Should Argentina's Economy be Dollarized Now.

Rich One

Rich One

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Dollarizing the Economy is the only way out, believes Cachanosky a top Argentinian Economist...

www.infobae.com

Por qué creo que dolarizar la economía argentina es la única salida

Si el respaldo de una moneda es la confianza en las instituciones de un país y en su dirigencia, se hace evidente el motivo por el cual los argentinos no creen en el peso
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"It could be argued that the withdrawal of bank deposits is due to the fear that Kirchnerism will impose a corralito again; However, what happens is not that people withdraw pesos from banks and store them in a safe deposit box. People withdraw pesos from the market and buy dollars, because they do not believe in the peso as a store of value."
 
There is a saying that states that good money always chases out the bad money.
I think that to dolarize the economy (or most of it) is an excelent idea.
The first benefit will be that the goverment will not be able to run a fiscal deficit, so it will be be forced to balance the budgets.
We can add the benefit that people will be able to buy a home with a 30 yrs loan at very low interest rates, at least for now.
 
Another possible solution coulbe to create an Argentine dolar (just like the Canadian or Autralian dolar) to replace the current peso.
Except that this time the printing of money will be left to the US Treasury Dept., away from the hands of our corrupt politicians.
They will not be able to print bills at will to plug their fiscal deficits.
 
Here is the USD to Argentine peso chart for the last 10 years. Just eyeballing it, the pesos obviously always goes down over time. However, there are occasional moves up. Just eyeballing it, the biggest move I see in the other direction (the peso getting stronger) is 10%. I would never keep more than about 1 month's expenses in pesos.

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