Argentinian just elected a rightist president. It's a country of zero economic prudence. Argentine libertarian Milei pledges new political era after election win | Reuters
What Argentina was doing is modern day thievery. Argentina’s yuan lifeline sign of brinksmanship between China, US | Business and Economy News | Al Jazeera
(Morning Brew) INTERNATIONAL Argentina’s president-elect is thirsty for greenbacks Tomas Cuesta/Getty Images You could soon be able to hop a flight to Buenos Aires without needing to stop at a currency exchange. Argentina’s newly elected president and chainsaw enthusiast Javier Milei ran on a platform that prioritized dollarization—or switching out the local currency for the US dollar. With the election in the rearview, Milei is eager to ditch pesos and make it rain Benjamins. What does dollarization look like? Argentina’s central bank would purchase all pesos in circulation and exchange them for dollars. In theory, this would 1) reduce the country’s historic inflation and 2) eliminate the power of the central bank and prevent it from printing more money—a main cause of Argentina’s inflation crisis. In addition to dollarizing, Milei wants to open up the country’s largely closed economy and cut spending. Could it work? Pulling off dollarization requires Argentina’s central bank to have enough dollars to buy all the pesos in circulation…and, like anyone under 30 trying to buy a house right now, experts estimate that it’s roughly $50 billion short. And that’s just the start: The country’s courts and divided congress could add additional obstacles. But…Emilio Ocampo, the economist appointed by Milei to oversee the dollarization process, is bullish. He argues that Argentinians could have over $200 billion in circulation that the central bank doesn’t include in its count of dollars. He also considers the economy “de-facto dollarized.” Zoom out: Dollarization is the economic equivalent of a Hail Mary pass. There’s no guarantee it’ll work, but with 143% inflation, Argentina has to try something. Other countries that have dollarized, like Ecuador and Panama, have seen mixed results.—CC
methheads, see this is how xi doing the business. Argentina has one ball, falkland island. china is supporting their claim. as crazy as milei sounds, he can’t bend over. https://www.reuters.com/world/argentinas-milei-thanks-chinese-president-softening-tone-2023-11-23/
Outsourcing financial system is equal to forfeiting independence. I lived in country with 100 % per month inflation. It's easily fixable - government just needs to stop printing money and inflation stops magically almost overnight
I have an agreement with my wife: She makes decisions on the little, non important things and I makes decisions on the big, important things. I worry about and make decision on how we can affect climate change, world peace and reserve currency... She worries and makes decisions on little things like where we live, what car we drive, how we spend our money, what to buy where we eat... So, I will let you guys make decision on important stuff like reserve currency and I on little thing like making money day trading.
Things that we don’t make or have, such ad rare earth, will have to make other forms of payments. The Fed would end up buying all the bonds because all the sudden no one wants it.
Most rare earth come from China and China uses the Yuan, so nothing changes. According to the IMF Data global US dollar reserves total $6.5 trillion and have risen in nominal terms over the past 12 months. The US treasury market is $33 trillion. The FOMC has ~$5 trillion in the system open market account (down from $8 trillion 2 years ago). And global reserves consist of more than just treasury securities. So yeah, maybe +100bp across the curve if every country on earth decided to completely liquidate their dollar reserves. And then no foreign country could trade with the US because the point of currency reserves is to facilitate international trade settlement. This is a whole lotta nothin'.
No, in your example, China does use Yuan domestically but international trades are settled in usd, for the most part. China banks swap it back to Yuan and keep USD treasuries and agency bonds. There was a countermeasure they floated when Trump started the trade war few years back, in which they want Walmart etc to buy goods in Yuan. Walmart and all the importers don’t have hundreds of billions liquid Yuan in their bank accounts for sure, their bankers would have to ask the Treasury to source Yuan for their clients. If this were for real, the damage is lot more than the Russian oil embargo, we will see empty shells immediately in Walmart, Target and the favriote Black Friday venues. The thing is that the Fed is not a bona fide buyer, and everyone knows that. Powell already said that the Fed is just a fiscal agent for the treasury, as selling treasury bonds is not his job. BTW, today's 2-year auction bid-to-cover ratio is 2.54 vs previus 2.64. Next fiscal year debt service will be more than the defense budget. Sunset of the Brits were very dramatic.