4 ms·

I went to Argentina for a month in 2011 to visit a friend. As soon as I got there he was trying to exchange for my usd cash I brought and offered me more than

I went to Argentina for a month in 2011 to visit a friend. As soon as I got there he was trying to exchange for my usd cash I brought and offered me more than I'd get at the currency exchange, he told me he didn't trust his own currency. I thought it was really odd until a couple years later when there was a lot of reporting on the fear of hyper inflation.

noduerme 4y ago
This is/was typical in Argentina. The reason is, in 2011 official prices and prices on controlled goods (like meat, bread, flour, water) was artificially pegged to $1 = ARS$3. But in reality the peso was much cheaper; this was a way to disburse the country's US Dollar reserve to the patrons of the ruling class. It had been done many times before at different currency pegs, while the government printed more money, each time resulting in hyperinflation. It's a form of theft from the working class who can't easily access foreign currency, siphoning the wealth to the rich who can do so. In any event, Argentines prefer strongly to have dollars, to the point where in 2011-2014 or so you could rent an apartment for perhaps 50% the going rate if you paid in hundred dollar American bills (but only the new ones, with the big Franklin). These could simply not be obtained in Argentina anymore. Back in 2002 or so, you could get $100 bills out of an ATM (maximum $200 per day). But in 2011 you either had to be paid directly by the government at the official rate (i.e. triple your salary for 20% of your wages) or you could take a boat to Uruguay and pull out $500 a day. The third way was using Bitcoin and trading with local Argentines on Localbitcoins.com, who would give you the normal US dollar rate for the bitcoins you were selling.
- gotorazor 4y ago
  I am a bit dense. How does hyperinflation, an artifical peg, and exchange restrictions allow USD currency reserves (presumably held by the government) to flow to those who has freely accessible USD exchange (the patron of the ruling class)? What is the mechanism that would facilitate this? (Also, I think I disagree with everything you have said in the thread so far. But, this is a serious question. I don't follow this argument at all.)
  - deleted 4y ago
    [deleted]
  - pjc50 4y ago
    Let's say the open market price is 10 pesos to one dollar, and the official rate is 3 pesos to one dollar. You want to buy $10 of stuff that's priced internationally, such as gasoline. How much does it cost? At the official rate, that's 30 pesos. But in practice you can't get the official rate, because of the currency controls. You have to pay 100 pesos. So people who can access the official rate get to be comparatively wealthy. Conversely, tourists come in not knowing this, or foreign businesses which can't access the grey market, and are fleeced for their dollars at a fraction of their worth.
  - noduerme 4y ago
    I'm happy to disagree in an intelligent conversation! This is a very bright question, and something that truly baffled me at first. But as is often the case when people enrich themselves, there's an unexpectedly dumb, blunt underlying mechanism which existed in Argentina. In addition to what the sibling posted, it's a little known fact that government workers (a huge sector in Argentina, where everything from bureaucrats to police to postal workers are underpaid and in oversupply) had the option under Kirchner to take 20% of their monthly salary in USD, in cash, drawn directly from the currency reserve. And this was paid at the official peg meaning it was worth roughly 5x as much as the pesos it was substituting were actually worth. This scheme was purely a way of ensuring loyalty to the regime among the public sector, and it virtually bankrupted the country. This is why USD was under every mattress and enough was in circulation to be used in every major transaction. At the same time, most daily things had to be bought with pesos, so those dollars flowed to street money changers where they were exchanged for 5x their official value. Thence some small amount of those bills went on to foreigners like me, and my Bitcoin was off to Miami... most of it remains buried on ranches in the pampa. I sort of hinted at this in an earlier post but didn't elaborate. I'm glad you asked such an insightful question. This really is the missing part of the puzzle.
    - gus_massa 4y ago
      The general idea is correct, but I want to clarify a few points. > government workers had the option under Kirchner to take 20% of their monthly salary in USD It was more complicated. Something like (salary - minimun_official_salay)/some_number, but 20% is a good approximation for a middle class salary. Note that poor people didn't get the dollars with discount! And rich people had more sophisticated ways to save their money. It was not only for government workers. Anyone with a declared salary could buy them, but many private workers had undeclared salary to avoid paying taxes. > And this was paid at the official peg meaning it was worth roughly 5x as much as the pesos it was substituting were actually worth. The difference was not x5, but only x1.5. Here is a random article found in Google https://www.ambito.com/economia/en-2014-dolar-oficial-subio-31-y-el-blue-cerro-1380-brecha-61-n3873112 https://www.ambito.com/economia/en-2014-dolar-oficial-subio-... (Autotransalation https://www-ambito-com.translate.goog/economia/en-2014-dolar-oficial-subio-31-y-el-blue-cerro-1380-brecha-61-n3873112?_x_tr_sl=es&_x_tr_tl=en&_x_tr_hl=es-419&_x_tr_pto=wapp https://www-ambito-com.translate.goog/economia/en-2014-dolar... )(Oficial price: $8.565. Unofficial price: $13.80. And there are many intermediate variants. The article claims that a few months before, the maximum difference was x2, not x5.) > This scheme was purely a way of ensuring loyalty to the regime among the public sector, and it virtually bankrupted the country. In my opinion it was mostly to keep middle class people in big cities not so angry, so they don't go out to the street to protest. (I.E. Not to buy loyalty forever, just to build temporal complacence.) I don't think this bankrupted the country. We also had a huge discount in natural gas and electricity (we paid like half of the price) and there was a lot of corruption and weird gubernamental contracts. I think the "20% in cheap dollars was a small part of the problem. > This is why USD was under every mattress and enough was in circulation to be used in every major transaction. Homes, cars and other very expensive stuff is bought here using dollars, but it started like 40 of 50 years before, perhaps more. > most of it remains buried on ranches in the pampa. I don't expect big farmers to have siphoned most of that money, but we would have to wait 50 years to have a good understanding of how money flow during that time. I think most big farmesr don't like to keep cash because thief, and also don't thrust the banks. They save in silobolas https://es.wikipedia.org/wiki/Silo_bolsa https://es.wikipedia.org/wiki/Silo_bolsa (autotranslation https://es-m-wikipedia-org.translate.goog/wiki/Silo_bolsa?_x_tr_sl=es&_x_tr_tl=en&_x_tr_hl=es-419&_x_tr_pto=wapp https://es-m-wikipedia-org.translate.goog/wiki/Silo_bolsa?_x... ), that are a huge tube of plastic filled with the soy they harvest, and is keep in the field until they need the money and have to sell it. And ver big players invested in subsidiaries abroad, that is better than having stored dollars. Disclaimer: I bought my "20%" of cheap dollars and when I bought a bigger home I used them to pay the difference between the mortgage and the price of the new home.

noduerme 4y ago

This is/was typical in Argentina. The reason is, in 2011 official prices and prices on controlled goods (like meat, bread, flour, water) was artificially pegged to $1 = ARS$3. But in reality the peso was much cheaper; this was a way to disburse the country's US Dollar reserve to the patrons of the ruling class. It had been done many times before at different currency pegs, while the government printed more money, each time resulting in hyperinflation. It's a form of theft from the working class who can't easily access foreign currency, siphoning the wealth to the rich who can do so. In any event, Argentines prefer strongly to have dollars, to the point where in 2011-2014 or so you could rent an apartment for perhaps 50% the going rate if you paid in hundred dollar American bills (but only the new ones, with the big Franklin). These could simply not be obtained in Argentina anymore. Back in 2002 or so, you could get $100 bills out of an ATM (maximum $200 per day). But in 2011 you either had to be paid directly by the government at the official rate (i.e. triple your salary for 20% of your wages) or you could take a boat to Uruguay and pull out $500 a day. The third way was using Bitcoin and trading with local Argentines on Localbitcoins.com, who would give you the normal US dollar rate for the bitcoins you were selling.

gotorazor 4y ago
I am a bit dense. How does hyperinflation, an artifical peg, and exchange restrictions allow USD currency reserves (presumably held by the government) to flow to those who has freely accessible USD exchange (the patron of the ruling class)? What is the mechanism that would facilitate this? (Also, I think I disagree with everything you have said in the thread so far. But, this is a serious question. I don't follow this argument at all.)
- deleted 4y ago
  [deleted]
- pjc50 4y ago
  Let's say the open market price is 10 pesos to one dollar, and the official rate is 3 pesos to one dollar. You want to buy $10 of stuff that's priced internationally, such as gasoline. How much does it cost? At the official rate, that's 30 pesos. But in practice you can't get the official rate, because of the currency controls. You have to pay 100 pesos. So people who can access the official rate get to be comparatively wealthy. Conversely, tourists come in not knowing this, or foreign businesses which can't access the grey market, and are fleeced for their dollars at a fraction of their worth.
- noduerme 4y ago
  I'm happy to disagree in an intelligent conversation! This is a very bright question, and something that truly baffled me at first. But as is often the case when people enrich themselves, there's an unexpectedly dumb, blunt underlying mechanism which existed in Argentina. In addition to what the sibling posted, it's a little known fact that government workers (a huge sector in Argentina, where everything from bureaucrats to police to postal workers are underpaid and in oversupply) had the option under Kirchner to take 20% of their monthly salary in USD, in cash, drawn directly from the currency reserve. And this was paid at the official peg meaning it was worth roughly 5x as much as the pesos it was substituting were actually worth. This scheme was purely a way of ensuring loyalty to the regime among the public sector, and it virtually bankrupted the country. This is why USD was under every mattress and enough was in circulation to be used in every major transaction. At the same time, most daily things had to be bought with pesos, so those dollars flowed to street money changers where they were exchanged for 5x their official value. Thence some small amount of those bills went on to foreigners like me, and my Bitcoin was off to Miami... most of it remains buried on ranches in the pampa. I sort of hinted at this in an earlier post but didn't elaborate. I'm glad you asked such an insightful question. This really is the missing part of the puzzle.
  - gus_massa 4y ago
    The general idea is correct, but I want to clarify a few points. > government workers had the option under Kirchner to take 20% of their monthly salary in USD It was more complicated. Something like (salary - minimun_official_salay)/some_number, but 20% is a good approximation for a middle class salary. Note that poor people didn't get the dollars with discount! And rich people had more sophisticated ways to save their money. It was not only for government workers. Anyone with a declared salary could buy them, but many private workers had undeclared salary to avoid paying taxes. > And this was paid at the official peg meaning it was worth roughly 5x as much as the pesos it was substituting were actually worth. The difference was not x5, but only x1.5. Here is a random article found in Google https://www.ambito.com/economia/en-2014-dolar-oficial-subio-31-y-el-blue-cerro-1380-brecha-61-n3873112 https://www.ambito.com/economia/en-2014-dolar-oficial-subio-... (Autotransalation https://www-ambito-com.translate.goog/economia/en-2014-dolar-oficial-subio-31-y-el-blue-cerro-1380-brecha-61-n3873112?_x_tr_sl=es&_x_tr_tl=en&_x_tr_hl=es-419&_x_tr_pto=wapp https://www-ambito-com.translate.goog/economia/en-2014-dolar... )(Oficial price: $8.565. Unofficial price: $13.80. And there are many intermediate variants. The article claims that a few months before, the maximum difference was x2, not x5.) > This scheme was purely a way of ensuring loyalty to the regime among the public sector, and it virtually bankrupted the country. In my opinion it was mostly to keep middle class people in big cities not so angry, so they don't go out to the street to protest. (I.E. Not to buy loyalty forever, just to build temporal complacence.) I don't think this bankrupted the country. We also had a huge discount in natural gas and electricity (we paid like half of the price) and there was a lot of corruption and weird gubernamental contracts. I think the "20% in cheap dollars was a small part of the problem. > This is why USD was under every mattress and enough was in circulation to be used in every major transaction. Homes, cars and other very expensive stuff is bought here using dollars, but it started like 40 of 50 years before, perhaps more. > most of it remains buried on ranches in the pampa. I don't expect big farmers to have siphoned most of that money, but we would have to wait 50 years to have a good understanding of how money flow during that time. I think most big farmesr don't like to keep cash because thief, and also don't thrust the banks. They save in silobolas https://es.wikipedia.org/wiki/Silo_bolsa https://es.wikipedia.org/wiki/Silo_bolsa (autotranslation https://es-m-wikipedia-org.translate.goog/wiki/Silo_bolsa?_x_tr_sl=es&_x_tr_tl=en&_x_tr_hl=es-419&_x_tr_pto=wapp https://es-m-wikipedia-org.translate.goog/wiki/Silo_bolsa?_x... ), that are a huge tube of plastic filled with the soy they harvest, and is keep in the field until they need the money and have to sell it. And ver big players invested in subsidiaries abroad, that is better than having stored dollars. Disclaimer: I bought my "20%" of cheap dollars and when I bought a bigger home I used them to pay the difference between the mortgage and the price of the new home.