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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

#171

Post by kragen »

Retric wrote: post #170
kragen wrote: post #162

Earlier quoted context omitted.

This is a specious (ha!) argument because the total amount of effort required to safeguard precious metals is so small, because the metals themselves are so small. Gold currently costs US$55.92 per gram. Gross world product is US$80 trillion per year over 7.9 billion people; this works out to US$10.1k per person per year, or US$770k per person per 76-year lifetime. The lifetime earnings of an average person are thus…

First you can most of the benefits of gold as a currency by just buying gold and then selling it in 40 years. At a personal level a gold backed currency doesn’t change much. Anyway, if gold was actually the words medium of exchange it’s value would be vastly higher. A reasonable estimate is the value of the worlds gold would equal the value of the words current money. As it’s a nice round number the US’s 20 Trillion…

I suppose that, if you're right that a hypothetical return to the gold standard would greatly increase the value of gold, that would greatly diminish the amount of gold you need to safeguard.

There's nothing in the use of commodity money rather than fiat money that prevents fractional-reserve banking, though you seem to be suggesting that there is, since you're doing the computation based on M1 (though I think you may be using the number for M2). The St. Louis Fed estimates the velocity of M1 and M2 at 1.122, which I guess is transactions per year: https://fred.stlouisfed.org/series/M2V so I think you're probably right that gold would be about 5 or 10 times as expensive without fractional-reserve banking.

So instead of 700 grams of gold your lifetime earnings would be 70 grams.

If 5% instead of 0.5% of the cost of electronics was gold, I don't think you'd be able to tell the difference. Maybe that boosts the economic impact of this return to the gold standard to the same as spelling both "through" as "thru" and "thorough" as "thoro".

Your implied prohibition on fractional-reserve banking would, by contrast, have an enormous economic impact.

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

#172

Post by TMWNN »

kragen wrote: post #151
TMWNN wrote: post #98

Earlier quoted context omitted.

Let me supplement the other replies to your question. The unofficial rate that outworlder mentioned is the dólar azul (blue dollar). As FabHK and jtsummers said, Argentina imposes capital controls, so you can't buy too many US dollars at the (artificially strong) official rate. The capital controls mean that an Argentinean that buys something from or while abroad must purchase US dollars at the blue dollar rate. Blue…

It's not the dólar azul , it's the dólar blue . Also, people who travel abroad are allowed to purchase some more dollars at the official rate. Otherwise your comment is correct.

Thank you for the correction. How much more US dollars are travelers allowed to purchase?

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

#173

Post by kragen »

Retric wrote: post #169
kragen wrote: post #159

Earlier quoted context omitted.

Surely we can all agree that fiat currencies are often less volatile than commodity currencies but have higher average (signed!) inflation, but looking at the development of the US economy during the 01776–01932 period we're talking about, I wonder what you are thinking of when you say "does horrific things to the economy ... would [be] insanely destructive". You may or may not be aware that during that time period t…

It’s hard to compare economies over such timescales, but in terms of PPP per capita the US was shockingly flat from 1776 to 1900. The overall GDP exploded due to a larger population and industrialization was in full swing, but people where also forced to farm more marginal land in the mid west largely using the same techniques from 130 years prior. The US started with extreme abundance of old growth forests, wild ani…

> in terms of PPP per capita the US was shockingly flat from 1776 to 1900.

What leaves you to believe that? And why do you want to move the dividing line to 01900 instead of 01933, when the US went off the gold standard?

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

#174

Post by kragen »

TMWNN wrote: post #172
kragen wrote: post #151

Earlier quoted context omitted.

It's not the dólar azul , it's the dólar blue . Also, people who travel abroad are allowed to purchase some more dollars at the official rate. Otherwise your comment is correct.

Thank you for the correction. How much more US dollars are travelers allowed to purchase?

Looks like I was wrong: the "dólar turista" is 75% higher than the "dólar oficial" that you get paid if you export something, AR$226/US$ rather than AR$130/US$ (but still much lower than the AR$321 of the black market). I haven't been able to figure out what the limit is or who is allowed to buy it. Maybe you can: https://www.cronista.com/finanzas-mercados/dolar-turista-asi...

Confusing the issue is that the same "dólar turista" term is also being used to describe a new exemption from the foreign exchange restrictions that allows banks to purchase dollars from non-Argentine tourists visiting Argentina at the "dólar MEP" rate, which is actually currently higher than the black-market rate, at AR$323. Up to US$5000 per tourist per month.

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

#175

Post by kragen »

kragen wrote: post #173
Retric wrote: post #169

Earlier quoted context omitted.

It’s hard to compare economies over such timescales, but in terms of PPP per capita the US was shockingly flat from 1776 to 1900. The overall GDP exploded due to a larger population and industrialization was in full swing, but people where also forced to farm more marginal land in the mid west largely using the same techniques from 130 years prior. The US started with extreme abundance of old growth forests, wild ani…

> in terms of PPP per capita the US was shockingly flat from 1776 to 1900. What leaves you to believe that? And why do you want to move the dividing line to 01900 instead of 01933, when the US went off the gold standard?

*leads

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

#176

Post by TMWNN »

kragen wrote: post #174
TMWNN wrote: post #172

Earlier quoted context omitted.

Thank you for the correction. How much more US dollars are travelers allowed to purchase?

Looks like I was wrong: the "dólar turista" is 75% higher than the "dólar oficial" that you get paid if you export something, AR$226/US$ rather than AR$130/US$ (but still much lower than the AR$321 of the black market). I haven't been able to figure out what the limit is or who is allowed to buy it. Maybe you can: https://www.cronista.com/finanzas-mercados/dolar-turista-asi... Confusing the issue is that the same "dó…

Doesn't the dólar MEP being higher than the dólar blue imply that Argentina has a severe US dollar shortage, severe enough to authorize Argentinean banks to pay pretty much whatever tourists bringing them to the country demand in exchange?

Also, as a non-Argentinean, I have to confess that I hadn't considered the impact of an artificially strong dólar oficial on the country's exports. Surely beef and other Argentinean exports aren't priced at the official exchange rate on world markets? But I don't see how they couldn't be, either.

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

#177

Post by mmustapic »

kragen wrote: post #88
the_af wrote: post #30

Earlier quoted context omitted.

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 d…

How can you say that the agricultural sector in Argentina speculating on the dollar is incoherent?

For starters, if the dollar goes up, the inflation doesn't necessarily follow. Otherwise that means that the salaries (among other things) follow the dollar, and that's not true at all.

Second, this whole week there were talks about a special exchange rate for the sector to tempt them to export more, because the government needs more dollars for energy imports. So by just waiting they get a better deal, that's clearly speculation.

You can argue if this is right or wrong, if it's good or bad for the economy or the people, but speculation it is.

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

#178

Post by xkcd1963 »

fomine3 wrote: post #165
plantain wrote: post #52

Earlier quoted context omitted.

My SaaS product has problems with users sharing accounts - more than half the problematic users are Argentinians :( Inevitably I will simply have to withdraw from the market there...

Do you offer different price by country, like Netflix? If so, possibly worldwide abusers just impersonate as Argentinian and share the account.

Man, I feel like being robbed when companies offer cheaper prices for other countries.

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

#179

Post by FabHK »

kragen wrote: post #164
FabHK wrote: post #148

Earlier quoted context omitted.

Inflation over half a lifetime is not really relevant. For investors, large savings should be in productive assets (debt or equity), and real rates (on bonds) or real returns (on shares) have been positive. For non-investors, real wages are much more important. But even including the high inflation in the 1970s and early 1980s (which Paul Volcker famously vanquished), that period from 1970 to 2020 averages less than…

See https://news.ycombinator.com/item?id=32258546 for why 4% inflation over decades is relevant to average people. Dollar inflation over the past year has been I think 9%, higher than at any time since Volcker supposedly vanquished it. It's anybody's guess whether the vanquished inflation will be 0% or 15% over the next year.

Next year will be closer to 0% than 15%, I wager. Let's see.

You say inflation is important when:

* you get a 30-year mortgage on a house. - true, but more inflation is better for you then.

* sign a 99-year lease. - true, but more inflation is better for you then.

* save money for retirement 45 years in the future. - that should not be in money, so the level of inflation is not relevant, real returns are (the difference between nominal returns and inflation).

* buy a life insurance policy that probably won't pay off for 50 years. - yes indeed. Some of them offer inflation protection.

* rent an apartment to someone under rent-control laws that can hold the rent fixed until they die. - yes indeed, good point. Also if you write a mortgage. That does not affect most average consumers, though.

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

#180

Post by Retric »

kragen wrote: post #171
Retric wrote: post #170

Earlier quoted context omitted.

First you can most of the benefits of gold as a currency by just buying gold and then selling it in 40 years. At a personal level a gold backed currency doesn’t change much. Anyway, if gold was actually the words medium of exchange it’s value would be vastly higher. A reasonable estimate is the value of the worlds gold would equal the value of the words current money. As it’s a nice round number the US’s 20 Trillion…

I suppose that, if you're right that a hypothetical return to the gold standard would greatly increase the value of gold, that would greatly diminish the amount of gold you need to safeguard. There's nothing in the use of commodity money rather than fiat money that prevents fractional-reserve banking, though you seem to be suggesting that there is, since you're doing the computation based on M1 (though I think you ma…

The most destructive bit was the pointless push to mine more gold. The physical volume of gold has very little to do with how expensive it is to keep safe.

Anyway, I thought M1 excluded fractional reserve money which is why it ignores money in bank vaults. Aka as you pay down a loan the M1 money supply is unchanged. Do you have a source for that?

M1 is listed at 20T here: https://fred.stlouisfed.org/series/M1SL

PS: Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

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