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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

#81
post #66

Earlier quoted context omitted.

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 i…

Incentives don’t need to be perfect to work out.

US has had a much more stable economy post fiat money than before fiat money. https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...

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

#82
post #40

Earlier quoted context omitted.

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…

11. Due to extremely taxes and an extremely unfavorable official exchange rate, citizens hoard dollars illegally and it exacerbates their currency reserve problems. Note that 11 is really an issue of both government policy and the culture. Tax evasion is both a response to inflation and a result of a culture that doesn’t see an issue with putting private benefit over public good.

On the other hand, its antagonising to see such malfancioning of the state and keep feeding the machine with taxes

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

#83
post #43

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…

If you want to make whatever point you're trying to make here, you have to write it a lot more carefully than this. Imputing negative traits to entire nations or cultures is explicitly not OK on HN: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...

I get where you're coming from. But I wonder how familiar you are with Argentina, though.

I was born and raised in Uruguay, a smaller neighboring country that shares a lot of traits with Argentina. I'd bet a lot of people from either country will not only agree with OP's characterization, but embrace it. This kind of behavior even has a name that carries positive connotations: "viveza criolla", loosely translated as "local wit". Behaving this way is considered the smart thing to do. Not behaving this way makes you an idiot.

I hated this mentality growing up. I never felt like I fit. I've now lived in Europe for the last 12 years and it feels a lot more like home.

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

#84
post #40
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…

There is an additional ingredient which is very important in Latin America: the very rich see their countries as cash cows and are not particularly interested in changing things.

There is practically no industrial class in Argentina any more. Their main business is to export soy and meat.

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

#85
post #66

Earlier quoted context omitted.

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 i…

You are right, those are the bad incentives. And that is why there are legal and institutional and customary mechanisms in place to insulate central banks from political pressure, and by and large they seem to work well (maybe not in Argentina...)

Even Trump didn't manage to sway Powell.

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

#86

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?

There's an official exchange rate. If you are a tourist and you want to buy pesos, you have to buy at the official exchange rate.

Of course, there will be other places that will give you rates that are closer to that the actual market value is. They may be disguised as place selling collectable coins or whatever.

At some stores, they may give you a much higher rate if you buy their stuff with foreign cash. USD and BRL are generally accepted.

Then there are the 'arbolitos'. They will be the guys shouting 'cambio!' at tourist locations. YMMV with them. Some are legitimate, some may insert some counterfeit currency in the mix. Personally, I never felt comfortable following someone to an unknown location when they know I have cash in my person.

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

#87
Argentina's economy is a self-similar process: when you look at snapshots taken days apart, nothing's really changed. When you look at snapshots taken a few years apart, nothing's changed, either. On occasion, there's (ephemeral) change at intermediate timescales.

Borges, one of their most excellent writers, once said: Argentina "has all its past ahead of it".

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

#88
post #30
post #23

Earlier quoted context omitted.

As this comment illustrates, partisan propaganda in Argentina is effective at getting much of the population to blame anybody except the ruling party, who somehow believe that "widespread speculation" is something that doesn't happen in countries like the US, the UK, Taiwan, Japan, etc. The current ruling party (the one that likes to blame the agricultural sector) just signed up for some new unpayable loans from the…

Please follow HN's guidelines and be respectful. I've no particular respect for the current government, and I did mention "it's not just the government", meaning I believe part of the blame is theirs. Do you deny the agricultural sector is one of the most powerful in Argentina, and one that speculates on the dollar and has a vested interest in it going higher? Do you deny the illegal dollar market is relatively small…

Surely it is true that my own views are also influenced by partisan propaganda. :) However, I think a much stronger influence is that I understand elementary economics, have lived outside Argentina, have operated an Argentine corporation, and have traded forex futures in real markets.

Certainly it is true that the agricultural sector is one of the most powerful in Argentina and that the real estate sector trades in dollars, but most of the rest of your comment is not even wrong, reflecting fundamental misunderstandings of a flat-earth level.

The assertion that the agricultural sector in Argentina is "speculating on the dollar" is incoherent. Speculating on the dollar is an activity dominated by big international investment banks and hedge funds, which make enormous leveraged bets on whether the dollar, the yen, the euro, or other real currencies will go up or down by 0.05%. The agricultural sector in Argentina is not able to do this because of legal prohibitions, and at any rate does not have nearly enough money to engage in the activity profitably.

When people in Argentina talk about the dollar "going higher" what they mean is that the fake Monopoly money we call the Argentine peso is losing value relative to the dollar, whose own changes in value are usually a rounding error by comparison, though not this year. Argentine pesos are an irresponsible speculative investment that are guaranteed to lose value; no prudent investor would hold them.

Anybody who owes debts denominated in Argentine pesos—most notably, the government—has a vested interest in inflation, the devaluation of the peso ("the dollar going higher"). Conversely, anyone who is owed debts denominated in Argentine pesos has a vested interest in the peso appreciating, or, since that's not going to happen, in the peso losing value more slowly. However, overall, the rampant inflation of the peso is one of the factors that makes the Argentine economy unstable and unproductive, which is the bigger factor in play here.

I suspect your reasoning is something along the lines of "the agricultural sector is a big exporter, so they get paid in dollars, so if those dollars are worth AR$600 instead of AR$300 then they make more money." But that is nonsense; if a dollar is "worth" AR$600 instead of AR$300, that's because the peso has lost half its value, so that AR$600 only buys you roughly the same amount of fertilizer, Monsanto seeds, farmhand labor, silage bags, etc., that you could have bought with the AR$300 without the additional inflation. Moreover when inflation is fast enough it becomes difficult to carry out any transactions at all.

It's relevant to point out to other readers that the official dollar, the fake value the exporters of agricultural as well as other goods get paid, is AR$129.25 × AR$137.25 today. That means that for every dollar of soybeans you export legally, you get paid AR$129.25, which is "worth" US$0.41. That is, the central bank confiscates 59% of your revenues (not your profits!) in order to subsidize imports and rich people going abroad for vacations. Unfortunately, soybeans are too bulky to smuggle out of the country.

Government confiscation of 59% of export revenues in order to subsidize Chinese imports goes a long way to explaining how we have ended up in such a terrible economic situation. Argentine makers trying to compete with Chinese imports have the central bank subsidizing 57% of the price of their foreign competition; Argentine consumers only pay 43% (137.25/316). So a hypothetical Argentine product of the same quality must be 57% cheaper than the Chinese product in order to compete. Government mandates of "Industria Argentina" result in companies importing fully manufactured products in kit form from China or Korea and paying unskilled workers a minimal amount to assemble the kits.

Export-led industrialization was the key policy that replaced poverty with prosperity in Taiwan, Japan, PRC, Korea, Indonesia, Singapore, and Malaysia. The Argentine currency policy has been precisely the opposite since *spit* Menem, with brief exceptions under Kirchner and *spit* Macri. Even back to Perón we focused on import substitution rather than exports, although actively sabotaging exporters with monetary policy seems to have started with Menem.

I don't have any idea how big the illegal dollar market is, and neither do you, but it evidently possesses significant liquidity. It has a high impact in people's minds because it's a reliable source of information about what the peso is actually worth; the government has not been a reliable source of that information since Kirchner coerced INDEC into falsifying the inflation numbers, a policy that has continued under Fernández de Kirchner, Macri, and Fernández and which was followed with the "cepo" policy of fake exchange rates that have gutted the Argentine economy over the past 11 years.

Hopefully that answers all of the questions you asked adequately; please feel free to ask for clarification if you feel that any of my answers were incomplete.

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

#89
post #43

Earlier quoted context omitted.

If you want to make whatever point you're trying to make here, you have to write it a lot more carefully than this. Imputing negative traits to entire nations or cultures is explicitly not OK on HN: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...

I get where you're coming from. But I wonder how familiar you are with Argentina, though. I was born and raised in Uruguay, a smaller neighboring country that shares a lot of traits with Argentina. I'd bet a lot of people from either country will not only agree with OP's characterization, but embrace it. This kind of behavior even has a name that carries positive connotations: "viveza criolla", loosely translated as…

[deleted]

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

#90
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 US is in a much different place than Argentina or Greece.

There are many countries with stable economies and currencies despite not using the US dollar natively.

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