3 ms·

Devaluing your currency to help another country? I don't think I've ever heard of a country doing anything like this for another country?

ninininino 1y ago
It works well when you already want to devalue your currency to improve the competitiveness of your exports (impact on non-diversified consumer's purchasing power and wealth debasement be damned)
- fuzzfactor 1y ago
  >US Treasury Sells Dollars Nothing to see here. They've got plenty. Plus they'll print more.
- rchaud 1y ago
  $20 billion isn't going to make a dent in the value of the USD. Buying pesos doesn't make the dollar any cheaper for major trading partners like Canada, China or the EU. This is a bailout of Argentina's collapsing currency peg instituted by its "free market libertarian" government.
  - londons_explore 1y ago
    It's literally a loan to Argentina to support the friendly government there and the US's existing interests in pesos. If we didn't do it, the peso would probably hyperinflate again and all our investments denominated in pesos would become worthless. If we do do it, we get back all our money as long as the currency doesn't collapse in the future.
    - rchaud 1y ago
      My comment was in response to the parent which hypothesized that this was done to devalue the dollar to make US exports cheaper.
Fade_Dance 1y ago
FX necessarily trades in pairs. To buy a peso one needs to sell something against it, and the US will sell dollars if acting in the FX space. Since the USD is one of the core currency crosses and is at the base layer of the financial system, raising the peso/dollar cross is effectively strengthening the currency against all other currencies. Also, while the specific political circumstances around the pesos swap line are dubious, the US often extends dollar swap lines to other central banks. The other side of the privilege of having the world reserve currency is having the obligation to support the stability of the world financial system (although this example is more off the wall than the typical example).
- bigbadfeline 1y ago
  > raising the peso/dollar cross is effectively strengthening the currency against all other currencies. If the peso rises against all other currencies, the dollar paying for it must fall against them, not as much but the dollar falls - at least relative to the movement it would experience without the purchase of pesos. > Since the USD is one of the core currency crosses and is at the base layer of the financial system, Abracadabra isn't an argument.
  - sdwr 1y ago
    Right, and the US (presumably) has the mass and stability to weather that impact much better than Argentina does.
vocram 1y ago
Switzerland did that for a few years in 2011, not to help another country but to avoid CHF overvaluation.
- lawlessone 1y ago
  Yes, and China allegedly does similar, but in both cases it's to help themselves.
  - mindslight 1y ago
    One of the butchers in the Trump regime wrote a book on how we need to devalue USD so we can go back to being competitive making shoes and all the other sort of unskilled factory jobs China did before they developed. So I guess one could consider this in "our" interest as well.
    - quamserena 1y ago
      Trying to revert a service-based economy into a manufacturing-based one is an incredibly stupid idea and there is no way this doesn’t blow up in our face. Devaluation of the dollar threatens our reserve currency status, yield rates, and will cause rapid inflation, all to chase some pipe dream that Joe the Factory Worker and his family will be able to live a middle-class life again on a single salary. In actuality, cash will flow into equities, the rich will benefit and the average American will suffer the consequences of their vote.

ninininino 1y ago

It works well when you already want to devalue your currency to improve the competitiveness of your exports (impact on non-diversified consumer's purchasing power and wealth debasement be damned)

fuzzfactor 1y ago
>US Treasury Sells Dollars Nothing to see here. They've got plenty. Plus they'll print more.
rchaud 1y ago
$20 billion isn't going to make a dent in the value of the USD. Buying pesos doesn't make the dollar any cheaper for major trading partners like Canada, China or the EU. This is a bailout of Argentina's collapsing currency peg instituted by its "free market libertarian" government.
- londons_explore 1y ago
  It's literally a loan to Argentina to support the friendly government there and the US's existing interests in pesos. If we didn't do it, the peso would probably hyperinflate again and all our investments denominated in pesos would become worthless. If we do do it, we get back all our money as long as the currency doesn't collapse in the future.
  - rchaud 1y ago
    My comment was in response to the parent which hypothesized that this was done to devalue the dollar to make US exports cheaper.

Fade_Dance 1y ago

FX necessarily trades in pairs. To buy a peso one needs to sell something against it, and the US will sell dollars if acting in the FX space. Since the USD is one of the core currency crosses and is at the base layer of the financial system, raising the peso/dollar cross is effectively strengthening the currency against all other currencies. Also, while the specific political circumstances around the pesos swap line are dubious, the US often extends dollar swap lines to other central banks. The other side of the privilege of having the world reserve currency is having the obligation to support the stability of the world financial system (although this example is more off the wall than the typical example).

bigbadfeline 1y ago
> raising the peso/dollar cross is effectively strengthening the currency against all other currencies. If the peso rises against all other currencies, the dollar paying for it must fall against them, not as much but the dollar falls - at least relative to the movement it would experience without the purchase of pesos. > Since the USD is one of the core currency crosses and is at the base layer of the financial system, Abracadabra isn't an argument.
- sdwr 1y ago
  Right, and the US (presumably) has the mass and stability to weather that impact much better than Argentina does.

vocram 1y ago

Switzerland did that for a few years in 2011, not to help another country but to avoid CHF overvaluation.

lawlessone 1y ago
Yes, and China allegedly does similar, but in both cases it's to help themselves.
- mindslight 1y ago
  One of the butchers in the Trump regime wrote a book on how we need to devalue USD so we can go back to being competitive making shoes and all the other sort of unskilled factory jobs China did before they developed. So I guess one could consider this in "our" interest as well.
  - quamserena 1y ago
    Trying to revert a service-based economy into a manufacturing-based one is an incredibly stupid idea and there is no way this doesn’t blow up in our face. Devaluation of the dollar threatens our reserve currency status, yield rates, and will cause rapid inflation, all to chase some pipe dream that Joe the Factory Worker and his family will be able to live a middle-class life again on a single salary. In actuality, cash will flow into equities, the rich will benefit and the average American will suffer the consequences of their vote.