Argentina’s pro-dollarization Milei wins amid Sri Lanka style objections

ECONOMYNEXT – Argentina’s Javier Milei, who has promised to close a central bank that was hyperinflating the peso and driving the country into repeated defaults, has won Presidential elections taking at least 56 percent of the vote.

“Today begins the end of Argentina’s decline,” Milei said after winning the vote. “Today ends the impoverishing model of the omnipresent state, which only benefits some while the majority suffers.”

Inflationist acro-economists within the country as well as outside severely opposed the move, similar to the way currency boards were criticized by inflationists in Sri Lanka, showing that chronic monetary problems are not linked to politicans but the lack of doctrinal foundation in sound money as claimed by some observers.

Objection letter by 300 ‘economists’: El espejismo de la dolarización

A key argument was that the Argentina’s central bank having borrowed dollars and printed money was in debt and could not exchange domestic reserve money for dollars.

However, in other countries where market dollarization, transactions simply took place in dollars, and a notes in circulation turned into dollars over time as dollar earners spent the money domestically curtailing imports by the same volume as legal tender laws were no longer enforced and shop keepers were allowed to price in dollars.

In Argentina, several hundred billion US dollars are in any case believed to be held by citizens in various ways.

Over 300 local economists in Argentina wrote a letter against dollarization, and another open letter was written by a 100, which included foreign inflationist.

One of the unusual criticisms was that dollarization would force Argentina to balance the budget or manage to levels that markets can finance without inflation/depreciation.

“So, what’s the problem?,” questions, Steve Hanke, an advocate for dollarization in Argentina.

Like in Sri Lanka in the case of currency boards in Sri Lanka, inflationists claim that there are pre-requisites to dollarization, including fiscal probity, not understanding that lower fiscal deficits and debt to GDP ratios are a direct result of dollarization that takes place after the fact.

However Milei in addition to providing sound money to protect the poor from macro-economic policy, has also proposed to ban abortion and cut government spending on education and health.

Though the subsidy bill automatically falls with dollarization as macro-economists lose the ability to impoverish the population with depreciation, cutting health and education budgets has drawn concerns.

ECONOMYNEXT – Argentina’s Javier Milei, who has promised to close a central bank that was hyperinflating the peso and driving the country into repeated defaults,…

ECONOMYNEXT – Argentina’s Javier Milei, who has promised to close a central bank that was hyperinflating the peso and driving the country into repeated defaults,…