Thursday , 18 October 2018

Home » Economy » Could a New Currency Be the Solution to Argentina’s Never-Ending Inflation Problem?

Could a New Currency Be the Solution to Argentina’s Never-Ending Inflation Problem?

February 2, 2018 1:12 pm A+ / A-

The Central Bank of Argentina has reaped nothing but failures throughout its history.

Since its founding in 1935, inflation has averaged 55 percent per year. Since its issuance by the BCRA, 13 zeros have been added to national currency. The Argentine state monopoly on money was devised by the conservatives, and, interestingly, those who opposed it were the socialists of the time, denouncing the Argentine state for converting the Central Bank into a source of financing and harming workers.

The last period of hyperinflation, which ended with President Raul Alfonsin, led to the premature assumption by President Carlos Menem that he could iron out the “convertibility law.” At that time — around 1991 — the Austral was replaced with the Peso at a rate of ten thousand to one. The new currency was exchangeable one to one with the US dollar. The impossibility of minting new currency ended with inflation, but as usual the underlying problem of the fiscal deficit had not been solved. The 2001 crisis ended with the 2002 devaluation. In 2003, President Néstor Kirchner took over. Today, the exchange rate is at 19 to one and the fiscal deficit remains the country’s underlying problem.

While the government is looking for alternatives to reduce public spending (many times without success, other times with small victories) economists Nicolás Cachanosky and Agustín Etchebarne have made a monetary proposal that again seeks to end the problem of inflation and the Central Bank’s access to the Argentine dollar.

They agreed that the country needs to create an exchange currency connected to the currency of Canada and Australia. The value of this new currency could be produced with an average obtained from half of the value of 1.5 currency. The proposal comes at an opportune time as it has been two years since President Mauricio Macri has struggled with the inflation problem.

Recently, federal officials acknowledged that they could not meet the inflation targets that had been set at the beginning of the year.

Agustín Etchebarne told the PanAm Post that a conversion was planned with these currencies given the similarities between their economies and Argentina’s.

“When there is a fall in the commodities of Canada and Australia, we see how devaluations occur that do not generate inflation,” the economist said.

According to Etchebarne, both Canada and Australia have a Common Wealth tradition from which “Argentina should never have departed”.

 

Posted by QCR Staff

Could a New Currency Be the Solution to Argentina’s Never-Ending Inflation Problem?

Could a New Currency Be the Solution to Argentina’s Never-Ending Inflation Problem? Reviewed by on . [caption id="attachment_997" align="aligncenter" width="590"] The Central Bank of Argentina has reaped nothing but failures throughout its history.[/caption] Si [caption id="attachment_997" align="aligncenter" width="590"] The Central Bank of Argentina has reaped nothing but failures throughout its history.[/caption] Si Rating: 0

Leave a Comment

scroll to top