little tale to bring you more fully into the picture…

Your editor spent most of the weekend in San Telmo, one of the capital city’s older, shabbier barrios. Perhaps owing to its distant and former glory, it’s arguably the best place in the country—perhaps the continent—to go “antiquing.”

(Your editor’s wife is decorating an old, French-style apartment. Her husband is nodding in agreement.)

Up and down the dilapidated Calle Defensa, one finds store after store bursting with exquisite period furniture, artifacts from a bygone era of elegance and class. Remnants from the country’s own Belle Epoch.

Ornate chandeliers and polished silver candelabras… bronze statues and oil paintings in gilded frames…deep Bergère armchairs and vast, handmade dining tables of walnut and rich oak…

It truly is a tale of two cities…the crumbling façades outside housing the lustrous trappings of high society within.

As mentioned above, Argentina offers us an instructive example of a system under perpetual collapse. And more importantly, a look at how individuals thinking outside the box learn to survive and, in many cases, thrive…despite the failing system around them.

At the turn of the 20th century, Argentina was ranked as the 8th most prosperous nation on earth. Only Belgium, Switzerland, Britain and a handful of former English colonies—including the United States—were more favorably positioned, economically.

In 1916, the nation’s bustling, cosmopolitan capital, Buenos Aires, had the thirteenth highest per capita telephone penetration rate in the world. Her per capita income was, around this time, 50% higher than in Italy, almost twice that of Japan and five times greater than its northern neighbor, Brazil.

Argentina’s industry churned out quality goods and textiles. Huge, refrigerated ships (a technological marvel at the time) carried her prized beef, first introduced in 16th century by the Spanish Conquistadors, from the fertile plains of the Pampas to the farthest reaches of the known world.

This was the age of the tango…the heyday of Teatro Colón…the high tide mark for culture and wealth in the “Paris of the South.”

But nothing is forever…

Beginning during the early years of the Great Depression, Argentina began pursuing a policy of “import substitution” in a foolish attempt to achieve “self-sufficiency.”

The result was predictable, especially given hindsight. The increasingly state-directed economy over-invested in some areas (creating excess capacity and expensive redundancy) and under-invested in others (leading to deep and widespread shortages in critical sectors, like agricultural production).

And while market distortions were busy wreaking havoc at home, increased competition from the post-WWII, export-driven economies abroad made it all but impossible for Argentina to compete on the global stage.

The road to disaster found its cliff during the 1970s…when the rise of a military dictatorship took matters from merely horrible to utterly unimaginable.

Since then, the economy has fumbled from crisis to crisis…devaluation to default…deterioration to disaster.

Today, the country ranks between former Soviet states of Latvia and Lithuania when it comes to average monthly wage…

Between Antigua and Barbuda and St. Kitts and Nevis for per capita GDP…

And between the Central African Republic and Equatorial Guinea on the measure of economic freedom.

If you think your bank account can’t be seized in an instant… If you think your currency can’t lose its value overnight… If you think “the system” is there to help you and to keep you safe at night…

…you simply haven’t spoken to enough Argentines.

And yet, here we are…sitting in a cozy café here in Buenos Aires, sipping a glass of wine in relative comfort and safety and penning a few thoughts for our dear Truth & Plenty readers.

What gives?

Yes, it’s true that the porteños know a thing or two about rolling disasters and century long economic busts…

But so too do they know the workarounds to a collapsing system…and how to ensure they aren’t tied to the tracks when the train comes ‘round the bend.

More next time, when we take a closer look at the situation unfolding north of the Rio Grande.

Image ©iStock.com/TERADAT SANTIVIVUT 

T&P Tool Shed

Out with the New

The U.S. furniture industry cranks out hundreds of thousands of new, must-have items every year, and while these ultra-modern “pieces” will seem irresistible at first, it’s not long before they fall apart or go out of fashion (whichever comes first).

Alternatively, antiques are the greenest way to decorate your home, tend to be well made (to have lasted so long), and retain or increase in value as they get older. These are T&P’s antiquing tips to make sure you don’t leave the flea market with a pile of junk.

Plan ahead: It’s easy to get sidetracked by shiny nick-nacks in the chaos of the flea market. Make a list of your desired items and focus your search.

Go online: The smart phone gives the modern treasure hunter an unfair advantage over his humble ancestors. Part of the romance of antiquing might be in rummaging through the junk, but there’s nothing wrong with checking online to make sure you’re not being fleeced.

Look carefully for repairs: It can be difficult to spot a good restoration job, but you need to be aware that it can significantly reduce the value of an antique. Cast a careful eye over the goods before buying. Seasoned antiquers will carry a small black light to identify repaired cracks in porcelain.

Ask questions: As you spend more time in the world of antiques you’ll learn what to look for. Until then, don’t be afraid to ask lots of questions. Antiquing attracts passionate folk who won’t mind chewing your ear off with insider knowledge.—ED