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Argentina voted no on the Argentinian peso. USD could become its new currency

nytimes.com

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Re: Argentina voted no on the Argentinian peso. USD could become its new currency

#31

Post by TMWNN »

reacharavindh wrote: post #23
TMWNN wrote: post #17

Earlier quoted context omitted.

>But, without the ability to control the value of their own currency, how would it work for the government to manage their domestic affairs? The idea is that the stability the economy gains by using the US dollar, and the in ability of the Argentine government to cause inflation by putting the currency printer on overdrive, benefit the country more than the loss of self-control from no longer having its own currency.…

Interesting. Other than the lack of control(which in some cases may be argued as a good thing), are there any downsides to adopting the USD as national currency?

If (a big if) one accepts said lack of control as a given then, no, for a historically chronically mismanaged country like Argentina, there are no downsides.

The situation is different for every country. The Eurozone includes many Western European countries with historically better records of monetary and fiscal discipline than Argentina, that have nonetheless decided that the benefits of using the same currency as its neighbors outweigh the loss of self-control. History will decide whether this view is correct; there certainly is no shortage of economists that argue that the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea. The UK never was a member of the Eurozone before Brexit, and no Scandinavian EU member is, either, all actively or passively remaining outside (not including non-EU member Norway). Conversely, the Bank of Canada has several times studied Canada adopting the US dollar.

Re: Argentina voted no on the Argentinian peso. USD could become its new currency

#32

Post by piva00 »

katamarimambo wrote: post #30

In the 90's both Brazil and Argentina pegged their currencies to the Dollar in some way to control inflation. In Argentina the peg was an 1 to 1 conversion. In Brazil, the Central Bank would define a band in which the Dollar would float and the band would be periodically changed like the interest rates. But the main difference was that in Brazil it was just a Government policy that could be removed in a whim, while i…

Brazil depegged quite quickly given the economical environment. I lived in Brazil at the time, in 1994 the Real was introduced as another set of monetary measures to control hyperinflation and from what I remember even gained value against the dollar, then up to 1998 it was tightly controlled by the Bacen and in 1999 it was already a floating rate.

It might not have been the absolute best approach in hindsight (or even at the time, I don't recall the discussions, I was also in my teens) but at least the Real did end up controling the spiraling hyperinflation of the late 80s-early 90s.

My memories from that time are pretty bleak, grocers would have people working the whole day at stores remarking prices on the shelves (once in the morning, once in the afternoon and sometimes in the evening), my family would go all together on payday to grocery stores and fill up carts and carts with everything we needed for the month because money would be less valuable in a few hours... It was quite fucked up.

Re: Argentina voted no on the Argentinian peso. USD could become its new currency

#33

Post by flr001 »

Sorry for the title. USD "could" become the new currency (not "will"). I got carried on by the excitement. We have been suffering the ARG peso for too long. I must say that the probability of Milei wining the elections are very high and most people agree that it would be surprising if he does not win the election after seeing the numbers he got in the PASO elections.

Re: Argentina voted no on the Argentinian peso. USD could become its new currency

#34

Post by katamarimambo »

piva00 wrote: post #32
katamarimambo wrote: post #30

In the 90's both Brazil and Argentina pegged their currencies to the Dollar in some way to control inflation. In Argentina the peg was an 1 to 1 conversion. In Brazil, the Central Bank would define a band in which the Dollar would float and the band would be periodically changed like the interest rates. But the main difference was that in Brazil it was just a Government policy that could be removed in a whim, while i…

Brazil depegged quite quickly given the economical environment. I lived in Brazil at the time, in 1994 the Real was introduced as another set of monetary measures to control hyperinflation and from what I remember even gained value against the dollar, then up to 1998 it was tightly controlled by the Bacen and in 1999 it was already a floating rate. It might not have been the absolute best approach in hindsight (or ev…

Real never really gained value this way, the government defined the value of the bands. It floated up and down inside the bands, but the government was acting behind the scenes to keep the bands (essentialy a peg), mostly burning reserves, selling companies and cutting programs. It helped controlling inflation and was a good approach even in hindsight, the duration of the measure is the problem. In 1997 it was clear to everyone that the peg was not sustainable and should be removed, but the government postergated until past the (re)-elections. But that's Brazil, and then there's Argentina...

Re: Argentina voted no on the Argentinian peso. USD could become its new currency

#36

Post by yorwba »

TMWNN wrote: post #31
reacharavindh wrote: post #23

Earlier quoted context omitted.

Interesting. Other than the lack of control(which in some cases may be argued as a good thing), are there any downsides to adopting the USD as national currency?

If (a big if) one accepts said lack of control as a given then, no, for a historically chronically mismanaged country like Argentina, there are no downsides. The situation is different for every country. The Eurozone includes many Western European countries with historically better records of monetary and fiscal discipline than Argentina, that have nonetheless decided that the benefits of using the same currency as i…

> the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea

Which is why countries in the Eurozone issue their own government bonds, each at a different interest rate. https://www.ecb.europa.eu/stats/financial_markets_and_intere...

The currency a country uses and the interest it pays are two different things. You could also imagine a group of countries with separate currencies agreeing to take on debt at the same interest rate, with differences in perceived risk resulting in corresponding exchange rate drift.

Re: Argentina voted no on the Argentinian peso. USD could become its new currency

#40

Post by dysoco »

hashtag-til wrote: post #24

Can somebody from Argentina here, provide some point of view?

First, the title is very misleading. A candidate which proposes dollarization has won, unexpectedly, the primary elections (not even the main elections yet). He will have to win again in October and the numbers are very close between the 3 main parties, however it is for sure a possibility that he (Milei) wins.

Even if he wins, he doesn't have a lot of support from the senate or congress to pass laws since he's a more "independent" candidate separate from the two main parties, he also has no governors on his side. So, it will be very difficult for him to actually accomplish anything, let alone something so significant.

Even if he can, I believe he actually said it's a 35-year plan to sort of bring Argentina back into tracks, so he might not even actually dollarize.

Now, on a more general note, his win was very unexpected, he was sort of regarded as a joke not too long ago but apparently amassed a good number of followers, some of which are libertarian but most I believe are just fed up with inflation and insecurity.

Personally, I believe he is really not fit for presidency, moreover, he claims to be "libertarian" however he's very conservative on social issues, already claimed he's going to hold a plebiscite to prohibit abortions, he's against sex education in schools because he claims it's "perverse", he's a climate change denier and his vice-president is a denier of the 70s Argentinian dictatorship as well. I believe him to be a potentially dangerous candidate were him to reach power. I know many people in HN will disagree because most Argentinians in this website sympathize with him.

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