Argentina must repudiate its debt

[Murray Rothbard]

Argentina must repudiate its debt | Mises Institute

Inflation from the government and the banking system is usually aided unconsciously by the people, who generally believe that some moderate periodic rise in

mises.org

After an initial devaluation, and although the Milei administration never stopped printing pesos, monthly price inflation numbers indicate a constant drop since Milei took office. The government has generated more debt to avoid printing, for example, by issuing Treasury Bills reimbursable during the year. And the central bank has stopped financing the Treasury and has dedicated itself, among other things, to increasing its dollar reserves....

And yet, neither a long cessation of peso printing that could turn off the tap and decelerate the inflationary expectations, nor an end to monetary inflation, will stabilize the peso until Argentinians choose pesos as voluntary as they choose dollars without any government policy forcing its use.

 

[LuckyLuke]

I've often read that inflation is a monetary event and hyperinflation is a socio-political event. The IMF is still waiting for the central bank to pay real positive interest on it's benchmark rate and not a constant lag of inflation. That would probably help shore up confidence instead of running the masses from one alternative investment (dollars) to the other (plazo fijo).

Prohibition increases perceived value and I've wondered if removing the cepo, while in the short term, would flood the peso market with dollar movements, would actually decrease it's perceived value by removing that prohibition premium.

 

[Redpossum]

I've often read that inflation is a monetary event and hyperinflation is a socio-political event. The IMF is still waiting for the central bank to pay real positive interest on it's benchmark rate and not a constant lag of inflation. That would probably help shore up confidence instead of running the masses from one alternative investment (dollars) to the other (plazo fijo).

Prohibition increases perceived value and I've wondered if removing the cepo, while in the short term, would flood the peso market with dollar movements, would actually decrease it's perceived value by removing that prohibition premium.

Then why did they allow Milei to borrow another 9 billion USD?

This was the first part of it, back in January

IMF to release $4.7bn to Argentina as Javier Milei pursues austerity

Fund says libertarian president is ‘fully determined’ to bring programme back on track

www.ft.com

Grrr, paywall. I searched on Duck Duck Go and was able to go directly to it

 

[Lisandra]

Then why did they allow Milei to borrow another 9 billion USD?

This was the first part of it, back in January

IMF to release $4.7bn to Argentina as Javier Milei pursues austerity

Fund says libertarian president is ‘fully determined’ to bring programme back on track

www.ft.com

Grrr, paywall. I searched on Duck Duck Go and was able to go directly to it

A simple concept called operating expenses.

Print or borrow, what would you do to fight inflation?

 

[antipodean]

Prohibition increases perceived value and I've wondered if removing the cepo, while in the short term, would flood the peso market with dollar movements, would actually decrease it's perceived value by removing that prohibition premium.

History will likely just repeat. The last time there was no CEPO (for a few very short years prior to 2019) the Blue (informal) dollar was actually worth slightly less than the official dollar - in practice only used as an option for those that had dirty money or tourists that wanted to avoid hefty ATM transaction fees.

 

[LuckyLuke]

Then why did they allow Milei to borrow another 9 billion USD?

This was the first part of it, back in January

IMF to release $4.7bn to Argentina as Javier Milei pursues austerity

Fund says libertarian president is ‘fully determined’ to bring programme back on track

www.ft.com

Grrr, paywall. I searched on Duck Duck Go and was able to go directly to it

It's my understanding that IMF loans right now are not new loans to add to the existing outstanding debt.
This is explained in the article here:



They are just extending existing scheduled loan repayments to avoid Milei from having to take punitive bridge loans at unfavorable terms or form alternate alliances. Something that could push Argentina's geopolitical position away from the US.

This is just can-kicking to see if Milei can accomplish fiscal stabilization and positive foreign reserve growth without thrusting the economy into depression. Something they talk about here:

 

[MilHojas]

Argentina must repudiate its debt | Mises Institute

Inflation from the government and the banking system is usually aided unconsciously by the people, who generally believe that some moderate periodic rise in

mises.org

Author: Oscar Grau is a musician and piano teacher, working in the family business.

So, the government should either default on the public debt or pay it off.

It's always nice to read a well qualified, insightful economic opinion.

 

[Bajo_cero2]

Nestor K already did it.

 

[SinPulgas]

Nestor K already did it.

No he didn't.

 

[Quilombo]

It's really fun watching the libertarians fall over themselves defending Milei doing Alberto's 2nd admin in many policies.

We're 7 months in and very little has changed:

• Cepo: intact
• Salaries: pulverized
• Inflation: still amongst the highest in the world
• Interest rates: negative
• GDP: crashing
• Dollar: "ironed"
• Reserves: flat
• BCRA: open

I feel like I'm watching a mile long train begin to derail yet the people in the caboose are chanting full steam ahead because they've yet to feel anything yet. Argentina is not just expensive in dollars for people that live here, it's also expensive in dollars for exports. Last week a bunch of emerging markets devalued their currencies, including Brazil, to keep competitive with the dollar, while the peso remains artificially overvalued via a managed devaluation of 2% a month. If you're buying soybeans, and Argentina and Brazil both sell them, and one of them made them cheaper, where are you going to buy them from?

Milei and Caputo can throw as many hissy fits a la Cristina about how "There's no real reason for inflation/value of the dollar being x/etc." but the reason is the market, businesses and people, don't trust a single word coming out of their mouthes. Inflation is going to be between 4% and 5% this month, still awful, and they're going to celebrate it like an olympic gold. What happens when it stays this way and never dips lower? Many economists are predicting we're near the floor, which means they blew up the economy for what, Cristina's worst year of inflation? Not really worth celebrating or worthy of a Nobel Prize if you ask me...