{"id":37682,"date":"2013-04-19T10:48:28","date_gmt":"2013-04-19T14:48:28","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37682"},"modified":"2013-04-19T09:48:58","modified_gmt":"2013-04-19T13:48:58","slug":"a-ph-d-in-monetary-catastrophe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/19\/a-ph-d-in-monetary-catastrophe\/","title":{"rendered":"A Ph.D. in Monetary Catastrophe"},"content":{"rendered":"

By Bill Bonner<\/strong><\/p>\n

Stocks down again yesterday. The Dow slipping 139 points. Gold down slightly.<\/p>\n

Gold has fallen so hard so fast we can’t help but feel sorry for the
\nlosers. But who were they? Estimates of the total loss go upward from $1
\ntrillion. Who has that kind of money to lose?<\/p>\n

Who lost it? And whom did they owe money to?<\/p>\n

We don’t know. It could be nothing more than a regular pullback in an
\noverextended, otherwise healthy bull market. We’ll just wait and see…
\nalong with everyone else.<\/p>\n

So let’s change the subject…<\/p>\n

One of the things that vexes just about everyone in Argentina is money. The value of the peso changes rapidly<\/a>.
\nThere is the official rate. And there is the unofficial rate. Nobody
\nknows what a peso is worth. Many people \u2013 including your humble editor \u2013
\nhave to do some pretty serious calculating. The parts of his brain that
\ndo math must be swelling from overexertion.<\/p>\n

“We need gas for the truck,” said Elizabeth yesterday.<\/p>\n

“Well, I don’t have any more peso cash. Let’s put it on a credit card.”<\/p>\n

“They don’t take credit cards. Cash only.”<\/p>\n

“Then let’s pay with dollars.”<\/p>\n

“Don’t be silly. That would cost us 50% more. He won’t give us a good rate.”<\/p>\n

“Then let’s get some pesos at the ATM.”<\/p>\n

“That’s just as bad… we’ll get the official rate.”<\/p>\n

Let’s see: We want to pay in pesos, but only if we get the pesos at
\nthe unofficial rate. Otherwise, it’s better to pay in dollars, but only
\nif the person on the other side will take the dollars at the “blue” or
\nfree-market rate.<\/p>\n

Usually, you end up somewhere in between. If you try to bring money
\ninto the country, the government insists you trade it on the official
\nmarket. But you can still work out trades at the “blue” rate \u2013 either by
\nbringing physical cash into the country or by working with an
\nunofficial money changer.<\/p>\n

The money changers buy bonds for you in Miami. Then they sell the
\nbonds in Buenos Aires. The market for the bonds should be about the same
\nin both cities. The money changer is happy to have his dollars. You are
\nhappy to have pesos that you can spend \u2013 or in our case, pay our
\nfarmhands and farm expenses.<\/p>\n

Half-Mad Money<\/h3>\n

It is always a pleasure to visit Argentina. It is a country where
\neconomic disaster stories are daily life… where economists’ daffy
\ntheories are government policy… and where everyday citizens have to
\nfigure out how to deal with a monetary system that is half-mad… and
\nhalf merely incompetent.<\/p>\n

When we are here, we need to spend pesos… especially out in the
\ncountry, where people’s math skills are not as well developed as they
\nare in Buenos Aires. But any serious purchase \u2013 say, if you’re buying an
\napartment \u2013 requires dollars… either on top of the table or
\nunderneath it. So you have to be prepared.<\/p>\n

Most people want dollars. But they can’t take them. Because the
\nArgentine feds will ask a lot of questions. If a merchant takes dollars
\nat the unofficial rate, the feds will give him a hard time.<\/p>\n

That leaves buyers and sellers of dollars getting together in dark “caves.” Dow Jones reports<\/a>:<\/p>\n

Argentina’s foreign-exchange market is
\ngoing underground. As the government restricts access to foreign
\ncurrencies, Argentines seeking hard-to-get dollars have been pushed
\ninto\u00a0cuevas, or caves \u2013 clandestine operations where customers pay
\ndearly to exchange pesos for greenbacks.<\/em><\/p>\n

Buying dollars for savings is banned,
\nand authorities make only small amounts of foreign currency available
\nfor travel abroad. Travelers must submit an online request to the
\nnational tax authority just days before leaving, and they usually
\nreceive approval for much less than they requested. <\/em><\/p>\n

Businesses need government approval to
\nimport equipment and materials at the cheap official exchange rate. The
\nnational tax agency has even posted dollar-sniffing dogs at border
\ncrossings to catch those traveling with undeclared currency.<\/em><\/p>\n

A visit to Argentina is like taking a Ph.D. in monetary catastrophe
\nand economic mismanagement. It reminds us how politicians can really
\nmake a mess of an economy<\/a> when they put their minds to it.<\/p>\n

Regards,<\/p>\n

\"Bill<\/p>\n

Bill<\/p>\n

To learn more about Bill visit his Google+<\/a> Page or Bill Bonner’s Diary<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Bill Bonner Stocks down again yesterday. The Dow slipping 139 points. Gold down slightly. Gold has fallen so hard so fast we can’t help but feel sorry for the losers. But who were they? Estimates of the total loss go upward from $1 trillion. Who has that kind of money to lose? Who lost … <\/p>\n

Continue reading “A Ph.D. in Monetary Catastrophe”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-37682","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=37682"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37682\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=37682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=37682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=37682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}