Is It Time To Close The Blue Market?

[ajoknoblauch]

Rich Argentines and Vulture Speculators are using the stock market as a proxy for Dollar Blue. It's time for a windfall profit tax on all stock assets. All profits in excess of the official inflation rate will be taxed at 95%. This proves that I am not just being an ogre to expats but to the entire spectrum of the bourgeoisie. In addition, all Kale must be purchased using a credit card or foreign currency.

The kale is missing from these graphs.

 

[Rich One]

As long as the inflation persists the Blue will keep going up.... Blue Dollar Dec 2014 may be around $15 or more .

The dif between 2nd and 3rd. positions only 20 Points.....??

 

[sleazemerchant]

It pains me to inform the forum membership that the AR peso is actually overvalued at it's current 11.55/ $1 USD selling price. The actual "book" value of the peso at this moment in time is about 12.63/ $1 USD. This number will continue to rise if BCRA reserves continue to plummet and the BCRA keeps the printing press running around the clock. As a means of comparison, back in May 2013 when the peso went to 10.45/ $1 USD the "book" value of the peso was really about 8.75; the spike in the price was a result of panic and speculation. This time around the sudden upward movement of the "blue" rate is based on fundamentals and the complete loss of any confidence in a government that has proved to be completely incompetent.

 

[Joe]

It pains me to inform the forum membership that the AR peso is actually overvalued at it's current 11.55/ $1 USD selling price. The actual "book" value of the peso at this moment in time is about 12.63/ $1 USD.

How do you determine "book value" of the AR peso?

 

[EricLovesBA]

Ah, ok, that supports my point actually, yes i do see QE and not an increase in money supply which is what we were talking about. That graph shows the increase in monetary base which of course includes bank reserves. Those very bank reserves which were included in the asset - bank reserve swap.

Again, no new green backs in circulation. Assets swapped for reserves to stimulate loans.

Here, in arg we have creation of new money supply. Not monetry base, actual new currency, 40% more in the economy.

Banks are in the business of loaning money - don't you suppose they're going to lend the money they have on hand? It's not like they have any risk in doing so as FDIC or bailouts will always be there to cover any bad decisions. Fractional reserve banking is pretty much how all new money comes into existence right? So even if they're not directly "printing money", QE is still indirectly creating money in that the bank can turn around and lend 10 times the reserves on hand, in combination with the 0% interest rate that causes people to borrow hand over fist instead of save. Additionally it creates an environment where worthless assets can be essentially force-sold to the taxpayers in the next round of bailouts.

 

[EdRooney]

Ah, ok, that supports my point actually, yes i do see QE and not an increase in money supply which is what we were talking about. That graph shows the increase in monetary base which of course includes bank reserves. Those very bank reserves which were included in the asset - bank reserve swap.

Again, no new green backs in circulation. Assets swapped for reserves to stimulate loans.

Here, in arg we have creation of new money supply. Not monetry base, actual new currency, 40% more in the economy.

Sheesh sorry about the delay. Way too many things getting in the way of my mindless chattering on the web.

OK so you're totally right about QE not technically being printing, but printing both in the OECD and here is a lot more complicated than we're making it here. Even Bernanke's response as to whether QE is printing money was "sort of". So we can either go into this long tangent or I could just withdraw the comparison, which would probably be better for sticking on topic.

So let me rephrase then: Argentine inflation is a result of excess aggregate demand. There are monetary factors that can aggravate or improve it, but the root issue is demand. For me, personally, what is most important is employment and real median household wealth, and in general I would be against any economic policy that would hamper them. When you talk about cutting government spending, yes that will cut inflation, but my first concern would be what effect that would have on unemployment, which Argentina's history in the 90s has shown to be intimately connected. Basically, the only solution Argentine politicians have come up with in the past for lowering inflation has been to raise unemployment (e.g., Rodrigo, Cavallo). I'm trying to come up with another solution, to work on a way to ease inflation down without the austerity.

If you have another way to prioritise employment and cut public expenditures I'd be all ears.

 

[dennisr]

How do you determine "book value" of the AR peso?

C = MB/R

 

[Matiasba]

So let me rephrase then: Argentine inflation is a result of excess aggregate demand. There are monetary factors that can aggravate or improve it, but the root issue is demand.

Is it demand or the lack of supply.


Or the concentration of supply, in other words. For instance La Serenisima and Sancor share more than 80% of the milk and derivatives market. If theres a tambo (milking yard) that grows and grows and capture an important percentage of market (always less than 5%), they simply buy it. So every pyme in the sector cant compete with these giants.

Fortunately they still exist, but are totally marginal.

Last year La Serenisima and Sancor, acting together, raised their prices (average) 42%. How can you fight inflation with this?

So its not only the strong demand but a weak supply.

 

[Rich One]

11.65 today no ceiling on sight until March....

 

[Jaredberryman]

Sheesh sorry about the delay. Way too many things getting in the way of my mindless chattering on the web.

OK so you're totally right about QE not technically being printing, but printing both in the OECD and here is a lot more complicated than we're making it here. Even Bernanke's response as to whether QE is printing money was "sort of". So we can either go into this long tangent or I could just withdraw the comparison, which would probably be better for sticking on topic.

So let me rephrase then: Argentine inflation is a result of excess aggregate demand. There are monetary factors that can aggravate or improve it, but the root issue is demand. For me, personally, what is most important is employment and real median household wealth, and in general I would be against any economic policy that would hamper them. When you talk about cutting government spending, yes that will cut inflation, but my first concern would be what effect that would have on unemployment, which Argentina's history in the 90s has shown to be intimately connected. Basically, the only solution Argentine politicians have come up with in the past for lowering inflation has been to raise unemployment (e.g., Rodrigo, Cavallo). I'm trying to come up with another solution, to work on a way to ease inflation down without the austerity.

If you have another way to prioritise employment and cut public expenditures I'd be all ears.

Very simple: create incentives and an environment that makes business extremely attractive, while continuing to protect the local market. More people start businesses, more people are hired because the climate is favorable for business, and since current business models are simplified, those businesses will need more employees. There is a major problem with the bureaucracy and taxes in this country that are killing the small and medium businesses. Anecdotal story: a friend of mine is an excellent accountant. I asked him to be my accountant, but he told me no. The reason he told me no is because he has already maxed out his monotributo. If he starts making more, he'd have to form a PYME or sociedad anonima. And then the taxes are a nightmare. So by actually expanding his business, he would make less in the short and possibly long term. This kind of non sensical crap is part of the massive problem in this country. If my friend could take on more clients, he would then need to hire more people, etc. So when businesses start expanding and making a lot extra money, they are going to have to start hiring. Government quits printing money and doesn't pay it in subsidies and planes de trabajo, but it doesn't matter, because everyone already has money in their pocket, and those who need to eat will have jobs available waiting for them. Thats an oversimplification, but I think it's the basic problem.