There is a phrase by Javier Maili (Buenos Aires, 1970) that could not be more logical and he repeated it again and again during his election campaign and in the last televised duel. “It is impossible to change reality by doing the same things, and it is impossible for Argentina to be different with the same old things.” And look where the magical realism of Argentine politics wanted the new president to begin doing exactly the opposite, after winning by a large margin and the freedom he longed to achieve, without theoretically having to make an agreement with anyone.
One of the main economic architects of the plan that began during the government of Mauricio Macri (2015-2019), first as Minister of Finance, then as Minister of Finance, and later as President of the Central Bank, i.e. Luis Caputo (Buenos). Ayres, 1965), one of the senior officials publicly vilified by Miley, is the new czar of the Argentine economy. Miley accused him of inheritance: “He smoked $15 billion and left us this desorio [il·legal] By Lilac [lletres de liquiditat amb les quals el Banc Central regula la quantitat de diners circulants]. Three weeks ago, on November 24, Miley said that Caputo was one of those responsible for the disasters that befell the central bank.
Well, yes, it is the same Caputo whom Miley chose – after a deal with Mauricio Macri and other tycoons – to author the disaster that he began to weave and in which the Peronist government of Alberto Fernández continues. If the inflation that Macri left behind was about 70%, under Fernandez it reached 140%.
The truth is that Miley not only wanted to do something different, but she also decided to do what she had already tried to do without success. And to end with the same things as always.
Parallelism in Germany
Argentina brings some resemblance to the economic crisis experienced by the Weimar Republic, and especially Germany in 21-23, the years of hyperinflation. In those years, the film Cabinet Dr. was shown. Caligari (filmed by Robert Wayne in Berlin, 1920) was described by director Vincent LoBrotto in 2005 as “the moral and physical collapse of Germany at the time, with a madman on the loose wreaking havoc on a society distorted and out of balance, a metaphor for a country in a state of Chaos.”
Even Miley explained in his speech about the inheritance he received that inflation could reach 15,000%, a figure that was undoubtedly invented artificially starting with the dollar, to which Caputo added in his speech last Tuesday the example of a house in which milk can cost 60,000 pesos. .
As radio commentator Victor Hugo Morales said on AM750 Radio’s La mañana show, Miley’s speech “is intended to impress the gelada.” [tontos, segons el diccionari d’americanismes de la RAE].
If you read the report on the Argentine economy released last August by the IMF team that visited Buenos Aires, you can see where the plan of Dr. Capotari’s government came from. The focus, as usual in the Fund, is on the fiscal deficit, and on the necessity of resolving the financial crisis that the central bank is suffering from in the face of the negative situation of international reserves. In short: there are no more dollars in the issuing bank.
The International Monetary Fund does not put the numbers in the structural plan it has already drawn up with representatives of Alberto Fernandez’s government. It was brought forward by Dr. Kabutari’s office. It is a plan designed to repay debts to foreign creditors and domestic creditors, a debt contracted under Caputo Macri’s policy and increased by his successor, Alberto Fernandez.
Far from anarcho-capitalism, which appealed to the American economist Murray Rothbard (USA 1926-1995) and which Miley declared in his election campaign, it is an interventionist program of the state that even mandated him to determine the income of pensioners by government decree (in addition to other measures for importers and exporters).
The Argentine Central Bank needs access to dollars and aspires to pay about $25 billion annually in interest on debt. For this reason, he designed an income policy in which wage earners (the new wage tax) and pensioners would be the main payers.
Exchange rate with the dollar
The starting point – although timidly promoted by Alberto Fernández’s government – was a massive exchange rate adjustment. The value of the official dollar has risen by 100%, from 400 pesos to 800 pesos per unit, which amounts to 50% devaluation or loss of the peso (in real terms it rises to 70%), since 400 pesos now buys $0.50.
The adjustment meant liberalizing prices, starting with the prices of fuel and public services, but yes, the so-called cepo cambiario, or restrictions on access to foreign currencies to control the outflow of the country’s currencies and avoid dollar speculation. .
Since 2018, according to selected IMF external sector indicators, Argentines have withdrawn $78 billion in cash from the country through the second quarter of 2023, and Argentine bondholders sold $23 billion worth of Argentine bonds in dollars.
The money needed to take care of these came from an IMF loan, from the central bank’s international reserves, which have a negative balance, and from a swap operation facilitated by the People’s Bank of China (a line that the central bank canceled) Xi Jinping’s government after Miley’s insults against China in campaign, which is now being renegotiated).
The crisis is of a financial nature for the central bank (purchasing government bonds last year) which has trumped any deficit monetization scheme to try to offset capital flight. This financial crisis, along with debt, is a tumor that may now be spreading more widely.
In addition to worsening the short-term financial crisis – the central bank will have to increase monetary issuance rather than reducing it – and threatening hyperinflation, a recession will also cause the entire year to work. You know what’s coming? For this reason, he warned Argentines of stagflation. In other words, recession with inflation. In fact, it has failed: we are talking about hyperinflation with a sharp decline in economic activity. Miley does not suggest that everything has changed so that everything remains the same (Il Gatopardo). But to be worse. It’s a shock.
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