Exchange Rates-another perspective.
I meant to post this a week ago but forgot.
The 2 currencies in the world that have depreciated against the U$ are the Arg$ peso and the Indonesian rupiah. All other currencies of note have apreciated, some by as much as 30%.
No elephant stamp for guessing which countries rate close to the top (or bottom depending on your perspective) of The Economist's survey of corrupt countries.
Incidently, The Economist is the source of the depreciation story.
The $60,000 question is: Do the Argentinian decision makers care?
I guess we're feeling a little pessimistic today
[QUOTE=Dirk Diggler]The way things are going the peso almost HAS to collapse to at least 4/1 and possibly 5/1.[/QUOTE]It's a good thing we are all holding Dollars or Euros then right?
[QUOTE=Dirk Diggler]There has been no sound economic mind guiding things, only currupt Kirchner cronies with dirty hands. Its sad really but the fact is that with Kirchner (either one) or any other Peronist in power, the economy and governmental instituitions of Argentina are so disfunctionally corrupt that there is no chance for long term improvement, just a continuous cycle of boom and bust. [/QUOTE]Seriously guys, since you all seem to be such great economic minds, maybe you should call Kirchner, tell him to fire all those Ivy league, PH. D idiots and hire one of you. I am sure you could fix things in a few weeks.
Bad.
BTW Jackson, The bridge didn't get built, and that is why the old one collapsed into the mississippi.
Chaos theorists - a rebuttal.
Despite all the hype by the government, the Argentine economy is not great. Many of the forum members have lived here from before the Menem era or during it. The economy is based on taxing rural exports and distributing that revenue according to whatever policy on spending is in vogue at the time. The current boom in retail sales is based on the available credit and the confidence the population has in borrowing and using this money. Argentine economists are as well trained as any western economists and they certainly understand that the current economic policies are unsustainable. And I am sure they have told the politicians. But Argentinians as a group, there are exceptions, lack a realistic economic sense, and the politicians do what is expedient at the time.
Since domestic accommodation prices (purchases) have plateaued, the current boom in construction of domestic housing will ensue that the builders will not profit. Costs are escalating and by the time the properties enter the market, they will be more expensive to build than the market will bear, and for those apartments sold off the plan. And then you will see the half completed apartment blocks that have been and still are a feature of the city skyline. Return on capital for domestic housing (5%) is about half the current interest rate for deposits (9%) The only real profit available is in construction. Very few Argentinians build to rent, hence the escalating rentals now a feature of this forum, due to the shortage of rental properties.
Of course economic reality will eventually come into play. But as long as Argentina can get money, either by grace of Chavez or any other source, they will take it and damm the consequences. When it becomes impossible to repay, they will blame the lenders for their lack of propriety.
So all forum members who think that the peso will fall to 4 or 5 to the U$, my experience in the past is that it just doesn't happen that way. Since the devaluation of 2002, the change is only 1% per annum. Internal inflation seems to run counter to all commonsense. I have no explanation but I do offer the following opinion. There is a long way to go before the currency will collapse based apon past observations.
So economic chaos is some time off!
