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U.S. vs. Argentina: Bigger than the World Cup

WON'T BACK DOWN: Christina Fernandez addressed the United Nations last fall.
Photo by Pool/Getty Images

While Argentina beat Belgium in the World Cup on Saturday, the South American country faces a far more crucial challenge off the pitch from global bankers.

The Obama administration this week came out in explicit support of so-called “vulture funds” that are trying to rip Argentina to shreds.

Deputy National Security Council Adviser Ben Rhodes issued a statement instructing Buenos Aires to "meet its obligations.” In other words: Bend over for speculators and impoverish your people.

The pressure on Argentina is the financial equivalent of England’s war over the Falklands three decades ago. Britain’s triumph on the tiny islands off the Argentine coast paid big political dividends for Prime Minister Margaret Thatcher back then.

“What the British Empire is trying to impose on Argentina now is a swindle beyond belief," said Lyndon LaRouche, a former Democratic candidate for U.S. president.

But a surge of support for Argentina among its South American neighbors, and from Russia and China, has leveled the odds.

On July 12, Russian President Vladimir Putin travels to Argentina for a summit with President Cristina Fernandez. On July 19, Chinese President Xi Jinping heads across the Pacific for a summit meeting with Fernandez.

Argentina is on the verge of defaulting on loans from a New York-based hedge fund. Default could shut Argentina’s financial system off from large parts of the international economy, Forbes magazine reported this week.

The doomsday scenario, Forbes predicted, would involve the Argentine government nationalizing private resources – but the magazine called that “unlikely.”

The current crisis is reminiscent of the 1970s, when the United States and a financially strapped Argentina dueled over control of its national assets, ranging from telecom companies to banks.

This time around, Argentina appears to have more allies, with Russia and China – Washington’s biggest creditor -- injecting themselves into the dispute.

Guyana's Robeson Benn, speaking as his country's acting foreign minister, told the Organization of American States that the Argentine showdown is an opportunity for imposing the Glass-Steagall banking law.

"I would like to pose the question, perhaps, as to whether we should not, out of this imbroglio, re-look at the overall question of the repeal of the Glass-Steagall Act in 1999 in the United States, which related to the activity of the banking system, the international financial institutions, mainly resident in the United States and in the United Kingdom."

Without Glass-Steagall protections to shield commercial bank deposits from global investment brokerages, Benn said, "We know the devastation, the dislocations in the United States economy in 2008, had even more devastating, dislocating effects in the world financial system."