Is the Milei "Transformation" Failing Already?

[Bajo_cero2]

Milei is not making the peso equal to the dollar so this is different situation. Back in Menem time Brazil devalued the Real and Argentina was stuck pegged to the dollar and couldn’t adjust so exports became expensive and hit the economy.

Well, here is Milei who is over valuating the peso and it makes no sense. Last time it costed 90 billion usd in debt.

 

[Musicman]

The recent trends in the US dollar losing value against the Argentine peso and the peso increasing in value can be attributed to several factors related to Javier Milei's presidency and his economic policies. Here are the main points to consider:

1. **Economic Confidence and Policy Shifts**:
- **Market Reactions**: Javier Milei's victory and his proposed economic reforms have created a wave of optimism among investors and markets. Milei, known for his libertarian views, has promised drastic measures to curb inflation and stabilize the economy, such as dollarization and reducing government spending.
- **Inflation Control**: Milei’s plans to implement stringent fiscal policies and potentially dollarize the economy have led to increased confidence that Argentina could get a handle on its rampant inflation. If markets believe these measures will succeed, this can lead to an increase in the peso's value.

2. **Expectations of Dollarization**:
- **Currency Speculation**: The prospect of dollarization (adopting the US dollar as the official currency) often leads to speculative movements in the foreign exchange market. If people believe the peso will be pegged to or replaced by the dollar at a favorable rate, they might start holding onto pesos in anticipation, reducing demand for dollars.

3. **Short-term Capital Flows**:
- **Increased Investments**: The new administration's promise of economic stability can attract foreign investment. Short-term capital inflows can lead to a stronger peso as investors need to convert their dollars into pesos to invest in Argentine assets.

4. **Central Bank Interventions**:
- **Monetary Policies**: The Central Bank of Argentina may also be actively managing the exchange rate by buying and selling foreign currencies to stabilize or strengthen the peso as part of Milei’s economic strategy.

### Implications for Argentina

**Potential Benefits**:
- **Lower Inflation**: A stronger peso can help reduce inflation, as import prices (including essential goods and services) become cheaper.
- **Economic Stability**: Increased confidence in the currency can lead to greater economic stability, attracting more investment and fostering growth.

**Potential Risks**:
- **Economic Disruptions**: Rapid policy changes, especially those as radical as dollarization, can lead to economic disruptions if not carefully managed. There can be transitional issues that affect the economy negatively.
- **Dependence on Foreign Currency**: If Argentina fully dollarizes, it loses control over its monetary policy, which can be detrimental if the country faces economic shocks that require tailored monetary responses.

In summary, while the immediate strengthening of the Argentine peso might signal optimism and potential stability under Milei’s administration, the long-term effects will depend heavily on the successful implementation and management of the proposed economic reforms. The outcomes could be beneficial in terms of reducing inflation and attracting investment, but there are significant risks involved in such drastic economic shifts.

 

[Reply Guy]

The recent trends in the US dollar losing value against the Argentine peso and the peso increasing in value can be attributed to several factors related to Javier Milei's presidency and his economic policies. Here are the main points to consider:

1. **Economic Confidence and Policy Shifts**:
- **Market Reactions**: Javier Milei's victory and his proposed economic reforms have created a wave of optimism among investors and markets. Milei, known for his libertarian views, has promised drastic measures to curb inflation and stabilize the economy, such as dollarization and reducing government spending.
- **Inflation Control**: Milei’s plans to implement stringent fiscal policies and potentially dollarize the economy have led to increased confidence that Argentina could get a handle on its rampant inflation. If markets believe these measures will succeed, this can lead to an increase in the peso's value.

2. **Expectations of Dollarization**:
- **Currency Speculation**: The prospect of dollarization (adopting the US dollar as the official currency) often leads to speculative movements in the foreign exchange market. If people believe the peso will be pegged to or replaced by the dollar at a favorable rate, they might start holding onto pesos in anticipation, reducing demand for dollars.

3. **Short-term Capital Flows**:
- **Increased Investments**: The new administration's promise of economic stability can attract foreign investment. Short-term capital inflows can lead to a stronger peso as investors need to convert their dollars into pesos to invest in Argentine assets.

4. **Central Bank Interventions**:
- **Monetary Policies**: The Central Bank of Argentina may also be actively managing the exchange rate by buying and selling foreign currencies to stabilize or strengthen the peso as part of Milei’s economic strategy.

### Implications for Argentina

**Potential Benefits**:
- **Lower Inflation**: A stronger peso can help reduce inflation, as import prices (including essential goods and services) become cheaper.
- **Economic Stability**: Increased confidence in the currency can lead to greater economic stability, attracting more investment and fostering growth.

**Potential Risks**:
- **Economic Disruptions**: Rapid policy changes, especially those as radical as dollarization, can lead to economic disruptions if not carefully managed. There can be transitional issues that affect the economy negatively.
- **Dependence on Foreign Currency**: If Argentina fully dollarizes, it loses control over its monetary policy, which can be detrimental if the country faces economic shocks that require tailored monetary responses.

In summary, while the immediate strengthening of the Argentine peso might signal optimism and potential stability under Milei’s administration, the long-term effects will depend heavily on the successful implementation and management of the proposed economic reforms. The outcomes could be beneficial in terms of reducing inflation and attracting investment, but there are significant risks involved in such drastic economic shifts.

Thanks ChatGPT

 

[argeiCanuck]

When I asked my Argentine friends:

How could people afford Milei's 300% inflation? No riots? No starvation? Why so quite?

They told me that sueldos have tripled.

Is this true?
Did he really solve Argentine Godzilla inflation in merely 5 months? Too good to be true. Hard to believe.

 

[Ronnie Hotdogs]

When I asked my Argentine friends:

How could people afford Milei's 300% inflation? No riots? No starvation? Why so quite?

They told me that sueldos have tripled.

Is this true?
Did he really solve Argentine inflation in merely 5 months? Too good to be true. Hard to believe.

Don’t know what world your Argentine friends are living in.

 

[argeiCanuck]

So it's not true. I couldn't believe it myself.

So why there are no riots on the streets?
Why they are not hungry?
How can they afford 300% inflation?

Something is missing here.

 

[mikic007]

So it's not true. I couldn't believe it myself.

So why there are no riots on the streets?
Why they are not hungry?
How can they afford 300% inflation?

Something is missing here.

Resignation? Like what to do even, who to call? Cristina is well remembered, massa isn't even in consideration, things are too complicated for the crowd to demand something...

In many countries streets would be burning on 20 of December already, not in Argentina. Instead people try to get by, some burning savings, some going to crime, most lowering their spending habits. All are waiting for things to get better as promised even if many don't believe they will. But what to do anyway? Run milei out of office is a hard and ugly work, and there is nothing and noone to turn to. And by now Argentines are a bit used to turbulent times, and expect it'll turn to better as it happened always in the past. I guess most find this the best way at the moment.

It might result in some turbulent times soon, depending on near future.

 

[antipodean]

So it's not true. I couldn't believe it myself.

So why there are no riots on the streets?
Why they are not hungry?
How can they afford 300% inflation?

Something is missing here.

Factors to consider as to why Argentina is not on fire:
- Last year the majority Argentines voted to change the status-quo and elect an outsider on a platform of austerity, giving him more votes than any other election in Argentine history. Most of his voters were from the poor and working class
- Poor Argentines (at least 30% of the population) have been poor for years/ decades and are still poor today, poverty is nothing new for them. They still have many (but not all) of the social plans and subsidies that they had before
- The last years are still fresh in peoples minds, while costs were lower than today, wages/ pensions/ benefits were also lower than today and many people were still having a very hard time as prices on pretty much everything went up each week (while salaries only went up every 3-4 months)
- Minimum wage is now higher than neighbouring countries like Brazil (which has similar COL to Argentina of today)
- Working class Argentines do have wage adjustments, most sectors (but not all, especially if you work in the large but downsizing public sector) are now with wage adjustments above inflation for the first time years
- Wages for in dollar terms are higher than they have been in years now
- There is increasing discontent amongst the working and popular classes against the unions and social movements for their abuses, corruption and poor performance in past years/ decades
- There is no consolidated opposition voice in politics
- The dollar / exchange rates are stable as market confidence has recovered and this means there is no more brecha
- 300% inflation looks at inflation in a 12 month period to date, most of that happened in 2023 and December/ January. It is now coming down and prices for many things (e.g. supermarket) are noticeably more stable than before ... you can leave pesos in your bank account from one month to another and they will hold enough value to be able to make use of them the following month as your supermarket bill or restaurant check will be about the same as last month. That said other prices in the economy are still "normalising" as controls and subsidies come off, meaning although food costs may now be fairly stable, one may find their energy bill tripling or more.
- Few major policy changes have actually been made yet with politicians still arguing over them while the country lingers in the doldrums, so many people still have optimism that once these changes are eventually approved a more rapid pace of reforms and improvements will start to be seen
- Argentines understand the roller-coaster in which they live and its laws of gravity (what goes up, must come down, until it goes up again...)
- For those old enough to remember, Argentina has been through worse shock crises (2001/2 and 1989) where the country did end up on fire both times resulting in a popular redirection in the economic, political and social trajectory from the years prior

 

[Musicman]

Could Argentina become a global economic powerhouse again by implementing Milei’s proposed free-market reforms? Yes it can! Reducing government intervention, lowering taxes, and dismantling protectionist policies of the past will stimulate economic growth. Give him time. His focus on deregulation will attract more foreign investment and help boost domestic entrepreneurship, jobs and peoples incomes. By addressing inflation and fiscal deficits through stringent monetary policies, he will eventually stabilise the economy. Rome wasn’t built in a day. Additionally, his plans to improve infrastructure and education will enhance productivity and workforce competitiveness. With these strategies will rejuvenate Argentina's economy and can restore its position on the global stage. Of course this journey is not pain free but neither have the past decades either been pain free. Vamos Argentina y tengan confianza y fe. Juntos podemos

 

[argeiCanuck]

What is the minimum wage: 1)on December 20? 2) Now?