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.

 


 

 
 

Emigrate While You Can... Learn More

 
 

 
 

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:

  • Gold Sector: Positioning and Sentiment
      A Case of Botched Timing, But... When last we wrote about the gold sector in mid February, we discussed historical patterns in the HUI following breaches of its 200-day moving average from below. Given that we expected such a breach to occur relatively soon, the post turned out to be rather ill-timed. Luckily we always advise readers that we are not exactly Nostradamus (occasionally our timing is a bit better). Below is a chart of the HUI Index depicting the action since the January...
  • India: The next Pakistan?
      India’s Rapid Degradation This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India's currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society.   The Modimobile is making the rounds amid a flower shower. [PT] Photo credit: PTI Photo   Tribal cultures face...
  • March to Default
      Style Over Substance “May you live in interesting times,” says the ancient Chinese curse.  No doubt about it, we live in interesting times.  Hardly a day goes by that we’re not aghast and astounded by a series of grotesque caricatures of the world as at devolves towards vulgarity. Just this week, for instance, U.S. Representative Maxine Waters tweeted, “Get ready for impeachment.”   Well, Maxine Waters is obviously right – impeaching the president is an urgent...
  • The Long Run Economics of Debt Based Stimulus
      Onward vs. Upward Something both unwanted and unexpected has tormented western economies in the 21st century.  Gross domestic product (GDP) has moderated onward while government debt has spiked upward.  Orthodox economists continue to be flummoxed by what has transpired.   What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity.  Although the fat lady has so far only...
  • Welcome to Totalitarian America, President Trump!
      Trump vs. the Deep State If there had been any doubt that the land of the free and home of the brave is now a totalitarian society, the revelations that its Chief Executive Officer has been spied upon while campaigning for that office and during his brief tenure as president should now be allayed.   Image adapted from the cover of “Deep State #5” - depicting an assassin from the future   President Trump joins the very crowded list of opponents of the American...
  • Searching for Truth
      Heresy or Truth? RANCHO SANTANA, NICARAGUA – In the fifth century, Christian scholars counted 88 different heresies. Arianism. Eutychianism. Nestorianism. If there was a way to “offend” God, they had a name for it. One group of “heretics” argued that there was no such thing as “original sin.” Another denied the trinity. And another claimed Jesus was not divine. Which one had the truth?   Depiction of the first Council of Ephesus in 431 AD, convened by Emperor...
  • Gold and the Fed's Looming Rate Hike in March
      Long Term Technical Backdrop Constructive After a challenging Q4 in 2016 in the context of rising bond yields and a stronger US dollar, gold seems to be getting its shine back in Q1. The technical picture is beginning to look a little more constructive and the “reflation trade”, spurred on further by expectations of higher infrastructure spending and tax cuts in the US, has thus far also benefited gold. From a technical perspective, there are indications that the low at $1045.40,...
  • The Unstable Empire – A Campfire Tale
      Campfire Tale   Caesar: The Ides of March are come. Soothsayer: Ay, Caesar, but not gone. — Julius Caesar, Shakespeare   GRANADA, NICARAGUA – Today, we stop the horses and circle the wagons. For 19 years, we have been rolling along, exploring, discovering. We began with the assumption that we didn’t “know” anything - so we kept our eyes open. Now we know even less.   Famous people who knew nothing and were not shy to admit it: Sergeant Schultz...
  • Why Silver Went Down – Precious Metals Supply and Demand
      Rumor-Mongering vs. Data The question on the lips of everyone who plans to exchange his metal for dollars—widely thought to be money—is why did silver go down? The price of silver in dollar terms dropped from about 18 bucks to about 17, or about 5 percent.   Reportedly silver was already assassinated in the late 19th century... so last week they must have assassinated its corpse. [PT] Illustration taken from 'Coin's Financial School'   The facile answer is...
  • Systematic Trading - Unwrapping the Onion
      Lumpy but Robust   [ed note: this article has originally appeared at the Evil Speculator and was written by trader and ES contributor Scott. We provide a link to Scott's past articles below this post for readers who want to get more familiar with his ideas and/or any unusual terminology used in this article]   One continual theme in my trading is that every time I think I have it figured out, I get punched in the face by an unexpected problem. The tendency is to go more...
  • LIBOR Pains
      Wrong Focus If one searches for news on LIBOR (=London Interbank Offered Rate, i.e., the rate at which banks lend dollars to each other in the euro-dollar market), they are currently dominated by Deutsche Bank getting slapped with a total fine of $775 million for the part it played in manipulating the benchmark rate in collusion with other banks (fine for one count of wire fraud: US$150 m.; additional shakedown by US Justice Department: US$625 m., the price tag for a deferred prosecution...
  • “People Need to Understand that their Biggest Asset is Individual Liberty” - an Interview with Claudio Grass
      Preserving Liberty in a Difficult Time   In his latest interview for the X22 Report, Claudio Grass shares his views on the future of the Euro, the Trump Presidency, the monetary system and the advantage of of owning gold in these times of global uncertainty.   Claudio Grass, managing director at Global Gold   As election season is upon us in Europe and political and economic tensions are heating up, Claudio Grass notes that “the euro is the most artificial...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

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]

 

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

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com