Currency Exchange Rates - Political Discussion

Interesting book, I will buy it. What I have been thinking is: Didn't Argentina and the IMF discuss the option to devaluate the peso years before the crisis on 2002? If Argentina had devaluated in 1998 the debt hadn't been so big and the fall of the peso might have been limited to 1:2 to the dollar?

[QUOTE=StrayLight]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[/QUOTE]

[QUOTE=Bairespirata]...Didn't Argentina and the IMF discuss the option to devaluate the peso years before the crisis on 2002? If Argentina had devaluated in 1998 the debt hadn't been so big and the fall of the peso might have been limited to 1:2 to the dollar?[/QUOTE]You need to read this book, pardner.

Pegging the peso to the dollar -- otherwise know as convertibility -- was **THE** central strategy of the Argentine government throughout the 90s. It was their effort to keep hyperinflation at bay. To wit, if the peso was pegged to the dollar, it limited the government's ability to print money.

When things started to fall apart, the option of dropping convertibility -- and letting the peso float -- came up from time to time in numerous forums. However, pretty much everyone agreed that the committment to convertibility was what was giving the government credibility. So they tried keeping it to the bitter end.

It's a pretty interesting book, and a fairly easy read. It seems to have some credibility of its own based on the pretty stellar online reviews and such.

SL

[QUOTE=StrayLight]

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.

SL[/QUOTE]What politicals do except for those in the Scandanavian countries? The US has a debt of $8 trillion dollars, the biggest debtor in the world-which is how this economy is fueled (until it collapses)-which means they the politicians, and all of us Americans, cannot criticize how other countries handle their finances and economy.

Suerte,

Stowe

In most developing countries, and traditionally in Latin America, the legislative branch of the government has access to the printing press, in that they can authorize additional currency issuance directly. Or, in some cases law provides that additional currency must be printed to cover budget deficits. The US is different in that the printing press is under the control of the executive branch of the government.

[QUOTE=Stowe]The US has a debt of $8 trillion dollars, the biggest debtor in the world-which is how this economy is fueled (until it collapses)-which means they the politicians, and all of us Americans, cannot criticize how other countries handle their finances and economy.[/QUOTE]Well, first of all, the U. S. has not defaulted on its debt, nor does it appear to be in any danger of doing so. Furthermore, the U. S. isn't borrowing money from international institutions to keep its debt up. Finally, the U. S. hasn't tied its hands behind its back with respect to dealing with it debt by adopting and stickig to a policy like convertability. So I'd say the analogy between the U. S. And Argentina is not very good.

However, just to be fair, the book I'm reading makes it pretty clear that the international lending community -- both IMF and private investors -- were just as responsible for Argentina's crisis as the Argentine politicians were.

SL

I think that the USD is like air. Nobody can lives without it. The USD are very unlikely to fall severly in value since the Euro-countires are so depended on a relatively strong USD as USA is their most important exportmarket. The European Central Bank will always buy USD to keep it's value at at least 1,30 to the Euro, and so will China and Japan do. The USD is the currency of the world and if it falls, everybody falls. No one with power will allow this to happen. No matter public and trade deficts.

[QUOTE=Bairespirata]I think that the USD is like air. Nobody can lives without it. The USD are very unlikely to fall severly in value since the Euro-countires are so depended on a relatively strong USD as USA is their most important exportmarket. The European Central Bank will always buy USD to keep it's value at at least 1,30 to the Euro, and so will China and Japan do. The USD is the currency of the world and if it falls, everybody falls. No one with power will allow this to happen. No matter public and trade deficts.[/QUOTE]The dollar has been devalued twice in my living memory. Once by Connelly, once by Baker. It is not sacrosanct.

On a somewhat related note, if the forum software will allow this, here's an interesting article from the New York Times a few weeks ago.

[QUOTE]The Mark of the Bust.

WHAT may be the most important number in the American panoply of economic statistics appears every Thursday night as an appendix to the weekly statement of the condition of the Federal Reserve System. This generally ignored number — few, if any, newspapers cover its release — has the unusual virtue of accuracy, for it is a simple financial statement derived from an adding machine, not from a computer or a formula.

What the number announces is the quantity of government and agency securities held "for foreign official and international accounts" — that is, for foreign central banks and finance ministries — by the federal reserve banks. It is important because over time it measures the demand for American assets by private enterprise in the world's creditor nations. It is important also because it is very large — last week, about $1.63 trillion. Three years ago, just before the invasion of Iraq, it was about $900 billion. The week George W. Bush took office, it was $693 billion.

Our appetite for imported goods throws some $600 billion to $700 billion a year into the hands of foreign suppliers. The businesses that receive these dollars have two fundamental choices about what to do with them: spend or invest them in the United States, or convert them into their own local currency.

Exporters to America who keep the dollars and use them for American purchases and investments create what economists call an autonomous flow of funds back to the United States, financing the American trade deficit with an American investment surplus.

This produces the argument most closely associated with the new Federal Reserve chairman, Ben Bernanke (though Alan Greenspan believed it, too) that our trade deficit is caused by a surplus of savings that can't be profitably invested in the home countries of our trading partners. Financing for our trade deficit comes before — and actually causes — the deficit itself.

If instead of investing their dollars in the United States, foreign exporters want to take the proceeds of their sales in their own currency, their central banks will in effect sell them that currency for their dollars. Back in the late 1960's, when Great Society deficits and the Vietnam War prompted the first serious sell-off of dollars (and forced the United States to abandon the gold standard because too many holders of dollars, led by President Charles de Gaulle of France, wanted gold) those central banks lent those dollars into the new Eurodollar market, where they traded somewhat separately from domestic dollars.

This created a nightmarish prospect of the United States losing control of its own currency, and in 1971 the Fed chairman, Arthur Burns, negotiated a deal with the European and Japanese central banks. The deal was that they would return to America the dollars they acquired in their own economies, and the Fed would invest the money on their behalf, in absolutely safe government securities, without charge and at the best rates.

Today, the Fed continues as custodian of the "foreign official holdings" of such government obligations. During the Clinton administration, the Fed agreed to invest in federally guaranteed housing securities for those foreign central banks that wanted a better yield on their dollar reserves than they would get from government bonds, and now more than half a trillion dollars of the total official holdings are invested in agency paper. Foreign official holdings of government paper is a miner's canary number. It tells you if there is big trouble ahead. The most common worry is that the number will shrink suddenly, with foreign governments dumping their dollar holdings, driving down the dollar's value and driving up American interest rates, but that's not a real danger. If the price of our government securities dived, the foreign central banks would have to bear the loss. This would be a budget item for their governments, whose leaders would not like it at all.

What we have to watch out for is a sudden and drastic increase in foreign official holdings. Rapid growth in this number in the late 1960's and 1970's forecast the recessions of the early 1970's and 1980's, and it could happen again.

Recent large increases in foreign official holdings indicate that foreign private investors see fewer attractive places to put their money in the American economy. They could presage a significant fall in the price of American assets, stocks (witness the recent drops in American stock markets) and bonds and real estate and all, and a hard landing for a world economy still floating on the crest of cheap credit.

[I]Martin Mayer, a guest scholar at the Brookings Institution, is the author of "The Fate of the Dollar."[/I][/QUOTE]

Thank you for your post, excellent, Straylight.

I still claim that the central banks will stop the dollars from falling below certain levels. It happend most recently during the spring in 2005 and again this month. EU, Japan and China are so dependent on their exports to the US that they will do everyting to keep it afloat. But I think the dollar could be relatively weak for years, but not under certain levels.

I think that Argentina seems to have left the emergy-stage in the rebuilding of it's economy after the 2002 crisis and therefore could start to implement a new policy aimed at sustainable long-term growth with growth and inflation rate of half of the current.

This demand discipline and Kirscher might prioriate other goals, but I think the centre-right coalition (yet to be formed) if they win the the 2007 elections will have as a first issue to control the macroeconomic variable before they run amok. If they do so, the peso will for certain be stabilized at 1:3 to the dollar. Up or down from this level the peso will meet strong resistance from the financial markets.

I found this vdo series on YouTube. I enjoyed watching it and maybe some of you may also. Only for those with broadband. Enjoy.

[url]http://youtube.com/profile_videos?user=highwired77[/url]

Does anyone know what the deal is with getting dollars from cash machines? I have tried various banks and various cards (debit from my checking, and credit cards) but I never succeed.

I remember a couple of years ago getting cash from Citibank up in Posadas, but Citibank doesn't work now either.

Anyone have any suggestions?

Dollar withdrawals are normally for the banks' customers only. But why would you want to withdraw dollars anyway? I've lived her for years and have never needed to.

[QUOTE=Dickhead]Dollar withdrawals are normally for the banks' customers only. But why would you want to withdraw dollars anyway? I've lived her for years and have never needed to.[/QUOTE]If you are paying rent in dollars. I brought enough dollars down with me when I came to pay rent for a year, but otherwise you would be searching for a dollar source. Or maybe Rockin Bob is flooding the chica market with C notes.

When you get your dollars in argentina, they are first converted into pesos and then from pesos back to dollars. Damn argie law that says everything has to be in pesos when it comes into the country.

If you're going to be getting larger amounts, you may want to pull them out in Uruguay. I don't know if Colonia has any large banks, but in Montevideo or Punta del este I did. I think I did a rough currency calculation at the time and it seemed that there was a direct deduction from the checking account.

Hope that helps a little. Correct me if I'm wrong anyone.

Yes, it's for the rent, and not just the current landlady, they all want dollars. I don't see what the difference is if they get the equivalent in pesos. Maybe they squirrel them away under the mattress like Doggboy. Never know when the next economic crisis will come. Those good old C-notes from the Reagan administration before the fancy anti-counterfeiting features still hold up pretty well!

Next thing they'll want to be paid in gold.

And I have never paid 100 US for a chica in BsAs!

But yeah, thanks for the info. Wasn't sure if the problem was just my own.