At the beginning of the 80s I was training with the Bank of America in its different offices in California, Chicago, New York, and London. In one of my stays in Los Angeles, I was invited to a talk that would offer the Nobel laureate, Milton Friedman, one of the men I have admired the most and, above all, the guide who shaped my ideas of liberty and economic freedom. The event took place in one of the elegant lounges of the bank that was crowded with people from early on. A crowd that included the famous actor Arnold Schwarzenegger, who years later would become governor of California. But my big surprise was the arrival of Ronald Reagan who a year later would be president of the United States.
The theme of the conference was the critical situation that the world banking system was going through, listing motives from the misbehavior of the world economy, the novel currency flotation system, the absence of political leaders with real ideas of what economic development is etc. At a certain point of his talk, this wise man made the venue vibrate when he said: "This situation is so serious that the main banks of the world have lent more of their capital and reserves to countries that can be considered bankrupt." Before a gloomy murmur of the assistants, Milton Friedman makes a long pause that is taken advantage of by someone who, breaking the protocol, almost screaming a question. "Countries in bankruptcy How, where?" The professor with a firm and slow voice answers: "There are many, but here close to us we have two examples; Brazil and Mexico. "
The gloomy murmur emerges again. The president of the bank, Tom Claussen, trying to lower the temperature, throws a question thinking the economist would elaborate an answer to return the calm. "But Dr, what do you mean by qualifying these two countries in bankruptcy?" The economist with that same firmness answers. "The two countries have a debt higher than their GDP, without adding the liabilities with funds such as the IMSS, pensions of government employees that have already been arranged, etc. Both are victims of galloping inflation. Their currencies have been artificially sustained and will soon experience aggressive devaluations. Both suffer from indescribable corruption. In the case of Mexico, its presumed growth has been supported only by oil prices, and that will not last. Both have fiscal deficits that they can no longer bear."
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