The actual situation is very different from the 2001 situation.
In 2001 we had ~10 years of 1%-2% annual inflation with the “convertibility” plan, that fix the exchange as $US1=$ARS1. So the dollar was 30% undervalued. But during that time, there was very little money emission. Some provinces had to make their own money, it was technically a bond, but it looked like a bill and was used like a bill. One of the few successful case was the Patacón ( http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) ). It was successful, because it was emitted by the biggest province, it was one of the last bonds created and it lasted only for a few years. Most of the other province bond started with a $X1=$ARS1=$US1 but after a few years the exchange rate became something like $X1=$ARS0.7=$US0.7, and the public employees of the province were paid in the bonds, as if still $X1=$ARS1=$US1.
Now we have a 20% - 30% annual inflation. Interestingly, the dollar is 30% undervalued. But the emission is so height that we used all the latin alphabet to name the series, and more emission will be translated directly to more inflation.
I wouldn't disagree with any of these points, but I'm not sure what any of them have to do with Krugman's comments about the relative merits of austerity in 2001.
In 2001 we had ~10 years of 1%-2% annual inflation with the “convertibility” plan, that fix the exchange as $US1=$ARS1. So the dollar was 30% undervalued. But during that time, there was very little money emission. Some provinces had to make their own money, it was technically a bond, but it looked like a bill and was used like a bill. One of the few successful case was the Patacón ( http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) ). It was successful, because it was emitted by the biggest province, it was one of the last bonds created and it lasted only for a few years. Most of the other province bond started with a $X1=$ARS1=$US1 but after a few years the exchange rate became something like $X1=$ARS0.7=$US0.7, and the public employees of the province were paid in the bonds, as if still $X1=$ARS1=$US1.
Now we have a 20% - 30% annual inflation. Interestingly, the dollar is 30% undervalued. But the emission is so height that we used all the latin alphabet to name the series, and more emission will be translated directly to more inflation.