Economists warn electing Milei would spell devastation

[sergio]

Dollarization, or any grandiose new government program requiring massive change, is easier to sell as a concept. Like all such proposals, the devil's in the details. Ideas and concepts are great, plans to implement them even better. Otherwise you just get politicians promising to follow through on the promises they made before being elected without actually ever doing so. We've all seen that too many times to count.

The government might not be printing money anymore, but how long before the counterfeiters take advantage of a population not used to handling US currency? How many bodegas are going to be accepting genuine dollars and passing counterfeits as change to unsuspecting and unknowing customers. Nearby Perú produces and distributes around 60% of the world's counterfeit US currency.

If it happens, it's gonna be a rough transition till it all settles.

https://www.washingtonpost.com/news/post-nation/wp/2016/11/22/they-make-fake-money-worth-more-than-cocaine-the-u-s-just-recovered-30-million-of-it/#:~:text=Responsible%20for%20producing%20and%20distributing,the%20currency%27s%20rise%20since%202003.

Seems to me that Argentines are very familiar with US dollars. I suspect that the old viveza criolla would prevail. Merchants are almost certainly going to take great care. Obviously all of this is going to take time, education and effort. It's been done in less sophisticared countries. Why do you underestimate Argentines? And why keep looking for every excuse under the sun to resist change?

 

[Big Swifty]

Seems to me that Argentines are very familiar with US dollars. I suspect that the old viveza criolla would prevail. Merchants are almost certainly going to take great care. Obviously all of this is going to take time, education and effort. It's been done in less sophisticared countries. Why do you underestimate Argentines? And why keep looking for every excuse under the sun to resist change?

I don't underestimate Argentines. I just know that in the little corner of Argentina I live in the only place you see dollars is the one cueva in town. I also doubt the majority of the 40% of Argentines living in poverty have much daily experience with using currencies other than ARG pesos. I don't think it matters what country it is, you change a nation's currency and there's going to be a learning curve. Back in the 70's the US tried changing from Imperial to Metric and it went over like a lead balloon - all new highway signage to supplement the Imperial signs, barely anybody could wrap their heads around using the Metric System, all the money spent on signs wasted when they discovered it didn't work. Different animal, sure, but the same concept. I doubt anyone not already currently handling US currency on a daily basis is able to recognize well done counterfeits; knowing about watermarks and other protective markings, paper feel and weight, etc. Peru being so close would seem to be an obvious opportunity to bring a large amount of counterfeits into a new system.

When I first moved to Peru a cab driver passed me a phony large denomination bill as part of my change. I was in a hurry to catch my flight and the currency was still new enough to me that I didn't recognize it until someone I was trying to pay had pointed it out to me. It had nothing to do with nationality or underestimating anyone's intelligence. But I'm not arguing that an increased opportunity for counterfeiters is one of the most important reasons to be cautious when considering abandoning one's currency and any control one has over policies tied to currency. It's really just something to consider as an aside.

I'm not following the resisting change argument. If someone proposed a policy you either flat out didn't like or were cautious about would that make you resistant to change and would you accept someone's "resistant to change" rebuttal to your opposing points as being valid, or just vague and off topic? Don't like a socialist proposal such as single payer healthcare or free University education? - why do you keep looking for every excuse under the sun to resist change? Maybe it's not that you're resistant to change, it's just that you're simply unconvinced, undecided, or for reasons having nothing to do with resistance to change are opposed to the idea being proposed?

Change simply for change's sake doesn't make sense. Change to something else simply because it's different from what exists now only makes sense if the change is better or you're literally facing imminent death if you don't make a change right now, fully realizing that even if you still may die, at least you tried - jumping from the fourth floor of burning building with no help in sight. Dollarization as a concept can be made to sound swell - just like many other economic policies that take research, knowledge, and understanding to fully grasp. I think politicians take advantage of the complexity of many issues to put forth very simplistic solutions, figuring the overwhelming majority of the public won't understand the issue but will like the sound of their proposal and couldn't be bothered to studying the issue. International trade and trade agreements - barely anyone understands the nitty gritty of them. But everyone understands the concept of a tariff and so without any further consideration they think a proposal for tariffs sounds like a great solution - whether it turns out that way or not (and it usually only hurts the population of the country that applies the tariffs since the producing country passes along the cost of the tariff through increased prices).

My preference is for careful examination of what effects dollarization would actually have, how has dollarization fared for other countries that have taken that route, etc. I realize it's been done in less sophisticated countries (one could ask "why do you underestimate them?"), but in at least some of those countries the results weren't what was expected and weren't all that rosy. Some prefer to paint study and caution as resistance to accepting something blindly because it sounds good and must be better than the current situation. Dollarization may well be better, but I need to be convinced by an argument much more substantial than "why resist change?" And isn't "resistance to change" usually something you hear to describe conservatives who want to conserve the status quo and make changes cautiously? And it's the liberals who want to change things from how they were/are? Strange times we're living in.

 

[perry]

Seems to me that Argentines are very familiar with US dollars. I suspect that the old viveza criolla would prevail. Merchants are almost certainly going to take great care. Obviously all of this is going to take time, education and effort. It's been done in less sophisticared countries. Why do you underestimate Argentines? And why keep looking for every excuse under the sun to resist change?

You seem to believe that just by dolarising the economy everything will be hunky dory ? Milei has said he will not trade officially with China Riussia and Brazil our main business partners . His policies are the most extreme ever proposed in Latin American history and in a country that has the best social systems of the continent . The reaction from the peoples will be extreme and anything will be possible with this scenario .

 

[sergio]

I don't underestimate Argentines. I just know that in the little corner of Argentina I live in the only place you see dollars is the one cueva in town. I also doubt the majority of the 40% of Argentines living in poverty have much daily experience with using currencies other than ARG pesos. I don't think it matters what country it is, you change a nation's currency and there's going to be a learning curve. Back in the 70's the US tried changing from Imperial to Metric and it went over like a lead balloon - all new highway signage to supplement the Imperial signs, barely anybody could wrap their heads around using the Metric System, all the money spent on signs wasted when they discovered it didn't work. Different animal, sure, but the same concept. I doubt anyone not already currently handling US currency on a daily basis is able to recognize well done counterfeits; knowing about watermarks and other protective markings, paper feel and weight, etc. Peru being so close would seem to be an obvious opportunity to bring a large amount of counterfeits into a new system.

When I first moved to Peru a cab driver passed me a phony large denomination bill as part of my change. I was in a hurry to catch my flight and the currency was still new enough to me that I didn't recognize it until someone I was trying to pay had pointed it out to me. It had nothing to do with nationality or underestimating anyone's intelligence. But I'm not arguing that an increased opportunity for counterfeiters is one of the most important reasons to be cautious when considering abandoning one's currency and any control one has over policies tied to currency. It's really just something to consider as an aside.

I'm not following the resisting change argument. If someone proposed a policy you either flat out didn't like or were cautious about would that make you resistant to change and would you accept someone's "resistant to change" rebuttal to your opposing points as being valid, or just vague and off topic? Don't like a socialist proposal such as single payer healthcare or free University education? - why do you keep looking for every excuse under the sun to resist change? Maybe it's not that you're resistant to change, it's just that you're simply unconvinced, undecided, or for reasons having nothing to do with resistance to change are opposed to the idea being proposed?

Change simply for change's sake doesn't make sense. Change to something else simply because it's different from what exists now only makes sense if the change is better or you're literally facing imminent death if you don't make a change right now, fully realizing that even if you still may die, at least you tried - jumping from the fourth floor of burning building with no help in sight. Dollarization as a concept can be made to sound swell - just like many other economic policies that take research, knowledge, and understanding to fully grasp. I think politicians take advantage of the complexity of many issues to put forth very simplistic solutions, figuring the overwhelming majority of the public won't understand the issue but will like the sound of their proposal and couldn't be bothered to studying the issue. International trade and trade agreements - barely anyone understands the nitty gritty of them. But everyone understands the concept of a tariff and so without any further consideration they think a proposal for tariffs sounds like a great solution - whether it turns out that way or not (and it usually only hurts the population of the country that applies the tariffs since the producing country passes along the cost of the tariff through increased prices).

My preference is for careful examination of what effects dollarization would actually have, how has dollarization fared for other countries that have taken that route, etc. I realize it's been done in less sophisticated countries (one could ask "why do you underestimate them?"), but in at least some of those countries the results weren't what was expected and weren't all that rosy. Some prefer to paint study and caution as resistance to accepting something blindly because it sounds good and must be better than the current situation. Dollarization may well be better, but I need to be convinced by an argument much more substantial than "why resist change?" And isn't "resistance to change" usually something you hear to describe conservatives who want to conserve the status quo and make changes cautiously? And it's the liberals who want to change things from how they were/are? Strange times we're living in.

In the countries that dollarised wasn't inflation tamed? Aren't the new US notes with the band far more counterfeit-proof than Argentine pesos? Wouldn't Argentine merchants be likely to examine notes carefully, as they used to do with one-hundred peso notes when they had value? I would disagree that even low income Argentines are unfamiliar with US dollars. Perhaps the most indigent but I think working class people save some money in dollars. Of course change for the sake of change is a bad idea however we are not talking about that. Argentina is in a profound crisis and needs a way out of the worsening cycle of inflation as a result of overspending and then printing money. Dollarisation was discussed decades ago. It's not a new concept and I suspect it's been studied. I understsand that for expats living on USD dollarisation would result in higher prices (and higher wages) but that is not a good reason for avoiding a change. Clearly the current system only works for a few.

 

[Macanudo]

I understand that for expats living on USD dollarisation would result in higher prices

Higher prices for expats = higher prices for everyone. How does that help anyone?

 

[sergio]

You seem to believe that just by dolarising the economy everything will be hunky dory ? Milei has said he will not trade officially with China Riussia and Brazil our main business partners . His policies are the most extreme ever proposed in Latin American history and in a country that has the best social systems of the continent . The reaction from the peoples will be extreme and anything will be possible with this scenario .

Yes, he said that if elected his government would not trade with communist or any other authoritarian state including Russia but he would not restrict private enterprise from doing so. In the end I suspect he'd have to compromise with China in particular given the extent to which Argentina is involved with China. I am not clear about your statement regarding Argentina's "social system". If you mean free hospitals and universitries my guess is that he would make reforms such as requiring those with means to pay something to attend university, perhaps charging non residents fees for public hospital costs etc. I suspect these policies will be met with approval by many Argentines. I have no doubt that if elected Millei would have to moderate his proposals but the core of his plan is dollarisation which I think he'd pursue. I very much doubt he'll be elected but if he were to be President and he lost the condifence of the public, he'd be forced out of office and the country would return to the current status quo.

 

[perry]

Higher prices for expats = higher prices for everyone. How does that help anyone?

And getting rid of public health and public education how does this help Argentina ? So many policies that are devastting for the working and middle classes .

 

[sergio]

Higher prices for expats = higher prices for everyone. How does that help anyone?

Prices would stablise and wages would be higher. It would help the majority, just not those living off a black market exchange rate.

 

[Macanudo]

wages would be higher.

What would cause wages to be higher?

 

[Agribotics]

The air is coming out of the USD too so good luck with using it as a life raft:

”In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”

Argentina needs to accept the simple fact that it’s the end of the road for it trying to use gimmicks to allow it to live beyond its means. If its means aren’t enough to meet its needs it’s only real solution is to do what it takes to increase its production of goods and services and thereby increase its means sufficient to meet its needs. it’s as simple - or as complicated - as that.