Argentina voted no on the Argentinian peso. USD could become its new currency
nytimes.com
nytimes.com
This is an English article I could find about it: https://www.as-coa.org/articles/what-are-argentinas-paso-pre...
I guess the dollar is the best option as it’s easier to adopt than gold or whatever. Perhaps the euro, but I guess the dollar is more widely used. And the dollar is less manipulated than the Yuan.
I guess the efficiency of not having to run a mint and the giving up on local corruptions and manipulations is a worse harm than being helpless against dollar inflation or whatever.
I think the financial reality of many economies limits the usefulness of what you can do with currencies. Just because you have your own currency does not mean you can maintain it without a peg and that peg comes with a cost. And then there is the political will. The British Pound for instance should have allowed the UK to fare much better than the Euro-Zone during the energy crisis, but it really did not.
Also, I question how much power it really gives in this case. Usage of USD is already large, and the government can't really control foreign exchange already.
The people simply decide not to use the local currency. And people generally care far more about stability, ease of movement and reasonably stable inflation over some control which they never experience directly.
And since this ends up being a parallel grey market that is outside the taxation and financial control systems it's better not to fight.
But the main difference was that in Brazil it was just a Government policy that could be removed in a whim, while in Argentina it was a law, enshrined by Congress vote. When the Mexican crisis hit in 1994, it was clear that such measure had limited effect and would become poisonous to the nation's economy. But the Argentinian middle class went balls-deep into the illusion of a cheap dollar (unlike their Brazilian counterpart) and any depegging suggestion was political suicide. Brazil eventually depegged (later than they should, also for political reasons, but it was an obvious decision). Argentina depegged too, but only after the whole nation imploded.
Nostalgia for that illusion is one of the things fueling this vote.
It might not have been the absolute best approach in hindsight (or even at the time, I don't recall the discussions, I was also in my teens) but at least the Real did end up controling the spiraling hyperinflation of the late 80s-early 90s.
My memories from that time are pretty bleak, grocers would have people working the whole day at stores remarking prices on the shelves (once in the morning, once in the afternoon and sometimes in the evening), my family would go all together on payday to grocery stores and fill up carts and carts with everything we needed for the month because money would be less valuable in a few hours... It was quite fucked up.
But, without the ability to control the value of their own currency, how would it work for the government to manage their domestic affairs? Would they buy a boat load of USD, and circulate it within the country to be traded for goods and services? Are there any downsides to this?
The idea is that the stability the economy gains by using the US dollar, and the inability of the Argentine government to cause inflation by putting the currency printer on overdrive, benefit the country more than the loss of self-control from no longer having its own currency.
In Latin America, Panama, El Salvador, and Ecuador formally use the US dollar as their own currencies: They have also decided that the stability of the dollar (and ease of transactions with the US and Americans) is more important than controlling its own monetary policy. While Argentina has never before formally adopted the US dollar as its currency, a) the dollar has been the informal currency for many domestic transactions, as in many other countries in South America and elsewhere; bank loans and real estate are common examples. b) Argentina linked its currency to the US dollar on a 1:1 basis from 1992 to 2001. I suppose the electorate has decided that the country should not have abandoned the peg.
The situation is different for every country. The Eurozone includes many Western European countries with historically better records of monetary and fiscal discipline than Argentina, that have nonetheless decided that the benefits of using the same currency as its neighbors outweigh the loss of self-control. History will decide whether this view is correct; there certainly is no shortage of economists that argue that the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea. The UK never was a member of the Eurozone before Brexit, and no Scandinavian EU member is, either, all actively or passively remaining outside (not including non-EU member Norway). Conversely, the Bank of Canada has several times studied Canada adopting the US dollar.
Which is why countries in the Eurozone issue their own government bonds, each at a different interest rate. https://www.ecb.europa.eu/stats/financial_markets_and_intere...
The currency a country uses and the interest it pays are two different things. You could also imagine a group of countries with separate currencies agreeing to take on debt at the same interest rate, with differences in perceived risk resulting in corresponding exchange rate drift.
This is, of course, a different way to name the "lack of control" you mention
Also the title is really misleading, it presents this as a run race when that is very much up in the air.
Yet more proof that Bitcoin is mostly a solution in search of a problem.
In short, a politician who wants to replace the dollar got 30% of the votes in the primary and will now contest the general election.
Even if he wins, he doesn't have a lot of support from the senate or congress to pass laws since he's a more "independent" candidate separate from the two main parties, he also has no governors on his side. So, it will be very difficult for him to actually accomplish anything, let alone something so significant.
Even if he can, I believe he actually said it's a 35-year plan to sort of bring Argentina back into tracks, so he might not even actually dollarize.
Now, on a more general note, his win was very unexpected, he was sort of regarded as a joke not too long ago but apparently amassed a good number of followers, some of which are libertarian but most I believe are just fed up with inflation and insecurity.
Personally, I believe he is really not fit for presidency, moreover, he claims to be "libertarian" however he's very conservative on social issues, already claimed he's going to hold a plebiscite to prohibit abortions, he's against sex education in schools because he claims it's "perverse", he's a climate change denier and his vice-president is a denier of the 70s Argentinian dictatorship as well. I believe him to be a potentially dangerous candidate were him to reach power. I know many people in HN will disagree because most Argentinians in this website sympathize with him.