Dollarization

[argeiCanuck]

Duped ils the process how they became free spirited for many decades. Unrealistic to undo a free spirited life style.

 

[Reply Guy]

Now I have to go back and correct myself. My bad.
Using USD in Argentina (Dollarization) does not imply that Argentine inflation will be determined by US FEDS.
Argentine inflation is cultural and traditional and will be very hard to reverse. (Spending more than earning=inflation). Argentines are not used or need to or accustomed to work hard. They are content that they can afford asado and football. They are not accustomed to working hard slavery.

Inflation isn't caused by Argentine individuals not working hard.

It's caused by too much money supply.

Dollarization will fix monetary inflation. That's the purpose.

It's not a fix all for the entire economy / society, and of course there are downsides too.

 

[mikic007]

I cannot even fathom the scale of this project. And the cost of it, of course. I don't think it's possible, but if there will be attempt, it will prove extremely harmful to population, because government will literally need to steal from people, to pull it through. You need to borrow all the money in the circulation, from the Fed. If you can do that, why would you do it?

 

[argeiCanuck]

Inflation isn't caused by Argentine individuals not working hard.

Most would agree that Argentines have been duped for decades to be free spirited ,, no need to slave for work. All I am saying is that this is a very hard uphill climb.

It's caused by too much money supply.

Too much money supply=living on subsidy=duped to be free spirited for decades.

Dollarization will fix monetary inflation. That's the purpose.

I am more than willing and happy to accept that only just because you said so and I have faith. I have been asking how? where is the connection? and can't see it. @sts7049 pointed out that that would put damping restrictions on spending ,, fair enough. However earnings and growth is the bigger and harder problem to solve.

 

[argeiCanuck]

government will literally need to steal from people,

Haven't they already done that once? When they magically overnight decided to give Argentines 1 USD for every 800 pesos instead of 400 pesos.

 

[mikic007]

Haven't they already done that once? When they magically overnight decided to give Argentines 1 USD for every 800 pesos instead of 400 pesos.

No, it was opposite, they forcibly pesified people's usds in banks, with the rate 1.4 peso for usd. Inflation hit soon after, so basically people easily lost more than 50% of their money. Not all of course, you can imagine.

Now there aren't many dolars on accounts in my opinion, but if government for example decides they will sell dolars for dolarization at 5000:1, instead of 1000:1, again people will pay for fiasco.

As usual, wealthy won't be much affected, because they already have dolars and upper hand. But if your salary goes from 300k ars to 60 usd, who is the happy winner?

Don't know, what will happen, but while stable currency would be much appreciated, I doubt it would outweighed cons of dolarization proces. Instead of watching Zimbabve and Ecuador as examples, Argentina should maybe check many other examples of how to deal with inflation, and didn't include such orthodox measures. But Argentina as Argentina, always something special and unique has to be implemented, instead to follow successful examples, and basically just put tax system in order...

 

[argeiCanuck]

No, it was opposite, they forcibly pesified people's usds in banks, with the rate 1.4 peso for usd. Inflation hit soon after, so basically people easily lost more than 50% of their money.

Correct ,,,, 800:1 instead of 400:1 represents 50% loss. (regardless wheather the process was pesofying or Dollarizing ,,,,, same end result ,,,, 50% loss).

Now there aren't many dolars on accounts in my opinion, but if government for example decides they will sell dolars for dolarization at 5000:1, instead of 1000:1, again people will pay for fiasco.

5000:1 instead of 1000:1 will result in 80% loss.

Don't know, what will happen, but while stable currency would be much appreciated, I doubt it would outweighed cons of dolarization proces. Instead of watching Zimbabve and Ecuador as examples, Argentina should maybe check many other examples of how to deal with inflation, and didn't include such orthodox measures. But Argentina as Argentina, always something special and unique has to be implemented, instead to follow successful examples, and basically just put tax system in order...

Agreed ,,,, Zimbabwe or Ecuador ,,, neither is exactly a success story befitting Argentina.

 

[argeiCanuck]

Correct ,,,, 800:1 instead of 400:1 represents 50% loss. (regardless wheather the process was pesofying or Dollarizing ,,,,, same end result ,,,, 50% loss).

Correction:

800:1 instead of 400:1 represents (a theoretical 100% gain for the rich if they choose to pesofy today). But the rich don't need to do anything. They are keeping their Dollar accounts offshore. They just wait and will realize much much bigger gains when the Dollarization day arrives.

Same 800:1 instead of 400:1 represents (a theoretical 50% loss for the poor who has only peso account if they are forced to Dollarize today). When the Dollarization day arrives they will be forced to sell at 5000:1 instead of 400:1. A devastating 87.5% loss.

Effectively it's a transfer of wealth from the poor to the rich by force (of law ).

 

[mikic007]

Effectively it's a transfer of wealth from the poor to the rich by force (of law ).

It has always been... Milei didn't even try to hide it, he was loud about it. And the poor still voted him. It's already happening. Producers are getting peanuts for their products, end consumers are paying top money for them, the cream is harvested by chosen few...

 

[argeiCanuck]

Another silly question:
The pain of devaluation from 400:1 to 800:1 didn't kill us all. Was not exactly a catastrophe. Much much less pain than I expected. Sounds too good to be true. We have already gone through 100% devaluation.

Why not take the next step all the way to 1100:1 the blue rate? Therefore totally FLOATING the peso. Another 50% more devaluation and we are done. Just like that.

Why are we fixating on Dollarization? If it's that simple?