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Why it is impossible to dollarize in Argentina

Before carrying out a feasibility study on the dollarization, it should be underlined the nostalgic convergence applied in the 1990s, since dollarization is very different. It is not the same as the national currency with a fixed and interchangeable exchange rate, the same amount of money recovery to be equal to the amount of reserves, and which directly uses the money signals of another country. We will see from point to point:

a) Dollarization is constitutional and therefore illegal. In fact, article 75, paragraph 6, of the Constitution establishes that the federal bank must have the ability to issue currency. That is, the national currency, the central bank and the sole issuer of the national currency.

b) Dollarization is not such a measure, it can take a single day because an idea has been created. To monetize it, it is necessary to exchange all the invested and circulated investments in banks to the BCRA reserves dollars. And they should have free access, otherwise the exchange would be impossible. Therefore, the BCRA reserves should be 66,000 million euros from the Argentine reserves, $ 17,000 million and $ 19,000 million, with non-China reserves. free availability The amount would be $ 30,000 million, and it would also be necessary to remove other assets that can not be made available freely and probably not to pay the IMF money to pay off the dollar and the dollar. But do you think the $ 30 billion money can be used? Well, the amount of deposits that circulate in pesos and the public exceeds $ 100 million, so that the devaluation of more than 300% could be dollarized. You need $ 150 per dollar for each dollar. It should be remembered that the amount of the dollarization reserves is much higher than in the convertibility, since dollarization is not sufficient for the reserve base, because depositors want to deduct their deposits, the bank should deliver 100% shareholders with shareholders, so it is necessary for all deposits and currencies 100% conversion.

c) If the forecasts set for 2020 do not appear to be what is currently underestimated, or should it speak about dollarization: the BCRA reserves would run out and the Treasury would not go to the collection. Only operating expenses, but the interest, as well as the equity capital, do not even renew the market. For this reason, the decommissioning of the dollar comes from a multidirect tax: it puts the debt, retirement and salaries of the public sector at risk if the collection is not sufficient through recession or any other factor. Markets are not funded by the deficit. The problems are not over: there is no mobile debt we have today, because you have the risk of falling into vital situations and the default would be a ghostly ghost. The country's risk could be stratospheric in Argentine dollarization.

d) The country's external accounts, trade balance or capital account, would appear to be unknown to the financial sector if the balance of the market deficit or foreign capital flight did not occur. Temporary financing option for any currency authority. In this case, the dollars would leave the financial system abroad, leaving many banks in a dangerous situation. Banks would be raw materials in true flesh, it would be dollarization in our country.

e) From the perspective of the level of activity, the Argentine economy would not allow the Federal Reserve of the United States to raise or lower the interest rates for relative prices, for reasons that would not impose this economy. Argentine economy If a dollar has risen or declined substantially in the world, it would be necessary to undergo sudden recessions or expansions of the Argentine economy to adapt interest rates or increase liquidity or reduction instruments.

f) From the banking sector's profitability perspective, the dollarization would require a large amount of reserve requirements, if it were necessary to stop the balance against a bank without any money, to stop depositing. . The performance of a single bank would become systematic to execute quickly, the public would inevitably know that the BCRA does not have a bank support. But it would be Hamlet's dilemma, with the high demands of the Argentine dollar, that the banking business would tend to go abroad.

g) The debts of the Argentines would become forever with the IMF. We could never pay for the fund and thank, for the cancellation of the loan or for any other financing, we would create a revenue collection that would not be possible. Providing fresh money in a country with no fiscal policy or monetary policy and a high probability of default.

And there are many, many more problems, we can not mention here. In short, the frustration caused by the lack of freedoms, the failure of the Central Banks or the lack of a private emission of coins, is being organized by a pile of dollars. They may be frustrated again. It would not be uncommon, with the eccentricity and extreme naming of these economists, the resurgent idea of ​​a virulent inflationary correlation against anarchocapitalist currents, which transforms Argentinean liberalism into dangerous sterility, exchange



Walter Graziano and associates

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We speak English. We travel internally


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