Argentine Economic Woes Raise New Doubts About Currency Peg

You can bet that Robert Rubin is now persona non grata in Buenos Aires.

In a seismic speech Wednesday, the Treasury secretary said the U.S. and the International Monetary Fund would, by and large, stop making loans for the purpose of defending pegged exchange rates, the type of currency regime in Argentina.

Rubin remarked that exceptions would be made for countries with "institutionalized" currency arrangements. For now, this would seem to include Argentina's currency board, which has successfully pegged the peso against the dollar at a strict one-to-one parity since 1991.

But it's clear that Rubin's key point -- that it's futile to defend unsustainable currency regimes -- could apply to Argentina sooner than some think. ...