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The Solution To Argentina's Banking Problems Is To Go Cashless
dkatana writes: There is no way back for Argentinian people to trust their own currency. Several governments have used the "Peso/Dollar" exchange to dig into people's savings, reward their friends and limit the freedom of citizens to use other currencies.
Short of Dollarizing the economy again, the only solution for the country is going cashless. People are desperate, and they're looking for alternatives such as mobile payments, Amazon gift cards and Bitcoin to store their savings away from government control. A digital currency could help curb black market exchanges, fight corruption and restore the country's image.
Short of Dollarizing the economy again, the only solution for the country is going cashless. People are desperate, and they're looking for alternatives such as mobile payments, Amazon gift cards and Bitcoin to store their savings away from government control. A digital currency could help curb black market exchanges, fight corruption and restore the country's image.
Cashless is a convenience. You need a currency. And once there is one, you're in the dollar world again.
"People are desperate...", maybe posting on SlashDot will help. or not.
We've made very little progress in anonymising cashless transactions (and this proposal might rely on transactions never being anonymous).
This not only reduces people's privacy but also gives government officials a way to remotely block you from making any payments. That's severe.
Help build the anti-software-patent wiki
Argentina is a democracy. Vote the idiots out of power.
once one country gets rid of cash, if it works, it'll avalanche. Goodbye to seignorage.
All of the alternatives involve seignorage or equivalent. Mobile payments and Amazon gift cards imply giving the telecom or Amazon an interest-free loan between the date the credit is paid for and the date it is redeemed - which is pretty much exactly the same as seignorage, which gives the government an interest free "float" to fill the gap between cumulative tax collections and cumulative government spending. Bitcoin involves continuous transaction fees (whether explicit or implicit in the mining rewards) that are substantial, but largely ignored by the "tech can disrupt everything successfully" boosterism of the Bitcoin fanclub.
You have no idea how creative the Argentine people are. Especially with inflation running about 30% per year. The official exchange rate is down to a little over eight pesos to the dollar while the "blue rate" is about 14 pesos to the dollar.
After a month in a Hotel in Mar del Plata, Argentina I paid not with cash or a credit card but with two cruise ship tickets that I bought online with my US credit card. The proprietor wanted to take the cruise after doing business in South Florida. He was heading to Miami with two suitcases stuffed with US dollars so he could add to his portfolio of rental condos. Did I forget to mention that he has both French and Argentine passports?
I've spent years in South America. This type of behavior is not exceptional in a country that has an extremely tenuous grip on reality.
But is it really overvalued? Debt is only part of the equation. When the statement "the dollar is backed by the US Government", that means the whole thing; Executive (including the Federal Reserve, military, and so forth), the courts, and of course Congress, not to mention the collective will of the citizens of the United States. When you look at the greenback in that light, it's hard to imagine a currency in modern times as well backed.
The world's burning. Moped Jesus spotted on I50. Details at 11.
1 - We're nowhere near desperate. We've been desperate-ish in the past... not lately.
2 - We have a high but predictable inflation... it's impossible to save in Pesos, so it stimulates spending and the economy survives.
3 - Purchase of dollars is restricted but there's a "healthy" black market that sells at a higher but well know rate (it's published in the newspapers and there are websites that inform the black market rate as well). The government counts on the existance of this black market to keep peace.
4 - Going cashless solves nothing..!!! Your cashless bank account still lists an amount of pesos and if you want to convert them to dollars the normal restrictions apply. People taking advantage of bitcoin and other schemes are simply operating in the black market... it could be bitcoin, it could be bonds or stock.
As a Slashdot discussion grows longer, the probability of an analogy involving cars approaches one.
Argentina has other problems, currency is just an symptom.
1) There is no dollar outrun, there is a government that artificially keeps the dollar cheap for political / economic esoteric reasons. So it needs to prevent massive access to that cheap dollar market.
2) Most the population hardly reaches the end of month, so the "lack of dollars" issue directly affects less than 30% of it, because the rest don't even have pesos to exchange for dollars.
3) The real problem of the people is that we've no credit... No 20 years mortgages for buying a house, 6 years is the best you can get, and only in specially stable situations. So the little guy can't "invest" his little money in anything bigger than a car. That has the secondary effect that the little money you save, you need to spend it quick before the government eats it. That's good for the economy, good for the government, bad for the little guy.
All in all, this is a government that has "kept" unemployment rates low, sacrificing other economic variables. Yes, it's socialism, but that's better than what we had from previous governments. And yes, this is a corrupt government, but that doesn't really make our country a special enough to be news for nerds.
Argentina, like most Latin American countries, would do well to toss the Presidential system. The US, by and large, has lucked out, in no small part to what Bagehot referred to as Americans' "genius for politics". But in other societies, where the legislative and judicial branches have remained stunted as compared to the US Congress, SCOTUS and the Federal Courts, all the Presidential system does is deliver near-dictatorial powers into the hands of the President. The checks and balances may exist on paper in countries like Argentina, but the reality is that legislative assemblies and courts become little more than rubber stamps.
A parliamentary system like the Westminster system would, I think, work far better. The titular head of state of a parliamentary state does hold some potent reserve powers, but is restricted from using them in all but the most extreme circumstances. The "effective" government, that is the governing Executive, only survives so long as the legislative assembly retains confidence in it, and ministers are normally chosen from among members of the legislature, and thus, at least in a nominal way, remain equals to every other person sitting in the legislature. In a parliamentary system, the titular head of state represents a sort of negative power; in that he or she deprives the effective executive of absolute control of reserve powers and prerogatives.
The world's burning. Moped Jesus spotted on I50. Details at 11.
If you do not trust your own country's currency that's your own problem. I do trust my Argentinian currency. What I don't trust is you and everyone else who are always trying to bring our economy down to a crisis, so you benefit with the foreign money you have been accumulating over the years. Just stop trying to convince the hole world that we all want what only you, and very few others want. I, as an Argentinian, am NOT desperate in the way you claim. I, as an Argentinian, do NOT agree with you. Please, Slashdot, if you are going to post things like this at least make a poll to every person in Argentina to know how everybody actually feels. And most of us voted for our actual president, consider that. This post is insulting.
Seigniorage is the difference between the cost to produce currency and the face value of the currency. Hypothetically, a cashless system would eliminate this inefficiency. There will inevitably, though, be "service fees" or somesuch taken from each transaction for administering the system.
At the end of the day, though, seigniorage is chump change compared to the power to deficit spend. What the Argentinian government really wants is to have its population to use a currency that they can make more of. If citizens are only accepting a foreign currency, or some private credits, the state has to directly collect taxes, which can be problematic politically. Forcing citizens to accept the Banana Dollar or whatever is simply the formalization of the state consuming goods and services from the population without having to answer to a set revenue policy.
"Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
Hi from Buenos Aires.
No, the solution is not going cashless. We don't have a banking problem. We have a currency problem, because the government steals from us in the form of inflation. Going cashless is giving the government more power to screw us.
Also we know very well how to play this game. If you can save, you buy other currencies like dollars. Or houses, if you are rich.
If you need the money, you convert and spend as fast as possible. Inefficient and somewhat expensive, but possible.
Bitcoin is easier to transfer, but too volatile. You might as well save in pesos.
Hi, Brilliant Anonymous Coward.
You are proposing your innovative idea 15 years too late.
We had that here in Argentina, it was called "Cupones de Trueque" (Barter cupons)... We used those when people were desperate (because they had no work, no pesos and nothing to eat)... It's something we don't want to go back to.
This is an example http://en.wikipedia.org/wiki/C...édito
Now people are "desperate" because they can't save their extra pesos at a rate they consider fair, It's a completely different situation, and really subjective because people freely buying dollars and taking them out of the country was what triggered (but no caused) our last crisis.
My wife is Argentinan, as well as all of her family, and a great deal of our friends. We live in Mexico, and travel to Argentina at least once a year.
The Argentinian exchange rate has dropped in the last year, although not as much as it happened 15 years ago — nor, by far, how it happened 30 years ago. And the local economy is far, far from hopeless— The standards of living in Argentina are quite high, most middle-class people travel outside the country regularly. As a Mexican travelling regularly to Argentina for the last five years, I have seen their life costs go from slightly cheaper to slightly more expensive — and today again slightly cheaper than ours.
My family has their savings partly in pesos, in local banks, and partly in US dollars, in the safe deposits in the bank — AFAICT, they don't have a dollarised bank account. And they have a very decent level of life. My in-laws, as an example, travelled last year one month in Europe, and came to visit for a month in Mexico, without compromising their finances.
This is the second post badmouthing Argentina in Slashdot in the past few weeks. I know I am answering with some (few) personal data points, but that's in the end how reality is: A huge collection of individual stories. And they are far from as dire as you portrait them.
Is to kick out that crazy government and put in one that is good at running the country.
Yes, you have a point — And specially in point #3. I live in Mexico, where few people can afford to buy a house as well. And there's a big difference favoring Argentina: The rental contracts. Legal rental contracts are always for two years or more, and with prices fixed in pesos (this means, you know how much you will pay for your rental two years from now). Although this won't allow you to buy a house, it does allow you to mid-term plan your finances better than in most of our continent.
In #2 I state things as I see them... I am not saying it's good or desirable... just the way it's being going.
We've had a yearly 25-30% inflation for some years now. Prices rise steadily, so do salaries, and as long as they're in sync people get by. Business incorporate this percentage in their calculations... in contrast to hyperinflation scenarios where inflation is unpredictable and everything freezes for a while. Buying in installments (with "zero interest") is a big thing in Argentina and for the last years we've been able to buy appliances, clothes or plane tickets in 12 to 24 fixed installments, which talks a lot of the trust banks have that things will continue the same.
Middle class in Argentina DOES NOT invest (exceptions exist, of course). They've been burned by banks before (last time in the 2001 crisis when there were restrictions to take money out of the bank and when deposits in dollars where converted to pesos for a big devaluation of the peso). Middle class in Argentina has two traditional places to put the money:
- Hidden "under the mattress" in dollars
- Buying property
Because of the high price of the dollar and the restrictions to acquire currency these options are only attractive to the higher sector of the middle class... Standard bank accounts don't have an interest rate that helps with the inflation, or anywhere near it, so whatever is left after paying the bills you spend... ... trips are a big thing right now... my Facebook account has been full of people travelling for the last couple of years. This is because we can pay for the tickets in installments, the cost of food and other expenses is not too far from the prices in Argentina, and you can buy technology, clothes, etc. at lower prices.
As a Slashdot discussion grows longer, the probability of an analogy involving cars approaches one.
Because the dang things get creases when I fold em up to put in my pocket.
This is the second "Argentina is desesperate" article in a few weeks. We (Argentinians) all know where this comes from (and no, I'm not that paranoid): Thomas Griesa and hedge funds, led by Paul Singer. This is just another paid article stating that the country is desesperate, while it's quite the opposite. We just live by with our local currency, there's no "desperation", public health works, public education works, national debt is being reduced, employment is up. Yeah, we have our whole deal of issues, that are *very* far from desperate. There will be presidential elections this year. I'm not very optimistic, the huge propaganda machine (which includes this article) seems to be working, 3 of 4 of the running candidates are known for favoring Griesa and Singer and putting the country back 30 years. The fourth one is the guy with less chances.
Reread your Constitution. Article 1, Section 8, on the list of enumerated powers:
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
In 1819 McCulloch vs. Maryland established that printed paper money was valid due to this clause and the "necessary and proper clause." ie: the Courts ruled that it was both necessary and proper for the Feds to "coin" paper bank notes.
This hysterical proposal is ludicrous, completely out of touch with Argentina's economic realities. First, for all her faults, and not withstanding the debt vultures' incredible legal chicanery, the fact is that Kirchner's gov has achieved a remarkable reduction in the country's net foreign public debt since 2004, to the point where its market value, net of reserves, is well under 50% of GDP -- the lowest level since the military junta seized power in 1976. Second, the fact is Argentina's own elite not only owns most of the remaining "foreign" debt itself, but also owns more than $400 billion of offshore flight wealth. None of this wealth is accounted for in Argentina's national economic statistics, and very little of it pays any taxes -- despite the fact that Argentina has a world wide income tax, like the U.S. So Argentina's economic problem is not now one of an unstable currency, but of its inability to tax its wealthy elites on all this offshore loot -- or to provide incentives for it to come home. Third, Argentina happens to be sitting on shale oil reserves that may well be larger than those of the U.S. All things considered, relative to its current population, it is one of the richest, most NEGATIVELY indebted countries in the world. Its currency is if anything undervalued, as are its gov bonds -- and as soon as the silly debt vulture problem is solved, and a new government is elected, the conditions may well exist for a sharp rise in inward investment. That, in turn, may require Argentina's central bank to move deftly to sterilize the inflows so that the peso doesn't appreciate too quickly. But overall, there's no reason for Argentina to repeat any of the weird experiments with monetary policy that the disastrous military gov of the 1976-83 and the mad cavallo gov of 1992-2001 ran -- policies that left the country heavily indebted, and hostage to NY judges.