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

>The physical volume of gold has very little to do with how expensive it is to keep safe.

I'm having my doubts about that. If I can fit all my life's savings in my pocket, I would very much prefer to do that with savings in one pocket and gat in the other (yes I know gold doesn't fit that for everyone, but lets imagine the physical volume is smaller since you said it doesn't matter). Fight to the death against violent intrusion upon your person. That doesn't incur me any material cost. If I die I won't be needing it anyway. would 100000% prefer that to sitting in the bank where some bonehead at a three letter agency can freeze or seize it at will, maybe the help of a rubber stamping judge. Or worse yet some unelected governors at the fed just choose to inflate it away.

I guess there is some argument to be made it's cheaper to keep something safe if it is either very small or very large. Small enough and you can more effectively hide it or keep it on your person. Large enough and someone will need a semi, a few men, and a big forklift or crane to steal it. Houses come to mind as something worth a lot but unpractical to steal in the conventional sense of just taking off with it.

I can't imagine the amount of costs lost in places like Argentina by people trying to find a way to keep their fiat held in a safe way.

I do! I think inflation is usually a real economy problem that has a bad quote about being a monetary phenomenon associated with it (which has confused a generation of lay people).

The implication of the economist doesn’t even really make sense - both Argentinas trade and budget deficits aren’t that big vs. the rest of the world, but their inflation and level of government intervention into the real economy sure is.

In general, my philosophy on economics is to notice what’s different about a country than just accepting the “easy” answer; a <10% of GDP deficit doesn’t phase me (Major trading partner Brazil is similar in both ways), but a government willing to renationalize a company it sold on the open market sure does!

Yes, but also it means they don't want the tourists to feed the "blue" markets.

Yes, Argentine exports (mostly direct farm products like soy and corn now rather than beef) are made artificially more expensive by the perverse dollar policy. Also, on top of the 59% haircut from the fraudulent exchange rate, there's a 33% "retención" applied to agricultural products, so the farmers only get 21% of the international price of the exported grain. The fraudulent exchange rate also subsidizes (legal) imports, making it impossible for most Argentine industry to compete even in the domestic market with overseas imports.

We're talking about exporters' reluctance to engage in transactions where they reduce a long position in the dollar in order to take a long position in the peso. The peso is an unstable speculative asset with extremely poor prospects of producing a return even in the short term. The dollar is, by contrast, a relatively stable currency, though much less so this year than for the previous 35 years, and though it, too, faces a continuous decline in its value.

Holding pesos is speculative. It's not just speculation — it's speculation done badly and irresponsibly, like buying a lottery ticket, because the peso's prospects for increasing in value are quite poor indeed. Holding dollars is, by comparison, not speculative at all.

We are facing a piece of absurd doublespeak in which "speculation" is being used to mean "refusing to foolishly invest in an unstable commodity", namely, the peso.

Speculation in dollars is not impossible. You need servers in London, New York, or Tokyo that respond to second-by-second price changes, and you need access to forex markets with very, very tight spreads — otherwise the spread will give all of your potential speculative profits to market makers, because forex price movements in real currencies are fractions of a tenth of a percent most days.

This is not what the agriculture sector in Argentina is doing.

(Let's leave aside for the moment that this is also a transaction in which the central bank confiscates 59% of the value of the currency being traded in order to subsidize vacations abroad for the rich, and to subsidize imports so that they are impossible for Argentine domestic industry to compete with.)

— ⁂ —

Salaries and other prices do follow the dollar relatively closely, though there is both volatility and a secular decline in Argentina's productivity over time. The current salario mínimo is $45540 per month, which was US$210 earlier this month, though now it's US$150. (Presumably that will change in the next month or two.) When I moved to Argentina in 02006 it was $800, equal to about US$260. See https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A....

The minimum wage did not track the dollar perfectly; US$210 differs from US$260 by 24% (or 19% calculated the other way round — a 1.3% decline per year), but $800 would now be worth US$2.61, or US$3.70 earlier this month, and US$210 differs from US$3.70 by 5600%. 24% is a significant tracking error but it's insignificant compared to 5600%.

This calculation understates the decline of the salario mínimo in real terms, because the dollar has experienced a total of 47% inflation since 02006, according to the US BLS CPI. US$1 in 02006 is US$1.47 today; 1.47 · US$260 · AR$216/US$ gives AR$82600 as the equivalent salario mínimo at the blue dollar rate earlier this month, and using today's mid-market blue dollar rate of AR$306/US$ it would be AR$117000. Over 16 years that's a 5.7% decline per year in the buying power of the salario mínimo, though obviously that's a very noisy estimate.

I would welcome other salary data. For example, how has the median Argentine salary changed over this time? How about the mean salary, which is essentially the per capita GDP?

You're right about the amount of M1; it's US$20T in the US. Thank you.

In fractional reserve banking demand deposits are lent out. So if you print $1000 cash (whether fiat or commodity-backed), you deposit it in a bank, the bank lends out $800, someone deposits that in their bank, that bank lends out $640, and someone else deposits that in their bank, then M1 is not $1000 but $2440. If that last person withdraws the $640 from their bank and repays the loan then M1 contracts to $1800. (And that's still true if they held the $640 as currency in their mattress rather than putting it in a bank.)

So, paying down a loan does not leave M1 unchanged. You're thinking of MB or maybe M0.

Gold mining is, due to its scale, not especially destructive; the amount of gold in circulation is about 60–100 years' worth of mining at current rates. There are many environmental and human-rights problems associated with gold mines, but their total magnitude is small just because there's not that much gold out there to mine.

The physical volume of gold has a great deal to do with how expensive it is to keep safe. So does its mass. In your earlier comment, you were talking about the effort required to dig vaults, for example; this effort scales directly with the volume of the gold.