Dollar & peso: 2010 forecast

[redrum]

Have you looked at the Gold chart in the past 10 years? It looks like Aconcagua! Moon shot! I think the opportunity to hedge gold has past. U$S1138 ounce. I would suggest smelting....

it's true that gold is up 9 years in a row, on its way to a 10th but i don't believe it's going to stop there.

the global economic crisis has a long way to go. we are no where near the end of the tunnel. there will be more bank and sovereign nation failures. as long as nations continue to debase their currencies, you will want to hold precious metals.

gold has been money for 5,000 years and it is now re assuming that position as central banks become net buyers instead of net sellers of gold to hold as part of their reserves.

 

[FAS]

Let's hope the currency market naturally eases some of the pain even without an official devaluation.

If inflation rises, it's because the government is printing lots of fresh cash to cover its debts. More money in the market means not only higher prices locally for goods and services, but also increased demand for foreign currency, and of course decreased demand for Argentine pesos. Which means that the exchange rate should - at least theoretically - fluctuate with the rate of inflation, and generally in favor of foreign currencies.

I've been surprised that given the all the complaints on BAExpats about price growth the currency market has been more or less stable for the past couple of months. I've been here since January and nothing has changed. If there really was a surfeit of pesos you should see evidence of it in the form of a run on dollars and euros. But so far nothing. Not saying there's no inflation, just that the consequences are yet to materialize.

One last thing: in order to get out of the financial crisis last year, the US government printed over a trillion fresh dollar bills. At the moment all the banks are keeping the cash in their corporate mattresses. But just wait. When that new money enters the market in a serious way you'll wish every liquid asset you own were in Argentine pesos if not Zimbabwean dollars.

Ok, that's an exaggeration. But the point still stands.

 

[perry]

Let's hope the currency market naturally eases some of the pain even without an official devaluation.

If inflation rises, it's because the government is printing lots of fresh cash to cover its debts. More money in the market means not only higher prices locally for goods and services, but also increased demand for foreign currency, and of course decreased demand for Argentine pesos. Which means that the exchange rate should - at least theoretically - fluctuate with the rate of inflation, and generally in favor of foreign currencies.

I've been surprised that given the all the complaints on BAExpats about price growth the currency market has been more or less stable for the past couple of months. I've been here since January and nothing has changed. If there really was a surfeit of pesos you should see evidence of it in the form of a run on dollars and euros. But so far nothing. Not saying there's no inflation, just that the consequences are yet to materialize.

One last thing: in order to get out of the financial crisis last year, the US government printed over a trillion fresh dollar bills. At the moment all the banks are keeping the cash in their corporate mattresses. But just wait. When that new money enters the market in a serious way you'll wish every liquid asset you own were in Argentine pesos if not Zimbabwean dollars.

Ok, that's an exaggeration. But the point still stands.

Some good points there and it makes no reason to believe that the US dollar is somehow going to survive this crisis . Redrum has made some great points about Gold. I personallly believe that in the coming years food prices will go through the roof for a combination of reasons. Anyone who has land that can sustain agriculture and food production will be very lucky.

Fiat currencies have been proven to be the riskiest investment over the last 100s of years and for those who have large cash holdings its close to zero hour.

 

[gusgutier]

Let's hope the currency market naturally eases some of the pain even without an official devaluation.

If inflation rises, it's because the government is printing lots of fresh cash to cover its debts.
Not the case here. The governement prints to buy exceeding dollars from international commerce in order to maintain competitiveness (not an stronger peso), and tries to sterelize emission selling bonds. This mechanism will try to catch part of us$ 10 bn surplus expected from export/import balance. Today, Central bank bought us$ 80 m to keep dollar in arg $ 3.95. Future operations are been made in arg $ 4.05 december price.
Inflation is caused by : 1) Those not sterelized pesos 2) Money injection to increase internal goods demand. 3) Not enough investment to update offer.

 

[Denver]

For Christmas this year, I am sending everyone on this forum an Economics 101 textbook.

Neil

 

[Alzinho]

For Christmas this year, I am sending everyone on this forum an Economics 101 textbook.

Neil

I'm going to remember that Neil...
(It might be the only Christmas present I get!)
Al

 

[ghost]

For Christmas this year, I am sending everyone on this forum an Economics 101 textbook.

Neil

Economics 101 does not pertain to Argentina.
Argentina operates independently from any and all known models. With inconsistencies and conflicting modes at 7 to 10 levels. It is a conundrum with it's own dedicated program of of study at Yale, Harvard and Princeton. [maybe Oxford also]

 

[marksoc]

Economics 101, aka "Chicago Economics", it is past its time. It is unrealistic and... that's it. Mankiw books make good paperweights.

 

[SaraSara]

Another cheerful piece about the dollar and the peso.

Can anyone explain the last paragraph? What do the BCRA "authorities" mean to say? I've read it three times and can't figure it out - am either in the final stage of Alzheimer's, or it is plain gobbledygook.
********************************************

"Real exchange: US$ 1 is equivalent to 1.40 Argentine pesos?
Monday, 19 April 2010

Taking the nominal value of the peso and dollar basis in December 2001 and considering the real inflation differential occurred since then between Argentina and the United States (computing a private measurements averaged since the beginning of 2007, to avoid the distortion caused by manipulating the official figures since then), anyone can reach the actual outcome of the peso against the dollar: $ 1.415.

This value is just a penny and a half above the value of $ 1.40 through which the Eduardo Duhalde administration tried in vain, in early 2002, addressing an orderly process of the peso devaluation (after the implosion of convertibility) which ended dramatically, costly and messy.

Therefore, the president of the Federación Agraria Argentina (FAA), Eduardo Buzzi, demanded a dollar above the four pesos to compensate for the loss of agricultural producers competitiveness.

This situation could be explained “with the movement of passengers from Argentina, to the U.S.and Canada “, whose numbers soared in recent years. INDEC figures show that to those countries, 85,400 Argentines traveled in the first nine months of 2007, 116,800 in the same period in 2008 and 133,000 in the same period last year.

Buenos Aires Governor Daniel Scioli said on Monday that the current level of exchange rate “is competitive” and asked not to be “masochistic” in reference to the sectors that demanded a higher dollar.

The authorities of the Central Bank (BCRA) said that “the current exchange rate is above equilibrium level of a medium and long term in any of the usual definitions, so there is no exchange rate appreciation.”

http://argentina.world-countries.net/archives/3437

 

[sergio]

Prices are now higher than they were in dollar terms prior to the devaluation (the exceptions being items subsidized by the state) so what was the purpose of the devaluation? Except for the farmers and a few others, almost everyone is far worse off.