Currency Exchange Rates - Political Discussion
[blue]Greetings everyone,
I started this thread to provide a seperate place for everyone to discuss their theories behind foreign currency exchange rates and to make their predicitions for future rates changes.
Hopefully, this will help keep the thread titled "Currency Exchange" focused on actually, physically, exchanging Dollars or Euros for Argentine Pesos while actually in Argentina.
Thanks,
Jackson[/blue]
And the money kept rolling in (and out)
I'm in the middle of a book called, "And The Money Kept Rolling In (And Out): Wall Street, the IMF and the Bankrupting of Argentina," by Paul Blustein. It covers the peso collapse a few years ago, and the years leading up to it.
Don't know what he concludes at the end yet, but it's pretty obvious that the Argentine politicians have no fucking discipline whatsoever when it comes to managing their country's finances and economy. Regardless of what classical or even common sense economic thought might dictate, these people are going to do what's politically expedient, consequences be damned. This appears mainly to involve a tug of war between the central government and the provincial governments, which are basically on the dole.
From what I can see so far from this book, it appears to be a fool's errand to try to predict what may or may not happen with the peso based on what rational people in government positions would / should do.
SL
Alternative strategy for Argentina?
I saw that my reasoning was contradictory.
One has to compare the current currency policy with a theroretical one in which Argentina not buy dollars. Would it be better for Argentina?
The current strategy.
The peso has a value of 3,1 to the dollar.
+the central bank can accumulate about 10 billion dollars a year.
+it's easy for the argentine industry to export and compete with imports.
-inflation is above 10 per cent and might rise more.
-it's expensive to import capital equipment to enhace to capacity of the argentine industry.
Theorectical strategy, not buying any dollars.
The peso has a value between 2,45 and 2,20 to the dollar.
+the inflation becomes acceptable.
+it's cheaper to buy necessary capital equipment for the argentine industry.
-the short-term pressure might be to hard on the economy and with small reserves an external shock can force Argentina to take new loans, which is hard to get after the country canceled it's payment in 2002 and then got away with only paying 1/3 of the value of the mammon-debt in 2005.