Argentines Keep Cash Under Mattresses As Milei Pushes Bank Accounts

[MilHojas]

Argentines Keep Cash Under Mattresses Even as Milei Pushes Bank Accounts

Archived version

 

[JMHarris]

I wonder why Milei would be struggling to convince people to put their cash under their mattresses in bank accounts? I can't for the life of me figure this one out. (All of this said with irony).

 

[Dim Witty]

Argentines Keep Cash Under Mattresses Even as Milei Pushes Bank Accounts

Archived version

Yes, visions of 2001 when there was not enough cash in the system to cover bank deposits.

 

[LuckyLuke]

The whole article is based on "Officials estimates". You have to laugh a bit about an article that questions where the oodles of savings are being hoarded during an obvious collapse in consumption, rising unemployment and bankruptcies. Perhaps "official estimates" are wrong. If people really were still accumulating physical dollars in droves, how come this hasn't shown up in a rising blue value?

 

[Ries]

why would a physical presence of paper money affect foreign exchange rates?
The amount of US paper dollars outside of the USA is enormous- its estimated to be around $1 Trillion dollars.
The vast majority of it is being held to avoid taxes, or for illegal and untraceable transactions in drugs, weapons, and people.
Daily For-Ex trading of virtual dollars is around $8 Trillion. A DAY!
That 8 trillion affects exchange rates far more than the measly 250 billion that is under mattresses in Argentina.
I know a lot of Argentines who keep US cash, the amount varies depending on their wealth.
They dont trust banks, they dont trust the future, they have seen the peso drop in value their entire lives, whether they are 8 or 80.
Obviously more is coming out and being spent due to the inflation- but its always a last resort.
I know a lot of people who are saving dollars for very specific purposes, and wont touch it for food or clothes purchases- thats for that special camera they need for work, for a down payment on an apartment, for a trip abroad.
Most remember when there were very strict limits on the amounts they could charge on a card abroad, and so they take dollars with them when they go to Miami, whether its buying gucci or earthmoving equipment. A lot of things are cheaper when you pay in dollars. Here, and, obviously, abroad, where nobody wants pesos.
Argentines trust US cash, and nothing Milei can do will change that.
Nobody wants to be holding lots of cash pesos...

 

[toongeorges]

... If people really were still accumulating physical dollars in droves, how come this hasn't shown up in a rising blue value?

Because the best use the government has for its recent budget surpluses is to buy back the pesos that people are selling to buy dollars.

 

[Ries]

Because the best use the government has for its recent budget surpluses is to buy back the pesos that people are selling to buy dollars.

I am really confused.
You buy dollars from a cueva. And you sell dollars to a cueva. They give you better rates, and dont report it to the taxman.
You arent actually suggesting that Banco Nacion is buying pesos from cuevas?
no cueva would do that- they sell the dollars AND pesos, and thus, try their best to balance the two- many times, if they are out of one or the other, you have to wait to the next day, when they have "stock".
The pesos the government buys are mostly virtual ones.
They are not sending Caputo out with a backpack and telling him not to come back until its full of 20,000 peso bills.

The vast majority of Argentines with dollars have real, paper benjamins. When they are forced to sell them, another Argentine buys them. Not Milei.
Nobody really trusts dollar accounts in banks- since the coralito, memories of 2/3 valuation still linger strongly, even in people who werent born in 2001.

 

[LuckyLuke]

why would a physical presence of paper money affect foreign exchange rates?
The amount of US paper dollars outside of the USA is enormous- its estimated to be around $1 Trillion dollars.
The vast majority of it is being held to avoid taxes, or for illegal and untraceable transactions in drugs, weapons, and people.
Daily For-Ex trading of virtual dollars is around $8 Trillion. A DAY!
That 8 trillion affects exchange rates far more than the measly 250 billion that is under mattresses in Argentina.
I know a lot of Argentines who keep US cash, the amount varies depending on their wealth.
They dont trust banks, they dont trust the future, they have seen the peso drop in value their entire lives, whether they are 8 or 80.
Obviously more is coming out and being spent due to the inflation- but its always a last resort.
I know a lot of people who are saving dollars for very specific purposes, and wont touch it for food or clothes purchases- thats for that special camera they need for work, for a down payment on an apartment, for a trip abroad.
Most remember when there were very strict limits on the amounts they could charge on a card abroad, and so they take dollars with them when they go to Miami, whether its buying gucci or earthmoving equipment. A lot of things are cheaper when you pay in dollars. Here, and, obviously, abroad, where nobody wants pesos.
Argentines trust US cash, and nothing Milei can do will change that.
Nobody wants to be holding lots of cash pesos...

You are conflating two different markets. The blue rate is dictated by the INFORMAL market, it has nothing to do with the Forex. Look to the MEP/CCL for a FX market rate. The blue rate is dictated by Cuevas and "Financieros".

To hoard is a verb. It means the continual accumulation of something driven by fear of future shortages. It would indicate net purchasers (demand exceeding supply) which would result in a rising blue rate.

Having Peter sell dollars to Paul to spend in Spain is not hoarding. That's normal market trading representing an equilibrium of buyers/sellers reflected by a stable blue rate.

What I propose is really happening is the BCRA knows you paid dearly for those dollars when the brecha was higher. They also know the majority of those purchases were likely from tax evaded gains. ARCA is offering you a premium (via tax amnesty) to buy them from you cheaply (while they still can). This is no different than late night commercials of Mirtha offering to buy your gold below market rate.

For some Argentines the blanqeo is quite a good deal. Not only does it allow them to keep their tax evaded gains, it allows them to invest it in something that yields a greater return than a musky mattress. Others feel the opporunity cost of stagnant dollars is worth sleeping better at night.

Personally, I think the real crux of the dollar hoarding dilemna isn't confiscated dollars. It's tax evasion. Afterall the real estate and auto market are already dollarized and Argentine dollar accounts are already legally in place at any bank. I was able to buy my last property by simply transferring dollars from my Banco Nacion dollar account to the sellers Macro dollar account all within Argentina. No cueva was necessary, no bullshit commissions and no shortage of dollars anywhere to be seen.

Of course, some members here will challenge you to liquidate your account and see how many dollars you receive. Did you need to do that in the USA? I don't recall ever withdrawing ALL my money. Why would you need to liquidate all your holdings? Is it to buy something that is obviously evading taxes?? This type of restriction would also happen at ANY bank in the USA as well. No bank keeps 100% of their deposits in cash in their vaults, let alone a foreign currency.

"But LuckyLuke a CEPO would mean you can't transfer your funds out either", Yea...it's called redemption limits and it's designed exactly for that reason, to prevent panics from destablizing price measures. It's in place in countless US investment funds already and that's exactly how Argentina treats your dollars, because IT'S NOT THE NATIONAL CURRENCY. This is precisely why US banks don't allow customers to have a foreign currency account outside of corporate clients engaging in international trade. You need an investment account for such a thing. It's absurd that Argentines expect differently, of course unless you NEED to regularly liquidate 100% of your foreign holdings...you know... to TAX EVADE, because "la casta y coso".

 

[carride]

You are conflating two different markets. The blue rate is dictated by the INFORMAL market, it has nothing to do with the Forex. Look to the MEP/CCL for a FX market rate. The blue rate is dictated by Cuevas and "Financieros".

To be clear, MEP and CCL are financial market rates that act as alternative foreign exchange (FX) rates. They are, fundamentally, legal "financial exchange rates" derived from securities trading.

 

[Ries]

The “ official “ estimate is somewhere around $170 billion, but most foreign financial experts figure its twice that. The govt bougt $2 billion in q1 2026, and total dollar accounts are estimated at around $40 billion, but a bunch of that is from foreign companies and businesses who have to have money in blanco for things like govt contracts.
The article is actually pretty accurate about how flexibility, lack of trust in both the finance sector and the government, and taxes all make most argentines more comfortable with American cash.
Lots of day to day business,like the used car dealer interviewed, takes place in dollars. Virtually any large sale is discounted for us cash, and everyone has counting machines.
Saving is not hoarding, and, technically, the legal currency is pesos. In terms of the blanco economy, th dollars don’t exist. Milei knows people have savings and he wants it. Which is exactly why people keep it in cash.