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The Argentine warning shot

Will Argentina spread ideological contagion across the whole of Latin America, prompting a revolt against free markets? Or does it show the failure of the political elite?

Author: Felix Salmon

It was run by friends of the bankers and politicians who really matter. The men in charge were always careful to ensure that they frequented the technocrats' inner circle in such places as Davos and Jackson Hole. That helped to give them something of a free ride during the boom years: the bank analysts and the US government didn't ask the tough questions, had no incentive to be sceptical about an institution that was being so good to them. But when the crash came, all the years of chumminess, all the expensive meals, turned out to have been for naught. The risks of systemic collapse were small and so the US made no effort to delay or avert the implosion.

In the aftermath, even as the world awaits a lot more clarity as to what exactly happened and how, nearly everybody agrees that the US was right not to intervene. Large losses at Citigroup and JPMorgan Chase notwithstanding, the system as a whole has not shown any severe signs of weakness - at least, not yet. But some people are already asking difficult questions. Could this happen again? How could we have known this was coming? Just how transparent is this market? Who else might be at risk? How safe are our investments, really?

The parallels between Enron and Argentina are striking.

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