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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

#71

Post by Jtsummers »

randyrand wrote: post #46

How does the "official" exchange rate work? The gov says the peso is worth way more than it really is, so can't you exploit that to get really cheap dollars? Do they only allow "one way" official exchanges, from dollars to pesos?

At present (or at the time of my last conversation about the situation with my mother-in-law), you can legally acquire 200 USD/month at the official rate. This is part of what's driving the black market rate higher. The "ideal" would be to go to a bank, get a large sum of dollars, and immediately arbitrage it at a changer in some market to double your money. At $200/month, that won't get you a lot right now.

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

#72

Post by xhrpost »

tiahura wrote: post #56
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.

Sounds like they should separate fiscal policy and monetary policy like the US, Congress/President and the Federal Reserve.

Related, I kind of wish that Congress would _not_ separate the budget from fiscal policy. Right now they vote on debt limit increases completely separate from the budget, which is bizarre to me because _they_ approved the budget! The side not in power just uses it as political leverage saying "we can't keep spending money we don't have". Well, I dunno, maybe you shouldn't have approved a budget you can't afford then? The budget and the _financing of the budget_ need to be a single bill.

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

#73

Post by FabHK »

randyrand wrote: post #46

How does the "official" exchange rate work? The gov says the peso is worth way more than it really is, so can't you exploit that to get really cheap dollars? Do they only allow "one way" official exchanges, from dollars to pesos?

Pick any two:

1. fixed (or managed) exchange rates

2. independent monetary policy

3. free flow of capital

Most countries pick 2, 3, not 1, and thus have floating exchange rates.

Countries within the Euro area, Hong Kong pick 1, 3, not 2, and thus have limited influence on monetary policy.

China, Argentina pick 1, 2, not 3, and thus impose capital controls.

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

#74

Post by RcouF1uZ4gsC »

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.

A lot of depends on if you are the reserve currency of the world.

Oil sales are in USD.

US Taxes are in USD.

US debt is in USD.

The USD is backed by the most powerful military in the world.

The US is in a much different place than Argentina or Greece.

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

#75

Post by xkcd1963 »

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.

I was given to understand that the owners of the Argentinian agriculture industry are the most corrupt part of Argentinian politics

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

#77

Post by the_af »

wbsss4412 wrote: post #67
the_af wrote: post #64

Earlier quoted context omitted.

You can infer it. The most important thing is that major operations are not done in this market, obviously . Also, bizarrely enough the location of all "cuevas" (which is what we call the physical places where the illegal market operates) are well known by the authorities and could be shut down if they so wished. So there is definitely that in favor of the "the government is corrupt" argument.

Crypto advocates on this forum frequently list Argentina as a specific use case ( ie getting around foreign currency rules/restrictions ), that would imply that the market doesn’t just happen in “Cuevas”

I admit I'm not too familiar with the (illegal) crypto thing. I wouldn't be surprised if it was run by the same cuevas. In any case, the situation I describe is historic; the cuevas have existed for decades and nobody does anything about them.

As for the size: again, major operations -- the kinds that actually "move the needle" -- are done in the legal market. I seriously doubt crypto has any impact in Argentina.

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

#78

Post by argentinian »

the_af wrote: post #57
argentinian wrote: post #42

Earlier quoted context omitted.

Prices of commodities are expressed in dollars and are global. The agricultural sector thinks in dollars, not in pesos. It's not that the dollar goes higher: the peso goes down. The illegal dollar market is not small, and its prices change similarly to the legal dolar market (mep, ccl).

The illegal dollar market is not where major operations are done, and so, it doesn't affect anything to a great degree. It's small in the sense a few big whales can manipulate it. > It's not that the dollar goes higher: the peso goes down. Well, yes . If you are from Argentina, you know what I meant. If the agricultural sector only "thinks in dollars", then why do they regularly push for a peso devaluation, talk abou…

The main actors pushing for the peso devaluation are the ones that finance deficit by printing money.

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

#79

Post by lvass »

RcouF1uZ4gsC wrote: post #74
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.

A lot of depends on if you are the reserve currency of the world. Oil sales are in USD. US Taxes are in USD. US debt is in USD. The USD is backed by the most powerful military in the world. The US is in a much different place than Argentina or Greece.

The functions don't matter much when you're talking about the few dominating currencies, but shitcoins are doubly suspicious when their contracts include a centralized_mint().

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

#80

Post by canadiantim »

FabHK wrote: post #66
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.

Look, nobody disputes that extremely bad policy can lead to hyperinflation - there are obvious cases of that. But that doesn't mean that it is impossible to manage fiat money sensibly, or do QE responsibly without subsequent inflation. It is not fine to print money at will, but it is fine to run expansive monetary policy when warranted.

It's not that it's impossible to manage fiat money sensibly. It's that the incentives are perverse such that politicians have every incentive to keep the gravy train going and little to no incentive to be disciplined about spending. The end result is a system that necessarily has a greater likelihood to evolve into an inability to manage fiat money sensibly.

So it's not about impossibilities, so much as it is about incentives and probabilities.

Note, there are definitely cases where deficit spending is warranted (e.g. recessions) and even a good investment during boom times. But when deficit-spending during good times goes towards not infrastructure but ephemeral program spending, which much of the world is currently doing, then it's easy to see why it is so difficult to manage fiat money responsibly.

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