What it looks like when a country doesn’t trust its banks

carride

Registered
Joined
Feb 5, 2013
Messages
413
Likes
357
At least this story is written by someone who lived here. Still it is aimed towards those who have not, explaining how the recent USA bank runs can be compared to life in Argentina. Better written, and better researched than the other “I was a tourist for weeks/months and you will not believe how it is in Argentina” articles that have been published this year.

What it looks like when a country doesn’t trust its banks
 
It's good to read a clear description of what is happening in the financial sector in Argentina. However not a clear what the future will bring..?
 
At least this story is written by someone who lived here. . . .
This year, another friend sold his mother’s house in a $110,000 transaction that will be in all dollars, all cash. He and his brother are trying to figure out how to make sure the dollars the buyer pays in aren’t fake. They think the best move is to put the money in the bank initially, but there’s debate about whether to keep it there — the other option is to take them back out in physical dollars and stash them away.
Why doesn't everybody in Argentina have one of these?:

 
I must admit I didn’t know money counting machines detect fakes too but given that they do then presumably all property lawyer offices have them too?
 
....because if they did the Amalgamated Union of Currency Forgers of Argentina (UCFAA) would have a piquete across General Paz before you could say Martin Fierro and would be claiming that the machines were stealing the bread from the mouths of the children of honest swindlers.
 
This is a pretty simplistic article.
first, everybody I know in Argentina uses their bank every day, and pay for everything from a coke at the kiosko to their utility bill by transfering money direct from their bank account.
So its not exactly they dont "trust" the bank.
Its that the peso is not safe against the constantly increasing value of the dollar. And that interest rates paid by banks on savings are not worth risking the loss of value against the dollar.
Since most imports, and most of argentinas exports, are priced in dollars, the FX issue is a giant part of what people call "inflation".
The US hundred dollar bill is the paper currency of choice in huge swaths of the globe- Argentina is not unique in this respect.
Approximately half of all US hundred dollar bills are outside of the US, being used for a stable currency. A lot of this is illegal business, or tax avoidance.
Which is another thing the article skips over- a lot of the cash use in Argentina is to avoid taxes.
In the US, the laws and banking system work much better to track untaxed transactions, and tax them- hence the lower use of cash.
The Argentine use of US cash is more a testimony to how bad the enforcement systems and laws are on things like property transactions.
Argentines risk trusting banks in the US and Uruguay, for example, even though there is risk of bank collapses in both countries.
Argentines often point to the coralito, in 2000, as a reason not to trust banks here, and to keep there money in Urugayan banks- but in 2002, the Urugayan bank crisis caused a huge run on the banks, and five major banks collapsed, and hundreds of millions of deposters money vanished- and yet, Argentines still "trust" Uruguayan banks, which really means, tax evasion.
 
We hired somebody know by the realtors, who specialized in counting the bills and detecting fake bills during the home sale. Everything went well.
 
This is a pretty simplistic article.
first, everybody I know in Argentina uses their bank every day, and pay for everything from a coke at the kiosko to their utility bill by transfering money direct from their bank account.
So its not exactly they dont "trust" the bank.
Its that the peso is not safe against the constantly increasing value of the dollar. And that interest rates paid by banks on savings are not worth risking the loss of value against the dollar.
Since most imports, and most of argentinas exports, are priced in dollars, the FX issue is a giant part of what people call "inflation".
The US hundred dollar bill is the paper currency of choice in huge swaths of the globe- Argentina is not unique in this respect.
Approximately half of all US hundred dollar bills are outside of the US, being used for a stable currency. A lot of this is illegal business, or tax avoidance.
Which is another thing the article skips over- a lot of the cash use in Argentina is to avoid taxes.
In the US, the laws and banking system work much better to track untaxed transactions, and tax them- hence the lower use of cash.
The Argentine use of US cash is more a testimony to how bad the enforcement systems and laws are on things like property transactions.
Argentines risk trusting banks in the US and Uruguay, for example, even though there is risk of bank collapses in both countries.
Argentines often point to the coralito, in 2000, as a reason not to trust banks here, and to keep there money in Urugayan banks- but in 2002, the Urugayan bank crisis caused a huge run on the banks, and five major banks collapsed, and hundreds of millions of deposters money vanished- and yet, Argentines still "trust" Uruguayan banks, which really means, tax evasion.
I really disagree with all of this, but I don't want to take the time to write a long rebuttal. I'll just say this:
  • In 2001, every person in the country that had money in the banks lost three quarters of their money in one day. My wife was one of those people.
  • Just because people use the banks doesn't mean they trust them.
  • I remember in 2004, three years after the crisis, seeing protests in the microcentro every single day, with people throwing red paint on all the banks every single day.
 
This is a pretty simplistic article.
first, everybody I know in Argentina uses their bank every day, and pay for everything from a coke at the kiosko to their utility bill by transfering money direct from their bank account.
So its not exactly they dont "trust" the bank.
Its that the peso is not safe against the constantly increasing value of the dollar. And that interest rates paid by banks on savings are not worth risking the loss of value against the dollar.
Since most imports, and most of argentinas exports, are priced in dollars, the FX issue is a giant part of what people call "inflation".
The US hundred dollar bill is the paper currency of choice in huge swaths of the globe- Argentina is not unique in this respect.
Approximately half of all US hundred dollar bills are outside of the US, being used for a stable currency. A lot of this is illegal business, or tax avoidance.
Which is another thing the article skips over- a lot of the cash use in Argentina is to avoid taxes.
In the US, the laws and banking system work much better to track untaxed transactions, and tax them- hence the lower use of cash.
The Argentine use of US cash is more a testimony to how bad the enforcement systems and laws are on things like property transactions.
Argentines risk trusting banks in the US and Uruguay, for example, even though there is risk of bank collapses in both countries.
Argentines often point to the coralito, in 2000, as a reason not to trust banks here, and to keep there money in Urugayan banks- but in 2002, the Urugayan bank crisis caused a huge run on the banks, and five major banks collapsed, and hundreds of millions of deposters money vanished- and yet, Argentines still "trust" Uruguayan banks, which really means, tax evasion.

Even if you don't trust the banks in Argentina, you need to keep some money in the bank for everyday transactions. I always have the equivalent of a couple thousand dollars in the bank here to make payments. I'm not going to stand in line at a rapipago with cash to pay every bill, it's just not practical.

Now, do I trust the banks in Argentina enough to hold a significant amount of dollars? Hell no. Neither do most Argentines, and it's not only about tax evasion, although there is some of that.

The government just went after the dollar assets of ANSES, which were forcibly exchanged for pesos. Do you really think if the government gets desperate enough they won't go after dollar deposits? There is something like $16B USD in private deposits in the banking system. Maybe it won't happen, but why take the risk?

Now you say there is a risk of a banking collapse in the US too. That's correct. However, you're missing one HUGE detail. If you have under $250k in a bank in the US there is zero risk of losing those dollars. And if you're in one of the systemically important banks Citi, JPM Chase, Wells Faro, BAC - you have zero risk of losing any amount of dollars deposited there. The treasury in coordination with the fed has said they will print to infinity to backstop it.

This presents a risk to the value of the dollar itself, but not losing deposits which is possible in Argentina.
 
Back
Top