View Full Version : Currency Exchange Rates - Political Discussion
Greetings everyone,
I started this thread to provide a seperate place for everyone to discuss their theories behind foreign currency exchange rates and to make their predicitions for future rates changes.
Hopefully, this will help keep the thread titled "Currency Exchange" focused on actually, physically, exchanging Dollars or Euros for Argentine Pesos while actually in Argentina.
Thanks,
Jackson
I happened to check the fx markets today for the 1st time in a while. I didnt know that the the Brasilian Real has made a very strong and steady move against the USD from about 3 to about 2.50 over the last several months, breaking out out of its 3.00 trading band. I consider the real to be closely linked to the peso since the devaluation and am surprised to see this. Keep and eye on the peso, a move like that makes everything 20% expensive here in USD terms in no time. Anyone know why this has happened?
Two things that weaken a country's currency are a fiscal deficit and a trade deficit. Argentina has a huge trade deficit with Brazil. Argentina currently has a large fiscal surplus but much of that is earmarked for future principal and interest payments on their newly restructured debt, so it is essentially "spoken for."
Ever since money stopped being made of or backed up by precious metals, the value has depended on the government's ability to derive revenue through taxation, import duties, selling passports to criminals, or whatever. And although slowly improving, Argentina has a problem collecting taxes. You think these hookers pay income tax? You think these guys selling dish towels on the corner are remitting the IVA (sales tax)? Not bloody likely.
So leaving the US dollar out of the equation (US currently has huge fiscal AND trade deficits), the pesos could weaken considerably against the real just because of the trade deficit.
Is it possible to leave the US and its deficits out of the equation? It does seem, logically and historically, that the strength of a currency is strongly (principally?) related to the economic/political discipline and stability of the country backing it. Argentina and Brasil both lack discipline and stability, and their currencies, representing relatively small world economies in the Western Hemisphere, are essentially tied to the USD in the sense that they are valued in terms of the USD. They did not have a gradual, yet material, gain against the dollar over the past 2-3 years, although the major world currencies (Euro, Pound, Yen, SFranc) did gain, more or less in tandem, against a weakening dollar. It seems to me that the Peso, Real, and most other Latin American currencies trade against the USD, and not against each other. That is why I dont understand, why has the Real gained so much against the dollar recently, and most importantly could it happen in Argentina?
In my opinion the very fact that the real strengthened considerably while the peso strengthened only slightly supports the hypothesis that these South American currencies trade more against each other than against the USD. I'd further encourage you to consider the role of Mercosur in giving them at least some isolation from the dollar. Additionally, I would postulate that right now Brazil under Lula is looked upon somewhat more favorably in terms of stability by the currency traders than are the welching, defaulting, and even sniveling Argentineans are.
Bottom line is that the US is pursuing policies that would tend, ceteris paribus, to weaken the dollar against whatever currency. The current Argentinean regime has publicly stated that they do not want their currency to strengthen, because that would make their exports less competitive. Argentina is following a policy known as "beggar thy neighbor," and I agree that is a sound policy right now in their position. In beggar thy neighbor, you allow your currency to weaken, by intervention in the currency markets or by simply printing more money. That lowers the price of your export goods in terms of the importing country's currency. That stimulates your own domestic economy by increasing the production of export goods. Argentina is doing this with goods such as wine and oranges. That, in turn, creates employment (which is why I think it is a good idea for Argentina right now).
So, in conclusion, I think the Argentinean and US currencies are weakening equally for different reasons, causing the peso/dollar rate to remain relatively stable, while Brazil is pursuing fiscal austerity to give credibility to a left wing regime that would otherwise be viewed negatively by the currency markets. Thus, the real is strengthening against both dollar and peso.
Fortunately the supply of pussy in Argentina continues to be fueled by imports from Paraguay. Paraguay is thus exporting pussy and importing hard currency, which can also be a sound policy if you like Paraguayan pussy. And what is not to like about Paraguayan pussy?
Second only to the Brazilan's, Paraguryan is the best.
And yes the Argentine government is deliberately selling peso's to support a strong dollar in their country, thus strengthing their international export business. This was published in the Buenos Aires Herald last March. They've dug a deep hole and this is one way out of it.
Inflation is going to become a problem some where down the line for as their economy improves prices are riseing.
Fortunely for us Mongers Pussy is not a capital intensive commodity but rather a personal service industry. The Pussy in it self is actuality Free, its the service of the pussy we pay for.
Thank goodness the Chica's don't have to buy their pussy's wholesale and turn around and sell it to us Mongers retail. For if that was the case this board would not exist.
Exon
I dont mean to beat a dead horse but this is the money thread and economics is a theory, so there is no perfect explanation for anything. Many times the US government has taken measures to keep the dollar relatively weak. Everybody knows that a cheap currency has its benefits. But that is one thing for a 1st world nation; a country cannot economically base itself on having a cheap currency and not much more. Yes Argentina has its natural resources, but is there not a negative correlation between natural resources and wealth in many cases (Japan rich, most of Africa poor)?
As Exon insinuated, I think if inflation continues at its current rate in Argentina we´ll soon see an fx rate of closer to 4.00/USD. That would be ideal for us expats, inflation at about 20% pa. Not nearly enough to cause another coup, but costs in USD at worst stay flat but probably go down as the peso gradually weakens. That would be great for me personally.
Prices are going up everywhere. You know that when the price of a 30 minute FUCK goes up substantially at places like Santa Fe 1707 and Affaire Puerredon, inflation is for real. The black market is the purest form of capitalism everywhere. This is best measured in the USA not by the cost of getting laid, but by the price of a quarter bag of mj.
M
I would be willing to bet $100 US at 2 to 1 odds in your favor that the peso does not go below 3.50 (in value, meaning it will not weaken that far vs. the dollar) at any time within the next year.
Argentina and Brasil both lack discipline and stability, and their currencies, representing relatively small world economies in the Western Hemisphere, are essentially tied to the USD in the sense that they are valued in terms of the USD.
I find it interesting that people claim other countries 'lack discipline' when the US is the biggest debtor nation on the planet, is running record fiscal and trade deficits and has a nearly $6 trillion debt. Interesting perspectives out there!!
Suerte,
Stowe
Hi Exon123,
I respect your position and your greater experience in Buenos Aires, but I have found that Paraguaya chicas are 'mas ardiente' las chicas de Brazil. Much nastier and willing to do ALOT more and with greater enthusiasm.
It's just my opinion but ALL of my best chica experiences have been with Paraquaya chicas and but have had a couple of so-so sessions (not any bad ones though-to your point) with Brazilian chicas.
IMO, only
Suerte,
Stowe
Spassmusssein
06-05-05, 23:17
...I bet a fine "Broccolino"-dinner, beeing shure that in one year the rate will be lower than 2.50 per dollar.
Please do NOT ask me (as an Austrian-European) where will be fixed the € at that time :(
Nibu Raphael
03-27-06, 16:41
That is great still, but how come in Brazil it is now 2 to 1? How long will the peso be 3 to 1 in Argentina? Lets hope for a few more years for sure.
Bairespirata
06-22-06, 01:22
Argentinas strategy is too substitute imports with locally produced goods and thereby aviod unemployment. The government also wants to accumulate bank reserves to make the economy less fragile to external shocks in the future. The government can go on with this policy as long as the demand for the peso is high. Selling pesos and buying dollars weakens the peso, but the effect is rather limited. In fact, shouldn't the central bank buy dollars, the peso would now be worth between 2,2-2,45 to the dollar. However, all included this might be the a good strategy considering the circumstances.
The problem for Argentine companies lay in that, in order to expand their production or make their products with international competitive quality, capital imports are very expensive with an undervalued peso. This can lead to stagnation. It should lead to stagnation, if not, on the other hand, the foreign investments rise. Which they might not do, considering that the negative impact the paper mill-conflict, frozen tariffs etc. Has on the willingness of foreign investors.
StrayLight
06-22-06, 19:53
I'm in the middle of a book called, "And The Money Kept Rolling In (And Out): Wall Street, the IMF and the Bankrupting of Argentina," by Paul Blustein. It covers the peso collapse a few years ago, and the years leading up to it.
Don't know what he concludes at the end yet, but it's pretty obvious that the Argentine politicians have no fucking discipline whatsoever when it comes to managing their country's finances and economy. Regardless of what classical or even common sense economic thought might dictate, these people are going to do what's politically expedient, consequences be damned. This appears mainly to involve a tug of war between the central government and the provincial governments, which are basically on the dole.
From what I can see so far from this book, it appears to be a fool's errand to try to predict what may or may not happen with the peso based on what rational people in government positions would / should do.
SL
Bairespirata
06-22-06, 19:59
I saw that my reasoning was contradictory.
One has to compare the current currency policy with a theroretical one in which Argentina not buy dollars. Would it be better for Argentina?
The current strategy.
The peso has a value of 3,1 to the dollar.
+the central bank can accumulate about 10 billion dollars a year.
+it's easy for the argentine industry to export and compete with imports.
-inflation is above 10 per cent and might rise more.
-it's expensive to import capital equipment to enhace to capacity of the argentine industry.
Theorectical strategy, not buying any dollars.
The peso has a value between 2,45 and 2,20 to the dollar.
+the inflation becomes acceptable.
+it's cheaper to buy necessary capital equipment for the argentine industry.
-the short-term pressure might be to hard on the economy and with small reserves an external shock can force Argentina to take new loans, which is hard to get after the country canceled it's payment in 2002 and then got away with only paying 1/3 of the value of the mammon-debt in 2005.
Bairespirata
06-22-06, 20:05
Interesting book, I will buy it. What I have been thinking is: Didn't Argentina and the IMF discuss the option to devaluate the peso years before the crisis on 2002? If Argentina had devaluated in 1998 the debt hadn't been so big and the fall of the peso might have been limited to 1:2 to the dollar?
I'm in the middle of a book called, "And The Money Kept Rolling In (And Out): Wall Street, the IMF and the Bankrupting of Argentina," by Paul Blustein. It covers the peso collapse a few years ago, and the years leading up to it.
Don't know what he concludes at the end yet, but it's pretty obvious that the Argentine politicians have no fucking discipline whatsoever when it comes to managing their country's finances and economy. Regardless of what classical or even common sense economic thought might dictate, these people are going to do what's politically expedient, consequences be damned. This appears mainly to involve a tug of war between the central government and the provincial governments, which are basically on the dole.
From what I can see so far from this book, it appears to be a fool's errand to try to predict what may or may not happen with the peso based on what rational people in government positions would / should do.
SL
StrayLight
06-22-06, 23:00
...Didn't Argentina and the IMF discuss the option to devaluate the peso years before the crisis on 2002? If Argentina had devaluated in 1998 the debt hadn't been so big and the fall of the peso might have been limited to 1:2 to the dollar?You need to read this book, pardner.
Pegging the peso to the dollar -- otherwise know as convertibility -- was **THE** central strategy of the Argentine government throughout the 90s. It was their effort to keep hyperinflation at bay. To wit, if the peso was pegged to the dollar, it limited the government's ability to print money.
When things started to fall apart, the option of dropping convertibility -- and letting the peso float -- came up from time to time in numerous forums. However, pretty much everyone agreed that the committment to convertibility was what was giving the government credibility. So they tried keeping it to the bitter end.
It's a pretty interesting book, and a fairly easy read. It seems to have some credibility of its own based on the pretty stellar online reviews and such.
SL
Don't know what he concludes at the end yet, but it's pretty obvious that the Argentine politicians have no fucking discipline whatsoever when it comes to managing their country's finances and economy.
SLWhat politicals do except for those in the Scandanavian countries? The US has a debt of $8 trillion dollars, the biggest debtor in the world-which is how this economy is fueled (until it collapses)-which means they the politicians, and all of us Americans, cannot criticize how other countries handle their finances and economy.
Suerte,
Stowe
In most developing countries, and traditionally in Latin America, the legislative branch of the government has access to the printing press, in that they can authorize additional currency issuance directly. Or, in some cases law provides that additional currency must be printed to cover budget deficits. The US is different in that the printing press is under the control of the executive branch of the government.
StrayLight
06-23-06, 07:08
The US has a debt of $8 trillion dollars, the biggest debtor in the world-which is how this economy is fueled (until it collapses)-which means they the politicians, and all of us Americans, cannot criticize how other countries handle their finances and economy.Well, first of all, the U. S. has not defaulted on its debt, nor does it appear to be in any danger of doing so. Furthermore, the U. S. isn't borrowing money from international institutions to keep its debt up. Finally, the U. S. hasn't tied its hands behind its back with respect to dealing with it debt by adopting and stickig to a policy like convertability. So I'd say the analogy between the U. S. And Argentina is not very good.
However, just to be fair, the book I'm reading makes it pretty clear that the international lending community -- both IMF and private investors -- were just as responsible for Argentina's crisis as the Argentine politicians were.
SL
Bairespirata
06-23-06, 23:10
I think that the USD is like air. Nobody can lives without it. The USD are very unlikely to fall severly in value since the Euro-countires are so depended on a relatively strong USD as USA is their most important exportmarket. The European Central Bank will always buy USD to keep it's value at at least 1,30 to the Euro, and so will China and Japan do. The USD is the currency of the world and if it falls, everybody falls. No one with power will allow this to happen. No matter public and trade deficts.
StrayLight
06-26-06, 16:03
I think that the USD is like air. Nobody can lives without it. The USD are very unlikely to fall severly in value since the Euro-countires are so depended on a relatively strong USD as USA is their most important exportmarket. The European Central Bank will always buy USD to keep it's value at at least 1,30 to the Euro, and so will China and Japan do. The USD is the currency of the world and if it falls, everybody falls. No one with power will allow this to happen. No matter public and trade deficts.The dollar has been devalued twice in my living memory. Once by Connelly, once by Baker. It is not sacrosanct.
On a somewhat related note, if the forum software will allow this, here's an interesting article from the New York Times a few weeks ago.
The Mark of the Bust.
WHAT may be the most important number in the American panoply of economic statistics appears every Thursday night as an appendix to the weekly statement of the condition of the Federal Reserve System. This generally ignored number — few, if any, newspapers cover its release — has the unusual virtue of accuracy, for it is a simple financial statement derived from an adding machine, not from a computer or a formula.
What the number announces is the quantity of government and agency securities held "for foreign official and international accounts" — that is, for foreign central banks and finance ministries — by the federal reserve banks. It is important because over time it measures the demand for American assets by private enterprise in the world's creditor nations. It is important also because it is very large — last week, about $1.63 trillion. Three years ago, just before the invasion of Iraq, it was about $900 billion. The week George W. Bush took office, it was $693 billion.
Our appetite for imported goods throws some $600 billion to $700 billion a year into the hands of foreign suppliers. The businesses that receive these dollars have two fundamental choices about what to do with them: spend or invest them in the United States, or convert them into their own local currency.
Exporters to America who keep the dollars and use them for American purchases and investments create what economists call an autonomous flow of funds back to the United States, financing the American trade deficit with an American investment surplus.
This produces the argument most closely associated with the new Federal Reserve chairman, Ben Bernanke (though Alan Greenspan believed it, too) that our trade deficit is caused by a surplus of savings that can't be profitably invested in the home countries of our trading partners. Financing for our trade deficit comes before — and actually causes — the deficit itself.
If instead of investing their dollars in the United States, foreign exporters want to take the proceeds of their sales in their own currency, their central banks will in effect sell them that currency for their dollars. Back in the late 1960's, when Great Society deficits and the Vietnam War prompted the first serious sell-off of dollars (and forced the United States to abandon the gold standard because too many holders of dollars, led by President Charles de Gaulle of France, wanted gold) those central banks lent those dollars into the new Eurodollar market, where they traded somewhat separately from domestic dollars.
This created a nightmarish prospect of the United States losing control of its own currency, and in 1971 the Fed chairman, Arthur Burns, negotiated a deal with the European and Japanese central banks. The deal was that they would return to America the dollars they acquired in their own economies, and the Fed would invest the money on their behalf, in absolutely safe government securities, without charge and at the best rates.
Today, the Fed continues as custodian of the "foreign official holdings" of such government obligations. During the Clinton administration, the Fed agreed to invest in federally guaranteed housing securities for those foreign central banks that wanted a better yield on their dollar reserves than they would get from government bonds, and now more than half a trillion dollars of the total official holdings are invested in agency paper. Foreign official holdings of government paper is a miner's canary number. It tells you if there is big trouble ahead. The most common worry is that the number will shrink suddenly, with foreign governments dumping their dollar holdings, driving down the dollar's value and driving up American interest rates, but that's not a real danger. If the price of our government securities dived, the foreign central banks would have to bear the loss. This would be a budget item for their governments, whose leaders would not like it at all.
What we have to watch out for is a sudden and drastic increase in foreign official holdings. Rapid growth in this number in the late 1960's and 1970's forecast the recessions of the early 1970's and 1980's, and it could happen again.
Recent large increases in foreign official holdings indicate that foreign private investors see fewer attractive places to put their money in the American economy. They could presage a significant fall in the price of American assets, stocks (witness the recent drops in American stock markets) and bonds and real estate and all, and a hard landing for a world economy still floating on the crest of cheap credit.
Martin Mayer, a guest scholar at the Brookings Institution, is the author of "The Fate of the Dollar."
Bairespirata
06-28-06, 00:26
Thank you for your post, excellent, Straylight.
I still claim that the central banks will stop the dollars from falling below certain levels. It happend most recently during the spring in 2005 and again this month. EU, Japan and China are so dependent on their exports to the US that they will do everyting to keep it afloat. But I think the dollar could be relatively weak for years, but not under certain levels.
Bairespirata
06-29-06, 02:50
I think that Argentina seems to have left the emergy-stage in the rebuilding of it's economy after the 2002 crisis and therefore could start to implement a new policy aimed at sustainable long-term growth with growth and inflation rate of half of the current.
This demand discipline and Kirscher might prioriate other goals, but I think the centre-right coalition (yet to be formed) if they win the the 2007 elections will have as a first issue to control the macroeconomic variable before they run amok. If they do so, the peso will for certain be stabilized at 1:3 to the dollar. Up or down from this level the peso will meet strong resistance from the financial markets.
I found this vdo series on YouTube. I enjoyed watching it and maybe some of you may also. Only for those with broadband. Enjoy.
http://youtube.com/profile_videos?user=highwired77
Rockin Bob
09-09-06, 13:25
Does anyone know what the deal is with getting dollars from cash machines? I have tried various banks and various cards (debit from my checking, and credit cards) but I never succeed.
I remember a couple of years ago getting cash from Citibank up in Posadas, but Citibank doesn't work now either.
Anyone have any suggestions?
Dollar withdrawals are normally for the banks' customers only. But why would you want to withdraw dollars anyway? I've lived her for years and have never needed to.
Dollar withdrawals are normally for the banks' customers only. But why would you want to withdraw dollars anyway? I've lived her for years and have never needed to.If you are paying rent in dollars. I brought enough dollars down with me when I came to pay rent for a year, but otherwise you would be searching for a dollar source. Or maybe Rockin Bob is flooding the chica market with C notes.
TangoManiac
09-09-06, 14:37
When you get your dollars in argentina, they are first converted into pesos and then from pesos back to dollars. Damn argie law that says everything has to be in pesos when it comes into the country.
If you're going to be getting larger amounts, you may want to pull them out in Uruguay. I don't know if Colonia has any large banks, but in Montevideo or Punta del este I did. I think I did a rough currency calculation at the time and it seemed that there was a direct deduction from the checking account.
Hope that helps a little. Correct me if I'm wrong anyone.
Rockin Bob
09-10-06, 01:59
Yes, it's for the rent, and not just the current landlady, they all want dollars. I don't see what the difference is if they get the equivalent in pesos. Maybe they squirrel them away under the mattress like Doggboy. Never know when the next economic crisis will come. Those good old C-notes from the Reagan administration before the fancy anti-counterfeiting features still hold up pretty well!
Next thing they'll want to be paid in gold.
And I have never paid 100 US for a chica in BsAs!
But yeah, thanks for the info. Wasn't sure if the problem was just my own.
I don't believe that locals pay anything in US$.
I witnessed similar conduct by area hotels. The standard listed rack rate is 200 pesos/night but, oh you're an American and pay in dollars. 200/3.10 = 120 dollars using monkey math. You pay with a credit card, which must be charged in pesos, as in US$120 * 3.10 = 372 pesos. Most Americans accept that.
US$ - What country do you think this is man?
In September the Blue was over 15 for 1 USD. Now its posted in the BAHerald at around 12.50. Is there a credible opinion here at AP as to why its falling so fast? Is there a target price or date as to where and when it will stop? I know the Portenos cry for the days when the Peso was 1 to 1. And it may be a few generations before those days return. But any sense of the ebb and flow of the value would help future trips.
In September the Blue was over 15 for 1 USD. Now its posted in the BAHerald at around 12.50. Is there a credible opinion here at AP as to why its falling so fast. ? Is there a target price or date as to where and when it will stop. ? I know the Portenos cry for the days when the Peso was 1 to 1. And it may be a few generations before those days return. But any sense of the ebb and flow of the value would help future trips.Everybody has an opinion but nobody really knows. Lots of variables to factor in and some of the variables change shape every week.
I saw some interesting analysis about a high yield bond trade being made on the assumption that the currency is going to liberalize (at least to a greater degree) in the next 3 years.
The article will explain the idea more eloquently, and its effect on exchange rates.
http://www.bloomberg.com/news/2014-11-20/traders-spot-63-return-in-dollar-linked-bonds-argentina-credit.html
Daddy Rulz
12-25-14, 14:45
I might be late to the party but I just found this site and like this article.
http://bubblear.com/central-bank-president-promises-change-forgets-feed-elephant-room/
Powered by vBulletin® Version 4.1.4 Copyright © 2024 vBulletin Solutions, Inc. All rights reserved.