Coping With Currency Restrictions

[Matiasba]

The people with lots of money always find a way. Others have to use their wits, but the policies still cause major distortions in the economy.

it surely is a distortion, as I said is the lesser of two evils.

 

[pauper]

it surely is a distortion, as I said is the lesser of two evils.

What was the other evil again? And how is it worse than having the central bank finance the shopping trips of the well off in Miami?

 

[Joe]

The government puts new restrictions and then people find away around them. It generates a lot of work for the bureaucrats and a lot of inconvenience for the people.

But a large segment of the Argentine population is convinced that Argentina has its own law of economics and that just letting the market work things out, may work in different countries, but not in Argentina - maybe its the magnetic pull of being close to the South Pole. What did Einstein say about trying the same thing over and over again and expecting different results.

Having said that, Argentina is only different in degree - not is substance. All the so called advanced economies are resorting to QE and other tricks to try and goose the economy. QE is just a sophisticated trick that the average Joe doesn't understand, but it is ultimately as idiotic as any of the other pathetic fiscal tricks most governments are resorting to now.

And like all these tricks, the rich and well connected find a way around them. The poor and middle class get slammed.

The rich in Argentina already have overseas bank accounts that they can draw funds from. In the US, the rich are the only ones that have benefited from QE as asset prices rise.

What particularly galling about these tricks is that so-called liberal economists like Krugman say that QE and "stimulus" benefit the poor when the result has been decades of increased wealth concentration in the top one percent. I would be willing to bet that in Argentina as well that wealth has become more concentrated at the top since the currency restrictions have been in effect.

 

[ajoknoblauch]

The government puts new restrictions and then people find away around them. It generates a lot of work for the bureaucrats and a lot of inconvenience for the people.

But a large segment of the Argentine population is convinced that Argentina has its own law of economics and that just letting the market work things out, may work in different countries, but not in Argentina - maybe its the magnetic pull of being close to the South Pole. What did Einstein say about trying the same thing over and over again and expecting different results.

Having said that, Argentina is only different in degree - not is substance. All the so called advanced economies are resorting to QE and other tricks to try and goose the economy. QE is just a sophisticated trick that the average Joe doesn't understand, but it is ultimately as idiotic as any of the other pathetic fiscal tricks most governments are resorting to now.

And like all these tricks, the rich and well connected find a way around them. The poor and middle class get slammed.

The rich in Argentina already have overseas bank accounts that they can draw funds from. In the US, the rich are the only ones that have benefited from QE as asset prices rise.

What particularly galling about these tricks is that so-called liberal economists like Krugman say that QE and "stimulus" benefit the poor when the result has been decades of increased wealth concentration in the top one percent. I would be willing to bet that in Argentina as well that wealth has become more concentrated at the top since the currency restrictions have been in effect.

I agree about the Argentine government's current restrictions, which are foolishly counterproductive, but I disagree strongly on the issues of stimulus and quantitative easing ("stimulus light"). When the Kirchners took over the presidency, they didn't have much choice but Keynesian stimulus, and it worked - the problem was that they didn't know when or how to stop. It's not sustainable in Argentina and it's not in the US either, but there's at least a recognition in the US that such measures have to be counter-cyclical - loose money when times are hard, tighter money when things are good. Though FDR's stimulus programs helped, they were also insufficient until WWII which was, for better or worse, the biggest stimulus program of all time. In reality, Krugman is right.

 

[Matiasba]

What was the other evil again?

restricting people getting out big amounts of dollars avoids a big definancing, a default, lack of dollars, reserves, devaluation, etc

 

[ajoknoblauch]

restricting people getting out big amounts of dollars avoids a big definancing, a default, lack of dollars, reserves, devaluation, etc

Dollar reserves are declining because of the government's own arbitrary policies, ineptitude, and unpredictability as the only country in the region that's struggling to maintain dollar reserves (except for Venezuela). Devaluation is not necessarily bad, and can actually lead to increased reserves.

 

[Matiasba]

Devaluation is not necessarily bad

it depends where you stand. I recognise devaluation may reactivate a dead economy, like it happened here in 2002, but the trick about devaluation is that you reduce arbitrarily peoples salary. Thats the trick. So if you want the majority of the people in your country looses 30 - 40% (or whatever you want) of their puchasing power, then devaluate. Of course affects the working men and beneffits the big capitals, corporations, people who works with dollars, people that hire people in pesos, etc

If you have dollars, as many of the multinationals do, then youll push for devaluation.

 

[internationalguy]

You don't realize it. All the people who have been telling you about the ridiculous idea of trying restrictions, FOR THE 17th time, are people with access to dollars outside Argentina. We have the blue rate because of those restrictions and it's good for us personally. Yet we have common sense to realize that since we live here (or spend a lot of time here, or something else), we might as well push for what's best for EVERYONE. A better Argentina for everyone will eventually lead to better things overall.

You mentioned you were a nice guy. I agree 100%. I think you're a very nice guy. I know your heart is in the right place. That being said, you won't be able to fit an elephant in a refrigerator no matter how many times you try.

 

[Matiasba]

since we live here (or spend a lot of time here, or something else), we might as well push for what's best for EVERYONE. A better Argentina for everyone will eventually lead to better things overall.

This is the thing. Not everyone here has the same interests. You just cant compare people who earns in dollars with people who earn in local money. One goes in the exact opposite direction than the other. Opposed interests. Like the boss and the working men. One wants to earn more, the other wants to pay less. That happens with people who have dollars and with people that have pesos.

I know all of you are good guys too, and in the end we all want the same, its just different ways.

 

[Inferno.]

This people who especulate with devaluation dont trust the country, no matter what the government does, they are all for a devaluation so their dollars could worth more. They exchange their pesos to dollars and speculate again the peso. Theres no possible country with the main economic actors betting against you. Maybe you dont get this because you earn in dollars so you are in that side too. Maybe you dont want a strong peso, you want a strong dollar to peso relation, and thats why in some way your taking that side of the problem.

I believe you are really misinterpreting the situation and are using propaganda words that do not apply to the current scenario. The average argentinian isn't a "speculator" which is a term often used for big players who CAN tip the scale from one side to the other using more complex options. For example the vulture funds that bought bonds at a low value and have been for the last years pushing trials and judges for a positive ruling to recover the face value on those bonds. Those are indeed speculators that are indeed working for gains.

These common people that buy dollars just want their saving to maintain their intrinsic value, not lose buying power due to a constant value depreciation that has been hitting for the last 5 years. This people aren't betting against the peso or something similar. The "dollar fever" started a few years ago when the government decided to kick the peso on the head and kill the stability that we had for a while. Here is an image showing this and this doesn't really take into account the 35% tax or the blue rate which push it even higher. Rembember, is just the official rate that isn't used in anything. People hide from the peso due to its current weakness, they are not causing it.