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Argentina’s black-market USD rate climbs 24% in two weeks

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Re: Argentina’s black-market USD rate climbs 24% in two weeks

#31

Post by mgh2 »

ab8 wrote: post #28
likortera wrote: post #22

Earlier quoted context omitted.

I lived for 20 years there. In my opinion the root of all problems there is that it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way. People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can a…

How is this related to currency?

Exchange rates are indirect measures of the country's production vs. others. ex: 1 usd is worth more because its population has a higher output (GDP) relative to Argentina

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#32

Post by masijo »

missedthecue wrote: post #8
droopyEyelids wrote: post #5

Earlier quoted context omitted.

way off course on my comment here, oops!

Hmmm. Argentina and the US have no beef. Not even historically. The US didn't even officially take the UK's side during the Falklands War. And that's despite the fact that the US/UK alliance is probably the strongest one.

Well they did finance and train several members of the dictatorship's Junta[1]. Same as in other countries in the region.

[1] https://en.m.wikipedia.org/wiki/Operation_Condor

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#33

Post by SllX »

likortera wrote: post #22
azinman2 wrote: post #2

Why does Argentina always have such a volatile currency?

I lived for 20 years there. In my opinion the root of all problems there is that it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way. People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can a…

I can’t comment on Argentina specifically but something I find people often forget is that government is downstream from culture. It doesn’t matter what your structure of government is or the text of your laws are if the culture they sit within is corrupt and/or decadent.

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#34

Post by mgh2 »

SllX wrote: post #33
likortera wrote: post #22

Earlier quoted context omitted.

I lived for 20 years there. In my opinion the root of all problems there is that it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way. People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can a…

I can’t comment on Argentina specifically but something I find people often forget is that government is downstream from culture. It doesn’t matter what your structure of government is or the text of your laws are if the culture they sit within is corrupt and/or decadent.

Yes, culture matters: https://trendguardian.medium.com/in-data-we-trust-2978dacc8c...

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#35

Post by likortera »

ab8 wrote: post #28
likortera wrote: post #22

Earlier quoted context omitted.

I lived for 20 years there. In my opinion the root of all problems there is that it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way. People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can a…

How is this related to currency?

I'm not an economist. But I'm pretty sure a culture of stealing each other and not paying taxes is somehow related.

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#36

Post by likortera »

SllX wrote: post #33
likortera wrote: post #22

Earlier quoted context omitted.

I lived for 20 years there. In my opinion the root of all problems there is that it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way. People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can a…

I can’t comment on Argentina specifically but something I find people often forget is that government is downstream from culture. It doesn’t matter what your structure of government is or the text of your laws are if the culture they sit within is corrupt and/or decadent.

Exactly. This is what I wanted to explain. You did it better. Thanks.

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#37

Post by the_af »

mixedCase wrote: post #29
the_af wrote: post #11

Earlier quoted context omitted.

It's not just the government. There's a broader problem, including unpayable loans from the IMF, lack of dollars leading to restrictions, some things are traded in dollars since our last dictatorship (e.g. real estate) and this is difficult to change, and widespread speculation of our agricultural sector (one of the most powerful groups in Argentina). Also: the black market of dollars is relatively small and also eas…

But it is , just the government. They refuse to cut down on deficit spending, keep a hopelessly intractable tax system, and they keep the money printer running non-stop to keep up. It doesn't help that they keep one of the most unenviable levels of corruption, either. And it's not limited to the current government, their previous one was woefully incompetent at fixing deficit spending. But it can't also be denied tha…

> But it is, just the government.

I really don't think it is just the government, nor is it the lack of cutting down deficit spending, nor the tax system. I try to take a more historically grounded view. I don't think there are easy answers though.

I believe the view that "there's the government, and there's this bunch of innocent businessmen at the mercy of big bad government" is not very compelling, for various reasons. One is that democratic governments in Argentina are pretty weak, all things considered; they aren't all-powerful, they usually have an opposition running interference at every step, US-style. Another is that when some businessmen had their chance to run their own government (you mentioned one recent occasion, the dictatorship was another) they still screwed up.

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#38

Post by ajot »

azinman2 wrote: post #2

Why does Argentina always have such a volatile currency?

The current administration (as many others before, mostly of the same party, Justicialism, but also of the other main party, UCR, and de-facto governments) doesn't allow for a floating exchange rate [0]. Nowadays, the ARS follows a (very slow) crawling peg devaluation against the USD, buuuut if you want to buy dollars (or want to pay some product or service abroad, think Aliexpress but also App Store, Netflix, AWS, etc.) you have to pay a tax, and can't buy more than 200 per month per person. Then you have dollars that you can acquire via a broker, buying and selling bonds or shares; these are more expensive than the official+tax rate. And then yoy have the black-market, which tends to be the highest priced.

Argentina also has a chronic problem with inflation (in my opinion, due to printing more money than required by the economy, most times to solve the fiscal deficit you obtain when the national state spends too much), so everyone knows that you have to save money in a hard currency, USD being the most common one. So it has a real big demand for savings and capitalization, e.g. real estate is priced in dollars.

As why argentinians keep voting parties that keep the dollar artificially cheap, I believe it's a mix between a survivorship behaviour (if USD goes up, prices of goods and services will more or less go up) and wanting to consume more than what one can afford (holidays in Brazil, trips to Europe or USA every other year, cheap electricity and natural gas so you can leave your air conditioner on all day, etc).

Disclaimer: I am not an economist, and as everyone else, I have a biased point of view.

[0] This newspaper article has a (badly cropped) chart of the difference between black-market and official dollar exchange rate through the years. https://www.infobae.com/economia/2020/08/22/la-historia-de-l...

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#39

Post by RC_ITR »

rmbyrro wrote: post #19

For those on the "it's-fine-to-print-money-at-will" bandwagon, please meditate on at least this part: > “everything starts with a large fiscal imbalance, which becomes a monetary imbalance due to printing [money] to finance the deficit.” Says the chief economist of the Agricultural Foundation for the Development of Argentina. A.k.a. someone in one of the best places in the world today to really know this stuff.

Sure, this random guy who works at a foundation who’s mission is “to explain to Argentinians that deficits are bad” [0] is the most qualified person to talk about global monetary policy.

[0] https://www.google.com/amp/s/www.infocampo.com.ar/gustavo-vi...

Carlos Schilling, el ex presidente de FADA, señaló que “es común que hoy en día nos preguntemos ¿qué estamos haciendo para mejorar nuestropaís? Desde FADA hacemos, y hacemos mucho: trabajamos para que todos entendamos que producir más es bueno para todos, que si el país está en déficit es malo, que si exportamos más nos ayuda a todos.

Re: Argentina’s black-market USD rate climbs 24% in two weeks

#40

Post by mastax »

azinman2 wrote: post #2

Why does Argentina always have such a volatile currency?

I'm no expert, but my understanding is that:

1. Low value of exports leads to a trade imbalance and long term decline in foreign currency reserves.

2. The government prints money to spend not on productive investments to solve 1. but on vanity projects or more-or-less bribes for their constituents to stay elected, leading to inflation.

3. Many historical periods of high ARS inflation leads to a lack of confidence in the local currency debt market.

4. 1+3 mean that Argentina needs to borrow in foreign currency, mostly USD.

5. Over time the debt accumulates and even more borrowing is necessary to pay interest.

6. Recently, rising US interest rates lead to a stronger USD, exacerbating the problem.

7. As debt rises so does the default risk and investors won't lend except at higher interest rates to compensate.

8. Eventually the country risks a default. Nobody wants that because the country wouldn't be able to import anything due to a lack of foreign currency (see Sri Lanka) and the creditors don't want that because they won't get paid back. So the IMF offers a bailout on the condition that the country will implement reforms to reduce spending so that it won't need to be bailed out again - austerity.

9. Austerity is unpopular and the government is replaced with one who promises to raise spending again and stick it to the IMF.

10. GOTO 1

This probably describes most countries in the world.

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