‘Searing Memories of Defaults’–and Selective Memory at the New York Times

I was struck by one sentence in Damien Cave’s New York Times analysis piece (10/16/13) on international reactions to the possibility of a US default:

Many people in countries like Greece, Argentina, Mexico and Russia still have searing memories of defaults and their lasting effects, including lost power.

It’s true that Mexico’s default on its debts in 1982 was followed by years of hard times, known as the “lost decade.” But Argentine and Russian memories of default are far less “searing”–in both countries, rejection or suspension of debt obligations was followed by years of solid economic growth.

Here’s a  chart of Argentina’s GDP before and after its December 2001 default:

Argentina real GDP

Does that look like something that ought to be haunting the Argentine people? If there were “lasting effects,” they appear to be quite positive. (See Extra!, 7/12.)

Likewise, here’s how the Russian economy fared after its August 1998 suspension of debt payments:

Russia GDP

Memories of default are not too searing in Russia, then, either.

As for Greece, it never really defaulted–it reached a voluntary agreement with creditors in 2012 to restructure some of its debt, but not enough to significantly improve its debt-to-GDP ratio. After this non-default, the Greek economy has continued to head downward: Greece debt and GDP


This does not mean, of course, that the United States should default–given the dollar’s status as a global currency, the consequences of a US default are likely to be quite different, though perhaps not as disastrous as commonly portrayed. Perhaps the real moral is that countries of all sorts should be skeptical of economic advice they get from the New York Times.

About Jim Naureckas

Extra! Magazine Editor Since 1990, Jim Naureckas has been the editor of Extra!, FAIR's monthly journal of media criticism. He is the co-author of The Way Things Aren't: Rush Limbaugh's Reign of Error, and co-editor of The FAIR Reader: An Extra! Review of Press and Politics in the '90s. He is also the co-manager of FAIR's website. He has worked as an investigative reporter for the newspaper In These Times, where he covered the Iran-Contra scandal, and was managing editor of the Washington Report on the Hemisphere, a newsletter on Latin America. Jim was born in Libertyville, Illinois, in 1964, and graduated from Stanford University in 1985 with a bachelor's degree in political science. Since 1997 he has been married to Janine Jackson, FAIR's program director. You can follow Jim on Twitter at @JNaureckas.