Friday, July 25, 2008


The Hobo Philosopher

Mexico and NAFTA

By Richard E. Noble

We hear so much talk about NAFA most Americans still don't know if it was a good idea or a bad idea.
One of my favorite world economic writers is William Greider. Here are a few excerpts from his book One World Ready or Not.
I will begin at page 259. The chapter is entitled El Barzon - the yoke of debt.
"The case of Mexico is the most vivid - and tragic - example among many others in recent years, of how supposedly learned people can be swept up in the enthusiasms of financial investors and led to accept a quite fanciful version of what another country is really like, what is happening there ... the North American Free Trade Agreement between the two countries in 1993 ... despite the supporting data, almost none of it turned out to be true.
"Two years later Mexico was in ruin, its economy contracting by a devastating 7 percent, its domestic commerce frozen by a banking crisis that was devouring both financial institutions and industrial firms. At least one million jobs were destroyed, probably many more. Wage incomes fell in value by nearly one third. With incomes shrinking, as many as one in five Mexicans fell dangerously behind on their loans for cars, homes, businesses. More than eight thousand firms failed.
"The reformers turned out to be corrupt themselves. Former president Carlos Salinas de Gortari was in disgraced exile (though still serving on the board of the Wall Street Journal). His brother was in prison, accused of stealing hundreds of millions in state assets and of complicity in murder ... Salinas's handpicked presidential nominee was murdered ... an armed uprising in the southern state of Chiapas provoked heightened paranoia ... The U.S. government ... evidently discovered what its investigative agents had always known - namely, that a major sector of Mexican commerce was involved in drug trafficking protected by highly placed patrons in the PRI ... Instead of prospering ordinary Mexicans formed a swollen new wave of immigrants, heading north ... the Mexican boom of the early
1990s was mainly confined to its financial sector, not its real economy of domestic production and employment. It was fed by borrowed money and selling off state assets.
"Rather than political reforms, the financial boom was fundamentally driven by a single fact of global finance: the opportunity to arbitrage the differences in interest rates between the U.S. and foreign financial markets. By borrowing in New York's money market where interest rates were comparatively low, an investor could buy Mexican stocks or short term government notes and capture the spread between returns of 5 to 6 percent in America and 12 to 14 percent in Mexico.
"As more investors were inspired to do this, the price of Mexican stocks naturally soared and the Bolsa de Valores index doubled, tripled, even quadrupled during a span of only three years. Smart investors (including major Mexican banks) reaped fabulous returns - as much as 80 and 100 percent - by borrowing in America and buying Mexican financial assets they might hold no more than a few weeks or months. Dumb investors thought it would last forever.
"The Mexican bubble popped in December 1994 - a harrowing collapse in financial values when the foreign investors panicked and fled en masse. The proximate trigger was the Mexican's governments dwindling reserves of the foreign currencies needed to redeem the mounting short term debt paper held by the overseas lenders. When this condition became critical, the government was compelled to devalue the peso, which for several years it had propped up at overvalued levels to attract the foreign money. The global investors felt betrayed and rushed for the door, all at once, dumping Mexican assets of every kind. Something like $25 billion flew out of the country. Instead of modest devaluation, the national currency collapsed, losing half of its purchasing power during a few frantic weeks ... The Clinton administration, without acknowledging any embarrassment for its own misplaced hopes, took the lead in assembling an international bailout - $50 billion in immediate credit to staunch Mexico's hemorrhage and reassure the capitalist adventurers."
Well, there you go. The successful NAFTA Trade Agreement - we need a couple of more like that. Some smart billionaire financial wise guys skimmed the cream off the Mexican currency, bankrupted millions of poor, struggling Mexicans and all under the guise of putting poor Mexicans to work and nobody goes to jail. This is not criminal. It's capitalism and capital financial currency speculation. I think that it is time to put a stop to this. Just like drug dealers, these monetary speculators have to be rounded up, their fortunes confiscated, and their butts thrown in an "international" jail cell - no water boarding though.

Hobo-ing America and A Summer with Charlie are books written by Richard E. Noble, a freelance writer who has lived in Franklin County for over thirty years. Both books are now available on If you would like to stock his books in your store or business, contact him at 670-8076 or e-mail him at