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How can you say that the agricultural sector in Argentina speculating on the dollar is incoherent? For starters, if the dollar goes up, the inflation doesn't n

How can you say that the agricultural sector in Argentina speculating on the dollar is incoherent? For starters, if the dollar goes up, the inflation doesn't necessarily follow. Otherwise that means that the salaries (among other things) follow the dollar, and that's not true at all. Second, this whole week there were talks about a special exchange rate for the sector to tempt them to export more, because the government needs more dollars for energy imports. So by just waiting they get a better deal, that's clearly speculation. You can argue if this is right or wrong, if it's good or bad for the economy or the people, but speculation it is.

kragen 4y ago
We're talking about exporters' reluctance to engage in transactions where they reduce a long position in the dollar in order to take a long position in the peso. The peso is an unstable speculative asset with extremely poor prospects of producing a return even in the short term. The dollar is, by contrast, a relatively stable currency, though much less so this year than for the previous 35 years, and though it, too, faces a continuous decline in its value. Holding pesos is speculative. It's not just speculation — it's speculation done badly and irresponsibly, like buying a lottery ticket, because the peso's prospects for increasing in value are quite poor indeed. Holding dollars is, by comparison, not speculative at all. We are facing a piece of absurd doublespeak in which "speculation" is being used to mean "refusing to foolishly invest in an unstable commodity", namely, the peso. Speculation in dollars is not impossible. You need servers in London, New York, or Tokyo that respond to second-by-second price changes, and you need access to forex markets with very, very tight spreads — otherwise the spread will give all of your potential speculative profits to market makers, because forex price movements in real currencies are fractions of a tenth of a percent most days. This is not what the agriculture sector in Argentina is doing. (Let's leave aside for the moment that this is also a transaction in which the central bank confiscates 59% of the value of the currency being traded in order to subsidize vacations abroad for the rich, and to subsidize imports so that they are impossible for Argentine domestic industry to compete with.) — ⁂ — Salaries and other prices do follow the dollar relatively closely, though there is both volatility and a secular decline in Argentina's productivity over time. The current salario mínimo is $45540 per month, which was US$210 earlier this month, though now it's US$150. (Presumably that will change in the next month or two.) When I moved to Argentina in 02006 it was $800, equal to about US$260. See https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_Argentina https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A.... The minimum wage did not track the dollar perfectly; US$210 differs from US$260 by 24% (or 19% calculated the other way round — a 1.3% decline per year), but $800 would now be worth US$2.61, or US$3.70 earlier this month, and US$210 differs from US$3.70 by 5600%. 24% is a significant tracking error but it's insignificant compared to 5600%. This calculation understates the decline of the salario mínimo in real terms, because the dollar has experienced a total of 47% inflation since 02006, according to the US BLS CPI. US$1 in 02006 is US$1.47 today; 1.47 · US$260 · AR$216/US$ gives AR$82600 as the equivalent salario mínimo at the blue dollar rate earlier this month, and using today's mid-market blue dollar rate of AR$306/US$ it would be AR$117000. Over 16 years that's a 5.7% decline per year in the buying power of the salario mínimo, though obviously that's a very noisy estimate. I would welcome other salary data. For example, how has the median Argentine salary changed over this time? How about the mean salary, which is essentially the per capita GDP?
- mmustapic 4y ago
  "Refusing to foolishly invest in an unstable commodity" is the only thing they can do: they either export or not. The question is, when will they do it? Waiting for the best moment is speculation. And about salaries, that was my point, they are 24% lower than in 2006. Considering the dollar's 47% inflation since that year, those USD 260 would be ~USD 380 now, so 68% lower.

kragen 4y ago

We're talking about exporters' reluctance to engage in transactions where they reduce a long position in the dollar in order to take a long position in the peso. The peso is an unstable speculative asset with extremely poor prospects of producing a return even in the short term. The dollar is, by contrast, a relatively stable currency, though much less so this year than for the previous 35 years, and though it, too, faces a continuous decline in its value. Holding pesos is speculative. It's not just speculation — it's speculation done badly and irresponsibly, like buying a lottery ticket, because the peso's prospects for increasing in value are quite poor indeed. Holding dollars is, by comparison, not speculative at all. We are facing a piece of absurd doublespeak in which "speculation" is being used to mean "refusing to foolishly invest in an unstable commodity", namely, the peso. Speculation in dollars is not impossible. You need servers in London, New York, or Tokyo that respond to second-by-second price changes, and you need access to forex markets with very, very tight spreads — otherwise the spread will give all of your potential speculative profits to market makers, because forex price movements in real currencies are fractions of a tenth of a percent most days. This is not what the agriculture sector in Argentina is doing. (Let's leave aside for the moment that this is also a transaction in which the central bank confiscates 59% of the value of the currency being traded in order to subsidize vacations abroad for the rich, and to subsidize imports so that they are impossible for Argentine domestic industry to compete with.) — ⁂ — Salaries and other prices do follow the dollar relatively closely, though there is both volatility and a secular decline in Argentina's productivity over time. The current salario mínimo is $45540 per month, which was US$210 earlier this month, though now it's US$150. (Presumably that will change in the next month or two.) When I moved to Argentina in 02006 it was $800, equal to about US$260. See https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_Argentina https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A.... The minimum wage did not track the dollar perfectly; US$210 differs from US$260 by 24% (or 19% calculated the other way round — a 1.3% decline per year), but $800 would now be worth US$2.61, or US$3.70 earlier this month, and US$210 differs from US$3.70 by 5600%. 24% is a significant tracking error but it's insignificant compared to 5600%. This calculation understates the decline of the salario mínimo in real terms, because the dollar has experienced a total of 47% inflation since 02006, according to the US BLS CPI. US$1 in 02006 is US$1.47 today; 1.47 · US$260 · AR$216/US$ gives AR$82600 as the equivalent salario mínimo at the blue dollar rate earlier this month, and using today's mid-market blue dollar rate of AR$306/US$ it would be AR$117000. Over 16 years that's a 5.7% decline per year in the buying power of the salario mínimo, though obviously that's a very noisy estimate. I would welcome other salary data. For example, how has the median Argentine salary changed over this time? How about the mean salary, which is essentially the per capita GDP?

mmustapic 4y ago
"Refusing to foolishly invest in an unstable commodity" is the only thing they can do: they either export or not. The question is, when will they do it? Waiting for the best moment is speculation. And about salaries, that was my point, they are 24% lower than in 2006. Considering the dollar's 47% inflation since that year, those USD 260 would be ~USD 380 now, so 68% lower.