Looking for Dollars

Argentina famously employs 'dollar-sniffing' dogs at its borders to keep its citizens from getting their savings out of the hands of the domestic kleptocracy to a safe haven. After years of soaring inflation, the black market rate of the peso has fallen to about half the official rate. As a result, rumors of an imminent devaluation are growing more pronounced of late.

In a new gambit to get hold of more foreign exchange, Argentina's government is offering people who bring undeclared dollars home an amnesty. This is almost like saying: 'please bring the stuff back for us to steal'. It probably won't work.

 

In fact, given the strenuous denials by the government, which insists that there will never – honest injun! – be a devaluation of the peso, it is almost certain that it will be devalued, based on the 'never believe anything until it's been officially denied' principle. In typical government fashion, fingers are wagged in the direction of 'those who want to profit from a devaluation', i.e., it's all the fault of evil speculators.

Meanwhile, president Fernandez-Kirchner has become tainted by a growing scandal over a close friend of her family who apparently shipped dollars out of Argentina by the plane load. As a result, her government is threatened by new political competition from the left (just what Argentina urgently needs: more socialism!).

Here are excerpts from a recent article describing the situation:

 

 

“Argentina's government announced new measures on Tuesday intended to suck up undeclared dollars in response to growing pressure to abruptly devalue the nation's currency.

Economy Minister Hernan Lorenzino said the new tax-free bonds and certificates of deposit will pull into the banking system the foreign currencies that Argentines have hidden under mattresses and spirited out to illegal tax havens. Both measures are being sent to congress for approval, presumably because enabling people to declare cash without paying criminal penalties requires the force of law.

Argentines will need to deposit these undeclared dollars at the Central Bank, which will issue CDs for the entire amounts, Central Bank President Mercedes Marco del Pont said. The bonds will pay 4 percent interest through 2017, Lorenzino said.

The money will be used to finance energy and home construction projects, generating jobs and stimulating the economy. Both sectors have stalled, in part because speculation about future inflation and a possible devaluation has made long-term investments in Argentina too risky.

[…]

A closely watched sign of the country's economic future is the illegal currency market, where Argentines are increasingly desperate to ditch their pesos as inflation climbs above 25 percent a year. Amid fears of a potential currency shock, they're now trading nearly 10 pesos for each dollar — close to half the official value of 5.2.

This "blue dollar" trading remains marginal compared to the overall economy, but it's a free market, stubbornly beyond the government's control, and as such, it's increasingly being looked at by Argentines trying to protect their pocketbooks. The central bank periodically releases dollars to rein it in, but that's risky as well, now that Argentina's reserves have dropped by more than 20 percent, to $39.75 billion.

[…]

Fernandez waved away the trouble in a speech at the Casa Rosada government house Monday night. "Those who want to make money at the cost of a devaluation that the people will have to pay for will have to wait for another government," she declared.

 

(emphasis added)

It should be noted that the energy sector has also 'stalled' because the government nationalized YPF Repsol, staffing it with its cronies.

Meanwhile, the growing scandal around businessman Lazaro Baez is proving very uncomfortable for Fernandez-Kirchner. While her popularity dwindles, the prosecutor of the case is receiving death threats:

 

"They're raising this idea again because an election period is approaching," she added. "Every time there's an election, on side there's the economy and on the other, the scandals. It's typical of every election."

That brief reference to scandals was her first comment yet about allegations that Baez had used his access to the presidential couple to make huge profits that he laundered by having aides fly the cash out of the country in mysterious trips on private planes. The allegations, made by former Baez associates in televised interviews with investigative journalist Jorge Lanata, have made for sensational television in Argentina, and a judge agreed to open a formal investigation of Baez and his associates.

Lanata struck closer still to the president on Sunday night, interviewing Kirchner's former secretary, Miriam Quiroga, who described bags full of cash in the Casa Rosada. She said they were delivered to the southern province of Santa Cruz, where Baez based his business empire and the Kirchners have several homes. Quiroga also alleged that the Kirchners had vaults built to hold the cash.

Judge Julian Ercolini subpoenaed Quiroga to testify in the widening criminal investigation by prosecutor Guillermo Marijuan, and Attorney General Alejandra Gils Carbo ordered additional police protection for the prosecutor, who reported receiving at least two threats that his young daughters will be killed if he doesn't drop the probe.”

 

(emphasis added)

Meanwhile, former Kirchner ally, union leader Hugo Moyano, has become a big critic of the president and has founded a new leftist party to challenge her. Argentina's unions are quite powerful – they have regularly demanded and received huge wage increases that indirectly confirm that the country's inflation rate is far higher than officially reported.

 

Conclusion:

Argentina was once the 5th richest country on earth in terms of per capita GDP. It is richly endowed with natural resources, but things have been going wrong for quite some time now. Looking at Mrs. Fernandez-Kirchner's opposition, that seems unlikely to change. Under Fernandez-Kirchner's rule, with the able assistance of her Yale-educated central bank chief Mercedes dela Pont (who once opined that her money printing was not to blame for soaring prices in Argentina), the peso has been in free-fall anyway, so 'those waiting for devaluation' probably won't have very long to wait (timing-wise, the day after the coming election can be tentatively penciled in for the next big lurch lower).

 


 

Argentine Peso

The Argentine Peso vs. the US dollar over the past decade, official rate – via XE.com, click to enlarge.

 


 

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • 21st Century Shoe-Shine Boys
      Anecdotal Flags are Waved   "If a shoeshine boy can predict where this market is going to go, then it's no place for a man with a lot of money to lose." - Joseph Kennedy   It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if...
  • India: The Genie of Lawlessness is out of the Bottle
      Recapitulation (Part XVI, the Last) Since the announcement of demonetization of Indian currency on 8th November 2016, I have written a large number of articles. The issue is not so much that the Indian Prime Minister, Narendra Modi, is a tyrant and extremely simplistic in his thinking (which he is), or that demonetization and the new sales tax system were horribly ill-conceived (which they were). Time erases all tyrants from the map, and eventually from people’s...
  • Christopher Columbus and the Falsification of History
      Crazed Decision The Los Angeles City Council’s recent, crazed decision* to replace Christopher Columbus Day with one celebrating “indigenous peoples” can be traced to the falsification of history and denigration of European man which began in earnest in the 1960s throughout the educational establishment (from grade school through the universities), book publishing, and the print and electronic media.   Christopher Columbus at the Court of the Catholic Monarchs (a...
  • The Government Debt Paradox: Pick Your Poison
      Lasting Debt “Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008.  “They are opportunities to do big things.”   Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT] Photo...
  • The Forking Paradise - Precious Metals Supply and Demand Report
      Forking Incentives A month ago, we wrote about the bitcoin fork. We described the fork:   Picture a bank, the old-fashioned kind. Call it Acme (sorry, we watched too much Coyote and Road Runner growing up). A group of disgruntled employees leave. They take a copy of the book of accounts. They set up a new bank across the street, Wile E Bank. To win customers, they say if you had an account at Acme Bank, you now have an account at Wile, with the same balance!   BCH, son...
  • The United States of Hubris
      Improving the World, One Death at a Time If anyone should have any questions about whether the United States of America is not the most aggressive, warlike, and terrorist nation on the face of the earth, its latest proposed action against the supposed rogue state of North Korea should allay any such doubts.   Throughout history, the problem with empires has always been the same: no matter how stable and invincible they appeared, eventually they ran into “imperial...
  • Long Term Statistics on AAPL
      Introductory Remarks by PT Below we present a recent article by the Mole discussing a number of technical statistics on the behavior of AAPL over time. Since the company has the largest market cap in the US stock market (~ USD 850 billion – a valuation that exceeds that of entire industries), it is the biggest component of capitalization-weighted big cap indexes and the ETFs based on them. It is also a component of the price-weighted DJIA. It is fair to say that the performance of...
  • Tragedy of the Speculations
      The Instability Problem Bitcoin is often promoted as the antidote to the madness of fiat irredeemable currencies. It is also promoted as their replacement. Bitcoin is promoted not only as money, but the future money, and our monetary future. In fact, it is not.   A tragedy... get the hankies out! :) [PT]   Why not? To answer, let us start with a look at the incentives offered by bitcoin. We saw a comment this week, which is apropos:   "Crypto is so...
  • Janet Yellen's 78-Month Plan for the National Monetary Policy of the United States
      Past the Point of No Return Adventures in depravity are nearly always confronted with the unpleasant reality that stopping the degeneracy is much more difficult than starting it.  This realization, and the unsettling feeling that comes with it, usually surfaces just after passing the point of no return.  That's when the cucumber has pickled over and the prospect of turning back is no longer an option.   Depravity and bedlam through the ages. The blue barge of perdition in the...
  • To Hell In A Bucket
      No-one Cares... “No one really cares about the U.S. federal debt,” remarked a colleague and Economic Prism reader earlier in the week.  “You keep writing about it as if anyone gives a lick.” We could tell he was just warming up.  So, we settled back into our chair and made ourselves comfortable.   The federal debtberg, which no-one cares about (yet). We have added the most recent bar manually, as the charts published by the Fed will only be updated at the end of the...
  • Despite 24/7 Trading: Bitcoin Investors are Taking off for the Weekend on Friday Already
      Crypto-Statistics In the last issue of Seasonal Insights I have discussed how the S&P 500 Index performs on individual days of the week. In this issue I will show an analysis of the average cumulative annual returns of bitcoin on individual days of the week.   Bitcoin, daily. While this is beside the point, we note the crypto-currency (and other “alt coins” as well) has minor performance issues lately. The white line indicates important lateral support, but this looks to...
  • Precious Metals Supply and Demand
      Fundamental Developments There were big moves in the metals markets this week. The price of gold was up an additional $21 and that of silver $0.30. Will the dollar fall further?As always, we are interested in the fundamentals of supply and demand as measured by the basis. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.   Gold and silver prices in USD terms (as of last week Friday) - click to enlarge.   Next, this is a...

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com