Skip to main content

Argentina Debates Dollarization in the Midst of Rampant Devaluation and Inflation

Argentina dollarization inflation miei

Javier Milei, a presidential candidate for the next election in Argentina, has presented a dollarization plan to fix the economy of the country if elected. The proposal, which has supporters and detractors, would aim to solve the historic devaluation of the Argentine peso and the 100%+ interannual inflation that Argentina registered in March.

Dollarization Surges as Option to ‘Fix’ Argentine Economy

Argentine economists and the population are debating dollarization as a possible solution to the devaluation and inflation problems the country is currently facing. The proposal, presented by Javier Milei, one of the strongest contenders in the next October presidential election according to several polls, includes the abandonment of the Argentine peso as a fiat currency, and the conversion of all deposits and reserves of the central and private banks to U.S. dollars.

According to Milei, this would be one of the more feasible solutions to the myriad problems the national economy is facing. Earlier this month, he stated:

If you want to end the scam of monetary emission to cover for the treasury and end inflation, given that Argentine politicians are thieves, the only way is to close down the Central Bank and, at the beginning [of my government], dollarize [the economy].

While Milei has not determined the exchange rate at which its plan would convert pesos to dollars, to him the social cost would be zero, as the dollarization would end inflation, which is hitting Argentine citizens hard.

Cost and Effects of the Proposed Dollar Switch

Milei’s plan, which is not new, is estimated to cost the country $40 billion. The Argentine peso has lost more than 15% of its value in less than ten days against the U.S. dollar, something that has given an upswing to Milei’s campaign. This in a country that has traditionally used the dollar as a savings option, even more so after the so-called “corralito” was introduced — a measure which restricted the number of dollars Argentines could withdraw from private banks back in 2001.

One of the effects of the new measure, if implemented, would be the abandonment of establishing a national monetary policy. This is being criticized by several analysts, that state the move would tie these policies to what the U.S. Federal Reserve dictates, which may or may not be beneficial to Argentina’s economy.

Others, like former Treasury Minister Domingo Cavallo, believe that the dollarization will be an option to “stabilize” the country in 2024 or 2025, before making a series of reforms to lessen the effect of this measure on wages, pensions, and other assets.

What do you think about Javier Milei and his dollarization proposal for Argentina? Tell us in the comment section below.



from Bitcoin News https://ift.tt/TsBA2HK
Labels:

Comments

Post a Comment

Popular posts from this blog

Mt Gox Creditors Updated, Trustee Says Rehabilitation Custodian Is ‘Currently Preparing to Make Repayments’

On August 31, 2022, the Mt Gox trustee Nobuaki Kobayashi explained in a recent letter that the rehabilitation custodian is “currently preparing to make repayments” to Mt Gox creditors. Trustee Updates Mt Gox Creditors — Repayment Date and Exchange Still Unknown Last week speculation and rumors concerning the release of 140K bitcoin ( BTC ) from Mt Gox littered social media platforms and headlines. Bitcoin.com News covered the situation six days ago as a number of people and Mt Gox creditors called the rumors “ fake news .” During that same period of time, a bitcoin whale transferred 10,000 BTC to unknown wallets, and a 2018 annotation , heuristics, and clustering methods show the funds likely originated from the June 2011 Mt Gox hacks. Following the mysterious whale transfer, last Wednesday, Mt Gox published an official update from the court trustee Nobuaki Kobayashi that explains the court is “currently preparing to make repayments” to creditors. Mt Gox creditors have been wait...
Post a Comment
Read more

Fidelity Discusses Bitcoin as Portfolio Insurance — Could Soon Stand in ‘Stark Contrast’ to Path Fiat Currencies Take

Fidelity Digital Assets, a subsidiary of Fidelity Investments, says that bitcoin could be considered portfolio insurance. The firm notes that the cryptocurrency “may soon stand in stark contrast to the path that the rest of the world and fiat currencies may take — namely the path of increased supply, additional currency creation, and central bank balance sheet expansion.” Fidelity Says Bitcoin Could Be Portfolio Insurance Fidelity Digital Assets, a subsidiary of Fidelity Investments, recently published a research study titled “The Rising Dollar and Bitcoin.” The research outlines “how bitcoin could be considered portfolio insurance” as the rising dollar impacts global currency markets. “The strengthening U.S. dollar is wreaking havoc among other countries and may put pressure on the Federal Reserve to soon reverse its tightening monetary actions, something that has precedent based on 1985’s Plaza Accord,” Fidelity explained. In addition, “more monetary debasement may be needed to ...
Post a Comment
Read more

Economists Discuss Russia, China Potentially Developing Gold-Backed Currency That Could Undermine US Dollar

Economists have weighed in on reports that China and Russia may be developing a new gold-backed currency that could undermine the U.S. dollar’s status as the world’s primary reserve currency. Russia and China May Be Developing Gold-Backed Currency Several experts have shared their views on Russia and China potentially creating a new gold-baked currency, Fox Business reported Saturday, emphasizing that China has been buying up huge quantities of gold while Russia was forced off the U.S. dollar due to sanctions imposed on the country following its invasion of Ukraine. The news outlet noted that some experts have cautioned that these moves, along with the closer relationship that has developed between Moscow and Beijing, point to the likelihood of China attempting to launch a gold-backed currency. However, neither Russia nor China has officially confirmed plans for such a currency. Craig Singleton, senior fellow at the Foundation for Defense of Democracies and a former U.S. diplomat,...
Post a Comment
Read more