Milei Wants Argentines to Dollarize the Economy for Him

[MilHojas]

Milei Wants Argentines to Dollarize the Economy for Him

Javier Milei seems to have abandoned his vision of a sudden, official dollarization of the Argentine economy. The politician, who suggested blowing up the central bank’s peso printing machines during last year’s presidential campaign, no longer talks about that. Instead, he wants his countrymen...

www.bnnbloomberg.ca

 

[Redpossum]

The second paragraph of the article reads -

The current approach — dubbed “endogenous dollarization” — entails curtailing the supply of pesos, forcing Argentines to use their dollars to pay for everyday expenses. Over time, that’s supposed to increase the amount of dollars in circulation and reduce reliance on the peso, which has lost 62% of its value since Milei took office.


Umm, say what? Basically, jump up in the air, wish hard, and fart?

 

[MarshallE]

The second paragraph of the article reads -

The current approach — dubbed “endogenous dollarization” — entails curtailing the supply of pesos, forcing Argentines to use their dollars to pay for everyday expenses. Over time, that’s supposed to increase the amount of dollars in circulation and reduce reliance on the peso, which has lost 62% of its value since Milei took office.


Umm, say what? Basically, jump up in the air, wish hard, and fart?

You see it with the "dolar diarco" where the grocery store is accepting dollars directly. Obviously real estate and car purchases, we'll have to see but the overnight approach seems to not be happening now

 

[Quilombo]

Umm, say what? Basically, jump up in the air, wish hard, and fart?

The power of positive thinking I guess?

I know I've debated this with other forum members previously, but endogenous dollarization assumes that the overwhelming majority of Argentines have dollars freely available to be liquidated that will enter in to the macroeconomy of which all Argentines are part of, something I seriously doubt as 53% of people live in poverty here. For example, INDEC said in Q1 2024 that Argentine residents had 257 Billion dollars outside the financial system, which would mean every man, woman, and child has about $5,500 in cash.

Now, I know I frequently suggest some folks on here are... disconnected from the the reality of the average Argentine economically compared to their social circles/personal wealth, but let's assume that we all more or less agree that $5,500 is an unrealistic number for several reasons. What does the reality look like in this case then with 53% poverty? I'd argue millions of people with nothing, and several hundred thousand families sitting on a basically a Scrooge McDuck vault of hundred dollar bills.

The issue with endogenous dollarization in this circumstance is that both poor and middle class people (generally) have the same caloric, basic consumption, health, etc. needs that wealthy people do. i.e. a single professional living in Cordoba has $5,000 in cash, and a family of 4 in Palermo has $100,000; the family of four isn't consuming 20x the Yerba Mate, 20x the electricity, 20x the YPF super, paying 20x the prepaga cutoa, etc. They're buying a new Hilux, they're renovating their quinta, they're buying business class tickets to Miami, things that have already been dollarized, and exist more or less outside of the current financial system as is. It reminds me a lot of the "flat tax" proponents, sounds great in theory, but it's the most regressive tax, and we have it here via 21% IVA.

In my humble opinion, the only way dollarization works is when the government sets the rules of the road, much in the way the European Union has done Eurozone expansion. Argentina gets inflation under control, it establishes a floating currency or crawling peg with the dollar, it enters the ERM II style peg to the dollar (without a cepo), and then a fixed date is established at which point pesos can be exchanged for dollars at the BCRA and commercial banks. And I'm saying this as someone who doesn't think dollarization is the right approach, but if you're going to do something, do it right, don't half ass it like Caputo and Milei are doing everything, changing the rules in the middle of the game and getting mad when the market and people don't trust them.

 

[Redpossum]

The power of positive thinking I guess?

I know I've debated this with other forum members previously, but endogenous dollarization assumes that the overwhelming majority of Argentines have dollars freely available to be liquidated that will enter in to the macroeconomy of which all Argentines are part of, something I seriously doubt as 53% of people live in poverty here. For example, INDEC said in Q1 2024 that Argentine residents had 257 Billion dollars outside the financial system, which would mean every man, woman, and child has about $5,500 in cash.

Now, I know I frequently suggest some folks on here are... disconnected from the the reality of the average Argentine economically compared to their social circles/personal wealth, but let's assume that we all more or less agree that $5,500 is an unrealistic number for several reasons. What does the reality look like in this case then with 53% poverty? I'd argue millions of people with nothing, and several hundred thousand families sitting on a basically a Scrooge McDuck vault of hundred dollar bills.

The issue with endogenous dollarization in this circumstance is that both poor and middle class people (generally) have the same caloric, basic consumption, health, etc. needs that wealthy people do. i.e. a single professional living in Cordoba has $5,000 in cash, and a family of 4 in Palermo has $100,000; the family of four isn't consuming 20x the Yerba Mate, 20x the electricity, 20x the YPF super, paying 20x the prepaga cutoa, etc. They're buying a new Hilux, they're renovating their quinta, they're buying business class tickets to Miami, things that have already been dollarized, and exist more or less outside of the current financial system as is. It reminds me a lot of the "flat tax" proponents, sounds great in theory, but it's the most regressive tax, and we have it here via 21% IVA.

In my humble opinion, the only way dollarization works is when the government sets the rules of the road, much in the way the European Union has done Eurozone expansion. Argentina gets inflation under control, it establishes a floating currency or crawling peg with the dollar, it enters the ERM II style peg to the dollar (without a cepo), and then a fixed date is established at which point pesos can be exchanged for dollars at the BCRA and commercial banks. And I'm saying this as someone who doesn't think dollarization is the right approach, but if you're going to do something, do it right, don't half ass it like Caputo and Milei are doing everything, changing the rules in the middle of the game and getting mad when the market and people don't trust them.

The amusing part is that Milei was supposedly an economist and a professor of economics once upon a time. I suppose we are witnessing what happens when theory and doctrine collide with cold, hard reality.

 

[GMan_27]

The amusing part is that Milei was supposedly an economist and a professor of economics once upon a time. I suppose we are witnessing what happens when theory and doctrine collide with cold, hard reality.

I have always been a fan of technocracies but seeing this play out here, now seems to be a type of "never meet your heroes" moment.
Not that I was a fan of Milei, but the idea of an economist turning the economy around seemed like a logical step.

 

[Rich One]

The amusing part is that Milei was supposedly an economist and a professor of economics once upon a time. I suppose we are witnessing what happens when theory and doctrine collide with cold, hard reality.

Milei until recently had no apolitical party, no Gov. team and has no "Cintura Politica"/ (Streetwise skills) attacking the "Viejos Meados" will hit him in the rear..!

 

[Redpossum]

(redacted)

 

[FrankPintor]

People, please lift the kimono and show us what you mean.

 

[dilmah]

For example, INDEC said in Q1 2024 that Argentine residents had 257 Billion dollars outside the financial system, which would mean every man, woman, and child has about $5,500 in cash.

mismatch between average savings (total divided by number of people) and median savings (sort all people from smallest savings to largest and pick the middle one) can easily be 10 times.

Which means that typical / median person has only $500 in cash. But average (total divided by number of people) is still $5500.