Currency Exchange Rates - Political Discussion

[StrayLight]

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.

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

[Dickhead]

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.

[Stowe]

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

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

[StrayLight]

...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?

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

[Bairespirata]

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?

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

[Bairespirata]

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.

[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

[Bairespirata]

Argentinas strategy is too substitute imports with locally produced goods and thereby aviod unemployment. The government also wants to accumulate bank reserves to make the economy less fragile to external shocks in the future. The government can go on with this policy as long as the demand for the peso is high. Selling pesos and buying dollars weakens the peso, but the effect is rather limited. In fact, shouldn't the central bank buy dollars, the peso would now be worth between 2,2-2,45 to the dollar. However, all included this might be the a good strategy considering the circumstances.

The problem for Argentine companies lay in that, in order to expand their production or make their products with international competitive quality, capital imports are very expensive with an undervalued peso. This can lead to stagnation. It should lead to stagnation, if not, on the other hand, the foreign investments rise. Which they might not do, considering that the negative impact the paper mill-conflict, frozen tariffs etc. Has on the willingness of foreign investors.

[Nibu Raphael]

That is great still, but how come in Brazil it is now 2 to 1? How long will the peso be 3 to 1 in Argentina? Lets hope for a few more years for sure.

[Spassmusssein]

...I bet a fine "Broccolino"-dinner, beeing shure that in one year the rate will be lower than 2.50 per dollar.
Please do NOT ask me (as an Austrian-European) where will be fixed the € at that time :(

[Stowe]

Hi Exon123,

I respect your position and your greater experience in Buenos Aires, but I have found that Paraguaya chicas are 'mas ardiente' las chicas de Brazil. Much nastier and willing to do ALOT more and with greater enthusiasm.

It's just my opinion but ALL of my best chica experiences have been with Paraquaya chicas and but have had a couple of so-so sessions (not any bad ones though-to your point) with Brazilian chicas.

IMO, only

Suerte,
Stowe

[Stowe]

Argentina and Brasil both lack discipline and stability, and their currencies, representing relatively small world economies in the Western Hemisphere, are essentially tied to the USD in the sense that they are valued in terms of the USD.

I find it interesting that people claim other countries 'lack discipline' when the US is the biggest debtor nation on the planet, is running record fiscal and trade deficits and has a nearly $6 trillion debt. Interesting perspectives out there!!

Suerte,
Stowe

[Dickhead]

I would be willing to bet $100 US at 2 to 1 odds in your favor that the peso does not go below 3.50 (in value, meaning it will not weaken that far vs. the dollar) at any time within the next year.

[Moore]

I dont mean to beat a dead horse but this is the money thread and economics is a theory, so there is no perfect explanation for anything. Many times the US government has taken measures to keep the dollar relatively weak. Everybody knows that a cheap currency has its benefits. But that is one thing for a 1st world nation; a country cannot economically base itself on having a cheap currency and not much more. Yes Argentina has its natural resources, but is there not a negative correlation between natural resources and wealth in many cases (Japan rich, most of Africa poor)?

As Exon insinuated, I think if inflation continues at its current rate in Argentina we´ll soon see an fx rate of closer to 4.00/USD. That would be ideal for us expats, inflation at about 20% pa. Not nearly enough to cause another coup, but costs in USD at worst stay flat but probably go down as the peso gradually weakens. That would be great for me personally.

Prices are going up everywhere. You know that when the price of a 30 minute FUCK goes up substantially at places like Santa Fe 1707 and Affaire Puerredon, inflation is for real. The black market is the purest form of capitalism everywhere. This is best measured in the USA not by the cost of getting laid, but by the price of a quarter bag of mj.

M

[Exon123]

Second only to the Brazilan's, Paraguryan is the best.

And yes the Argentine government is deliberately selling peso's to support a strong dollar in their country, thus strengthing their international export business. This was published in the Buenos Aires Herald last March. They've dug a deep hole and this is one way out of it.

Inflation is going to become a problem some where down the line for as their economy improves prices are riseing.

Fortunely for us Mongers Pussy is not a capital intensive commodity but rather a personal service industry. The Pussy in it self is actuality Free, its the service of the pussy we pay for.

Thank goodness the Chica's don't have to buy their pussy's wholesale and turn around and sell it to us Mongers retail. For if that was the case this board would not exist.

Exon