Ottawa Citizen Wednesday Aug. 22 2001
by David Plumb
Bloomberg News, with files from Eliana Raszewski and Charles Penty

Complete article is reprinted at this URL:

Follow up discussion about Argentina's new bond currency at this URL:

     JCT: This article is from Bloomberg, a financial newspaper, so I expected it to be slanted. I unslanted it by moving paragraphs 12,14,15 up to the front to expose the smear for what it is. (My numbered comments later)

Picture Caption:
Buenos Aires Gov. Carlos Ruckauf shows patacons, a new half-currency, half-bond and the planned savior of for Argentina's $153 billion debt. Economists say the bills undermine the peso's one-to-one exchange with the dollar. "Argentina is bankrupt" Mr. Ruckauf said.

Argentines in Buenos Aires province fear patacons are worthless, David Plumb reports (2)

Buenos Aires

. The cash machine at Banco de la Provincia Buenos Aires spit out part of Carlos Rodriguez's $1,400 U.S. monthly wage in crisp, 20-patacon notes.

The provincial governor in Buenos Aires, Carlos Ruckauf, asked companies to accept patacons as currency alongside the peso, and said they could be used as payment for federal or municipal taxes.(3)

P14. Water utilities Azurix SA, and Augas Argentinas SA, phone companies Telefonica SA and Telecom Agentia, Stet-France Telecom SA and railroad Metrovias SA have all agreed to accept the patacon. McDonals Corp. said it expects to take the currency in exchange for a new meal it plans, the Patacombo. Some banks said they would accept the notes as payment on personal and home loans.(4)

. Osvaldo Rial, president of the Buenos Aires Province Industrial Union, offered "total support" for the new currency while Alto Palermo SA, which runs seven shopping malls, is negotiating with stores to accept the notes. Argentina's world champion soccer team, Boca Juniors, will let fans pay for tickets with Patacons, treasurer Orlando Salvestrini said. "For many months, people are not going to have another currency," Mr. Ruckauf yesterday in a televised news conference. "Argentina is bankrupt."

P2. "I don't know if my salary has been devalued or not," said the 43-year-old Mr. Rodriguez, one of 160,000 employees and retirees in the province of Buenos Aires getting paid in the new currency. "It depends on how I'll be able to use these patacons."(5)

P3. As the patacon - a one-year security with 7% interest - went into circulation yesterday, residents weren't sure what it is worth. Economists said the bills undermine the peso's one-to-one exchange rate with the dollar, the economy's anchor for a decade.(6)

P4. The Buenos Aires province, Argentina's largest with 14.4 million people, more than a third of the nation's population, printed $95 million of the new notes after banks limited access to loans. Provincial employees began withdrawing in patacons the portion of their July salary above 740 pesos - three weeks after the payment was due.

Other provinces, strapped for cash, plan to follow Buenos Aires' lead.(7)

P6. "When the pile of worthless paper the provinces are printing avalanches, the federal government will not be politically able to stand by and just watch the Argentine people suffer the consequences," said Colin Negrych, manager of the Centaur Fund, a hedge fund in New York.(8)
P7. The new money, which looks like an oversized peso bill, arrived as Argentine officials entered a 12th day of negotiations with the International Monetary Fund for as much as $9 billion in new loans to help the country avert a default. In all, the federal and provincial governments have $153 billion in combined debt.

P8. Brazil's GloboNews network reported Argentina may announce an agreement for new IMF loans as early as tonight.

P9. The benchmark bond, due 2005, fell 2.25 to an offer price of 67.063 to yield 32.5 percent on growing concerns a default is imminent. The bond was yielding about 17.5 percent in early July.(9)

P10. "Already some residents fear the patacon has no value."(10) The province plans to print a total of $400 million worth by year end in bills as small as one patacon - which has a face value of one peso and pays seven percent interest at maturity.

P11. Eventually, the federal government plans to issue a new note that would replace the patacon and other provincial currencies alongside the peso, giving them nationwide circulation.(11)

P13. At the Alto Avellaneda shopping mall, Hugo Noblega doesn't trust the plan. "We don't know what to do with them," said Mr. Noblega, sales manager at a branch of Kartum, a cosmetic retailer. "My worry is - what happens if we take them and then someone comes along and changes the rules?"

     JCT: So that's David Plumb's hatchet job on Argentina's new local currency. He chose to highlight the opinions of idiots who worry about what they spend their money on despite finding out "almost everything in town."
     Of course, in the article, only at the end do we find out that almost everything in town can be bought with the new money. Had he put that at the start of the article like I did, David wouldn't have been able to keep citing all these people asking "what's it worth?" when they sound like idiots once you've heard what it's worth. A "1-Pero Bond" is worth a "1-Peso Bill." All those repeated anxieties and doubts about Patacons being worthless and then we're told the doubts themselves are groundless. The admission of the truth at the end destroyed the whole previous inferences of worthlessness. It makes the whole piece look like a tissue of lies.
     Of course, when the alternative is using no federal currency or using some local currency, regardless of whether businesses want to accept the currency or not, if they refuse to accept the only currency that everyone has and insist on selling for only currency that nobody has, then they won't stay open long enough to oppose it for long. After all, like the governor says, it's the only currency they're going to have, everyone's going to be using it. And like I say, what idiots would say such negotiable paper has no value and where did David Plumb find them? My comments will follow, but first, my contribution to this debate:


     As the world's first anti-globalisation protester, when I was arrested picketing the IMF/World-Bank meeting in Toronto in 1982, it brought attention the pamphlet I was passing out.

     Quebec Social Credit first argued for a national LETS currency. But Canada Social Credit didn't agree and threw me out and changed their policy from prohibition of interest rates to 6%. So I founded the Christian Credit thinking that credit could only be christian and friendly if there was no interest.
     This is the way I explained then what are the Abolitionist Party programs of today:
     I reproduce the bit about bond-currency here:

1) The abolition of interest rates;
2) The establishment of a government dividend;
3) The establishment of no-premium fire and auto insurance.

1) The abolition of interest rates:
     Consider how governments presently finance their activities:
     If the city has expended the money allocated for snow removal and is hit with a major snow-storm, Council calls an emergency session and authorizes the issuance of $1,000,000 in municipal bonds. The mayor has them printed up and exchanges the $1,000,000 in bonds with a banker for $1,000,000 in dollar bills bearing 20% interest which
happen to weigh 100 pounds in all.
     Council pays for the $1,000,000 job of snow removal with the 100 pounds of bills. The merchants and their employees accept the 100 pounds ($1,000,000) of bills in exchange for their goods and services but at the end of the year, because the banker demands the repayment of 100 pounds ($1,000,000) in principal and 20 pounds ($200,000) in interest at 20%, Council must demand 120 pounds ($1,200,000) of bills in taxes from the citizens who only received the original 100 pounds ($1,000,000). Because every level of government uses this super stupid way of financing civic services, the tax-payers find themselves in the impossible situation of having to repay a greater amount of money than is issued into circulation. Interest is the root of the evil.
     The solution is to be found in the Bible: "Let the exacting of interest stop" Nehemiah 5:10. Accepting that credit is only christian when the exacting of interest has ceased, the major goal of the Christian Credit Party is the total abolition of interest on credit. This will be accomplished with the use of small denomination interest-free bonds in lieu of small denomination interest-bearing bills. If Abraham Lincoln could get it implemented 100 years ago, we will certainly get it implemented due to our powerful computer technology.
     When elected, a Christian Credit Council would also authorize the printing of $1,000,000 in municipal bonds to get the snow cleared except that the mayor would bypass the banker by printing up $1,000,000 in dollar bonds bearing no interest which happen to weigh 100 pounds.
     Council will pay for the $1,000,000 job of snow removal with the 100 pounds of small denomination interest-free bonds instead of the 100 pounds of small denomination interest-bearing bills. Because the bonds retain the value of the original services performed, inflation will cease to exist. The merchants and their employees can accept the 100 pounds in bonds from the civil servants in exchange for the same goods and services that they would have delivered for the 100 pounds in bills
when they realize that at the end of the year, because the banker middleman was cut out, Council will only have to demand the 100 pounds ($1,000,000) of bonds in taxes to pay for the principal saving them the 20 pounds ($200,000) in taxes to pay for the interest.
     Having demonstrated that small denomination interest-free bonds cleared the snow as well as small denomination interest-bearing bills, council will print up enough bonds to hire all the able-bodied people on welfare and unemployment to build themselves some affordable houses that can be bought interest-free because they were financed with our
new interest-free paper.
     With less people on welfare and unemployment, our taxes must be reduced. With more people paying their share, our taxes must again be reduced. The abolition of interest must benefit even the rich man by resulting in tax cuts so massive as to exceed the spread between what he gets in interest and what he loses in inflation. In days of old, interest did benefit the rich man because on foreclosure, the debtor would become his slave and be put to work. Today, foreclosures do not add to the rich man's wealth by the addition of profit-producing slaves but actually decrease his wealth but increasing his taxation to
care for the ever increasing number of unemployed. The abolition of interest will benefit both the rich man and the poor man.
     Though participating is completely voluntary, only those merchants who have accepted the bonds in lieu of the bills will save
the interest. Those who have not accepted the bonds in lieu of bills will not save the interest tax and will be allowed to enjoy the ever increasing taxes that they now enjoy. THE CHRISTIAN CREDIT ENGINEER

     JCT: That was my main political program back in 1982. Then a couple of years later, I read:

Thursday November 28, 1985,
The Charlotte Observer,
By Andres Oppenheimer, Knight-Ridder News.

     MIAMI -- Two remote Argentine provinces, short of cash to pay public employees, have come up with an easy solution.
     They're printing up their own money, to the chagrin of the national and international banking authorities.
     "We are paying all our public employees with provincial bonds," Roberto Romero, governor of the northern Argentina province of Salta, said in a telephone interview. He said Salta started printing its own IOUs because it wasn't getting sufficient federal currency fast enough.
     "People can change these bonds for money at any bank," Romero said. "They can use them to shop at supermarkets and to buy cars or any other products."
     The Argentine government is not smiling, and world bankers are worried that other cash-starved states will copy Salta's financial extravaganza and jeopardize Latin efforts to curb inflation and pay huge foreign debts.
     The International Monetary Fund (IMF), the world's main financial inspector for debt-ridden countries, was concerned enough to bring up the issue in recent talks with the Argentine government, said sources in Argentina and Washington. The IMF does not comment on negotiations with individual countries.
     After Salta started quietly issuing its own IOUs in September last year, the nearby province of La Rioja started printing its own bonds too. Four other Argentine provinces have either begun adopting similar programs or are preparing to do so.
     In all cases, the bonds are good only within the province where they're issued.
     But the government of President Raul Alfonsin says the provincial bonds are expanding the country's money supply and are undermining efforts to remove Argentina from the list of world inflation leaders. Earlier this year, Argentina had a 1,000% annual inflation rate.
     Alfonsin made headlines worldwide in June when he launched an austerity program built around a commitment to stop his government from printing money. Since then, inflation has dropped to 3% a month, a record low in recent history.
     The bonds printed in Salta come in denominations of 10, 100, and 1,000 australes, the same as ordinary Argentine currency bills. They pay no interest and can be either exchanged for Argentine currency or used to buy goods.
     Romero, of the opposition Peronist Party, and officials of other provinces claim their bonds are not really new currencies because they are no good outside their provinces.

     JCT: So using small denomination bonds as provincial local currency worked then and it will work now, even with the 7% usury. As long as the government keeps printing the money to pay the interest, everything will balance in the end. As long as they're not in debt to banks who are the only guys who can print the money, all will work well.

     So there, I hope, is the genesis of the LETS bond-currency proven so effective in Argentina that they used it the last time their money system broke down and they're having to turn to it again now.
     Comments on the latest article:

     (1) "New currency spawns anxiety" only in New York banks that won't be getting any interest on currency created by the Argentines themselves. The Argentinian workers who accept the bonds will be getting the benefit. A kind of "demurrage" that LETSers will love but that a casino chip purist like me finds technically unnecessary though I'll admit this could prove to be the spark that makes UNILETS go. .

     (2) That "Argentines in Buenos Aires province fear patacons are worthless, David Plumb reports" is quite a misrepresentation. The three Argentines he quotes do not the province make, especially when he found them in an insane asylum.

     (3) Great, The Engineer's Number One Prime Feature for saturation is the demand that they "be used as payment for federal or municipal taxes." Any piece of paper people can pay their taxes with is instantaneously valuable to everyone, a saturated market. King Henry's Tallies were government IOUS, Lincoln's and Kennedy's Greenbacks were too.

     (4) Even better than just being able to spend it on taxes. All those people in the article who kept asking "what's a 1-peso bond worth?" it's a peso worth water, communications, transportation, or rent or taxes. If you think it's worthless, throw them out over here.

     (5) Still the big question in the article is "How to use the Patacons?" Of course, a 1 peso bond can pay his water bill as well as a 1 peso bill, a 1 peso bond can pay his telephone bill as well as a 1 peso bill, a 1 peso bond can get him transportation as well as a 1 peso bill, and a 1 peso bond can pay his house mortgage as well as a 1 peso bill and a 1 peso bond can pay his federal and municipal taxes as well as a 1 peso bill too. And he's asking "how I'll be able to use these patacons."
     Of course, in the original article, the reporter put the fact that all the large corporations are going to be taking the new money at the end of the article and the opinions expressed of his doubters aren't provably laughable at this point for this reason. So while you are unaware that all the big companies are going to take it, you can take their comments seriously. But learning about the companies earlier, then the stupidity of these quotes becomes clearer.

     JCT: (6) We're endangering their anchor. As if it's been such a great anchor when everyone's screaming that it's not.

     (7) When Argentina faced the banks who wouldn't grant the loan,They said "We'll do like Salta did in 80s: Print our own.
     Any bets that Salta is soon on the list. The Province of Salta was the first of the six provinces who, when they ran out of cash in the early 1980s, used small denomination interest-free bonds to pay all their employees thereby causing huge drops in unemployment and inflation. The same thing will happen here even though their 7% interest on the bonds is an unnecessary, even if perhaps attractive, feature. It's not so bad thinking when you think that the worker who accepts the bond for his labor is going to get the 7% instead of some foreign New York bank. More on the Salta experiment later.

     (8) As for the New York Bond salesman saying that all the paper that can buy all these things is worthless, did we really expect the New York bankers to approve an idea where the interest they used to collect on large denomination bonds that only they could accept going to the guys who accepted the small denomination bonds for the the work they did? All that worthless paper that can only pay people's water telephone, transport and rent bills. Quick, throw all that worthless money away, says the Financial advisor. Throw it over here.

     (9) We know it's not our 7% bond they're talking about so it must be their 17.5% bond to the New York bankers they're talking aboutreplacing with the 7% bonds to the workers. And most of the $9 billion will be used to pay the interest to the New York banks anyway. That's why it's so important to them and not to Argentine citizens. They certainly aren't going to see much more it than it passing through their hands from the IMF to their creditors.

     (10) "Already some residents fear the patacon has no value." Where did he find people as mentally impaired as to ask themselves if the piece of paper that buys them everything in town has any value or not? Of course, we still didn't know about all the companies that were taking it and so this didn't seem as stupid a statement as we now know it is. And we know that the reporter was trying to mislead us on purpose. 

     (11) Though I do like the idea of the feds issuing their own bond-currency to finance their activities, there's no reason to make the provinces give up theirs. It's too easy to phase the new out and get back to interest-bearing bonds to the New York banks again.

     Early smears of the system are left unchallenged until the important facts are printed at the end of the article that defeat the
smears. So I moved the last few paragraphs to the front. Certainly did change things, didn't it. That's an easy way to defeat propaganda pieces. Look at the part they put last first.
     And finally, Argentina already has the world's largest private LETS with over half a million people. So even if the governments hadn't stepped in, many were already finding a legitimate source of alternate currency to Trade Employment Locally.
     Financial pundits may be fuming and forecasting destruction, but just like they forecast worse inflation in the 1980s and inflation went down, not up, from an injection of healing currency, so too, even with the 7% bonus and despite the same kind of dire forecasts, I'll bet that things will get better from now on, not worse.
     Investors betting on Argentina early will reap the rewards.

John C. "The Banking Systems Engineer" Turmel, Author of the UNILETSinterest-free time-based currency United Nations C6 recommendation toGovernments in the    
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