5 ms·

At this point, isn't is better for the country to officially accept USD? Is there is any other way out of this kind of inflationry spiral?

Jtsummers 3y ago
At least one presidential candidate going into the next election has proposed dollarization as (part of) a way out. I don't know how likely he is to win or his other policy positions though.
- AbraKdabra 3y ago
  He's (Javier Milei) been in the rise for the past few years, I really don't know if he's going to win, but I do hope so, even if he's not my preferred Libertarianism candidate.
  - Jtsummers 3y ago
    Thanks, I was in a rush and didn't have a chance to look up his name to get the correct spelling before I hit submit. I know there are a lot of Argentinians on here so I figured someone could fill in the details.
jnwatson 3y ago
The fundamental problem is that the government spends way more than it takes in. Until they fix that, the currency is just a detail.
- jasmer 3y ago
  If people stop lending to the government and stop using the currency so that gov. can't print anymore, then that problem goes away. Also, worth noting that all succesfully countries spend more than they take in. US, Canada, UK, France, especially Japan. They just structure it differently. Put another way, in Japan, they don't print money to debauch the currency, they just borrow from retirees under weird terms that don't make sense. Ultimately, the net quality of life will wash out the accounting, but the difference is if investments are made rationally be actors - and - the system 'believes' that it works and upholds it. Especially outside parties who continue to value the currency on some level. Simply by 'losing the faith' of outside parties, everything can go downhill and break in ways that even our own economies would break if that happened - so sometimes it's hard to tell what's really happening. For this reason, countries like Russia have to hoard gold, run surpluses, keep a fat current account, so that when the 'system loses trust' in a huge way aka 'sanctions' - they can stay alive without the need for international credit. So this simplistic 'balance the books' approach isn't really it. It's more like: 'everyone has to act responsibly and rationally and especially not be corrupt' - in the state, private sector, everywhere - including voters. This is a nuanced argument though. Not very populist.
TMWNN 3y ago
Argentina pegged its currency to the dollar for a decade. It should not have abandoned the peg in 2002.
WheelsAtLarge 3y ago
It's hard to do that over the long term. One of the advantages of having your own currency is that you can use it to manage the economy. During recessions a central bank can buy bonds from the government for pesos that they can use to prop up the economy in a downturn. When the currency is not your own then that's not possible so recessions are deeper and more painful. I suspect that's why argentina decided to depeg it to the dollar. They probably had a nasty recession that they hoped that by issuing more currency they could fix. But they could not do that while the peso was peg to the dollar.

Jtsummers 3y ago

At least one presidential candidate going into the next election has proposed dollarization as (part of) a way out. I don't know how likely he is to win or his other policy positions though.

AbraKdabra 3y ago
He's (Javier Milei) been in the rise for the past few years, I really don't know if he's going to win, but I do hope so, even if he's not my preferred Libertarianism candidate.
- Jtsummers 3y ago
  Thanks, I was in a rush and didn't have a chance to look up his name to get the correct spelling before I hit submit. I know there are a lot of Argentinians on here so I figured someone could fill in the details.

jnwatson 3y ago

The fundamental problem is that the government spends way more than it takes in. Until they fix that, the currency is just a detail.

jasmer 3y ago
If people stop lending to the government and stop using the currency so that gov. can't print anymore, then that problem goes away. Also, worth noting that all succesfully countries spend more than they take in. US, Canada, UK, France, especially Japan. They just structure it differently. Put another way, in Japan, they don't print money to debauch the currency, they just borrow from retirees under weird terms that don't make sense. Ultimately, the net quality of life will wash out the accounting, but the difference is if investments are made rationally be actors - and - the system 'believes' that it works and upholds it. Especially outside parties who continue to value the currency on some level. Simply by 'losing the faith' of outside parties, everything can go downhill and break in ways that even our own economies would break if that happened - so sometimes it's hard to tell what's really happening. For this reason, countries like Russia have to hoard gold, run surpluses, keep a fat current account, so that when the 'system loses trust' in a huge way aka 'sanctions' - they can stay alive without the need for international credit. So this simplistic 'balance the books' approach isn't really it. It's more like: 'everyone has to act responsibly and rationally and especially not be corrupt' - in the state, private sector, everywhere - including voters. This is a nuanced argument though. Not very populist.

TMWNN 3y ago

Argentina pegged its currency to the dollar for a decade. It should not have abandoned the peg in 2002.

WheelsAtLarge 3y ago

It's hard to do that over the long term. One of the advantages of having your own currency is that you can use it to manage the economy. During recessions a central bank can buy bonds from the government for pesos that they can use to prop up the economy in a downturn. When the currency is not your own then that's not possible so recessions are deeper and more painful. I suspect that's why argentina decided to depeg it to the dollar. They probably had a nasty recession that they hoped that by issuing more currency they could fix. But they could not do that while the peso was peg to the dollar.