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.

Comments

"Cashless" is meaningless

[jodido]

Cashless is a convenience. You need a currency. And once there is one, you're in the dollar world again.

Re:"Cashless" is meaningless

[roman_mir]

It's not meaningless if your goal is to steal and that's what that 'article' proposes - theft.

1. Government steals by forcing people to declare all of their cash savings and to justify them to transfer them into the electronic form.

2. Government steals by creating inflation electronically, so it's cheaper and faster for the government to create vast amounts of virtual money and dilute existing savings, thus stealing (creating inflation).

3. Government can steal everything at any time by simply emptying your bank account and leaving you with nothing.

4. Government will steal by setting stupid exchange rates that are absolutely fake, like pegging the exchange say 1USD to 10Pesos while on the 'black market' you would get many times more pesos, for example 100 for 1.

5. Government can control you if you do not have access to your own money, and it can prevent you from doing anything they don't like and punish you for doing anything they don't approve of.

It's a gigantic con, don't fall for it, it doesn't matter what the name of the currency is if you are not even able to have it in your own hands.

Basically if you cannot hold your own money in your own hands but government holds it for you (directly or through proxy banks) you are fucked, you have nothing.

If you try to switch to gold and other currencies of your choice, you will be labeled a 'speculator' and 'enemy of the working class' etc., and you can be dealt with criminally.

Re:"Cashless" is meaningless

[PolygamousRanchKid]

You need a currency.

"1000 Quatloos for the newcomers!"

It will be interesting to see how Greece gets out of their mess, when they run out of Euros. Pundits are guessing that Greece will issue "scrips", which are a kind of government IOU, and pay government salaries and pensions with them.

The only problem with that is . . . who will want these scrips? Certainly not even the Greeks themselves. They want Euros. And they will try to get rid of their scrips as soon as they can, in exchange for something of value.

Car sales are up now in Greece by something like 40%, as people worry about if their bank accounts will get raided by the government. An automobile is considered as something "valuable". The cruel irony here, is that Greeks prefer to buy German cars . . . exactly the folks who Greeks blame for all their problems. So the Germans are actually benefiting the most from this.

Re:"Cashless" is meaningless

[PolygamousRanchKid]

A slight correction. Greece has already received two bailouts worth billions in the last five years . . . with the condition that they will implement necessary structural reforms in their economy. For example, pensions in Greece are way to high for what the people paid in. And their are way too many civil servants.

Greece essentially "cooked the books" and hid state debt. This only works for a while. When this was discovered five years ago, Greece was shutout from the international capital markets: No one would lend to them anymore. However, a lot of private banks had too much exposure to Greece, which forced the Troika, the EU, the European Central Bank (ECB) and the International Monetary Fund, to arrange a bailout, to avoid financial contagion. The private banks received a "haircut", which means that they would only receive a smaller percentage of the money owed to them. Most of the debt now rests on EU taxpayers.

Greece dragged their feet on implementing reforms. So a second bailout was necessary. Things were getting better, as they now had GDP growth. Well, then the Greeks went off at the beginning of this year, and elected a new coalition of Radical Left Marxists, and Right Wingers. And since then, things have taken a major turn for the worse. The new government promised to:

Raise pensions
Hire more civil servants (to reduce unemployment)
Erase bailout debts

Sounds like a nice plan . . . but where do you get the money to finance this? Well, the EU should just give more Euros to Greece! Which is politically untenable for the rest of Europe. The only way this could work, is if Greece had their own currency to devalue. So, in the long run, Greece needs to leave the Euro. Except, a majority of Greeks want to stay in the Euro. Thus, the current Greek government wants to get kicked out, so they can blame the EU for it. But the EU does not want to take the blame, so they won't kick out Greece. What we have now, is a slow speed train wreck.

Re:"Cashless" is meaningless

[rahvin112]

It's not a sideline, it's entirely the point. The German citizenry isn't willing to see their taxes go up again to pay Greek debt that was incurred buying votes. The again in that sentence is the important bit. Germany has already raised the taxes on their people to pay the original Greek bailout. They will NOT allow their government to do it again. And it infuriates them to no end that this happened because the Greek government lied about their spending and borrowing and used much of the proceeds to "buy votes" by raising minimum wages, increases pension plans and other electorate appeasing measures that require cash.

For example, the current Greek government refuses to lower the minimum wage. Most people don't even realize that the minimum wage in Greece is almost 50% higher than in Germany! This goes for almost all the items of the bailout under attack. The most galling thing to most Europeans is that the troika didn't even require the Greeks to cut their higher wage rates, higher pension payments and such to match their European neighbors, they only required that they reduce them partially and this is how the Greeks react?

Coming down to reality is hard, they built up a system with purchased votes that wasn't sustainable and it's a big impact to lower down to reasonable values. I personally don't agree with the austerity push, I think it's catastrophic policy with no historical backing and heavy counter demonstrations that it doesn't even work. But, I do agree with the rest of the Europeans that the EU and IMF have been extremely lenient with Greece and to have it thrown back in their face as asking too much is frankly stupid.

But that's the problem with Greece's current government. They should have attacked austerity, not the measures they are expected to undertake to re-balance their economy with the rest of Europe. Many of the Torika's requirements were real improvements that would have been long term very positive for the Greeks economy and some of those are the ones the Greeks are attacking the hardest, rather than attacking the real problem, which is this Austerity idea that you can succeed by cutting spending during a recession. The Greek economy was heavily damaged by the Austerity drive where the measures should have been more targeted towards competition and divestiture of state assets because it was those very state assets and the salaries they included that bankrupted the Greek government to begin with. And this dragging of the feet on everything and inexperience has just created an environment where everyone in the economy is running for cover. The cuts to the pensions and minimum wage levels should have been done with a permanent freeze to increases until inflation balanced them with the rest of Europe because of the direct and immediate damage a large cut would do. The biggest problem the greeks face is a general disrespect for tax collection, that's what government should be spending their time fixing.

Re:"Cashless" is meaningless

[ChrisMaple]

With a government controlled electronic currency the government could handle your money, and you only have to piss off one bureaucrat to have anything in your name electronically made worthless. There are already people who think all Republicans should be killed, and others who think all "global warming deniers" should be killed. Do you want someone like that with the power to turn off your money?

Re:"Cashless" is meaningless

[ultranova]

Basically if you cannot hold your own money in your own hands but government holds it for you (directly or through proxy banks) you are fucked, you have nothing.

If you can't trust the local government, either because it's corrupt or because it doesn't exist, you're fucked anyway. Not only is your cash not safe from theft (or forgery - let's not forget that), but you also can't trade efficiently since there's no way to enforce deals.

If you can't trust the local government to enforce your claims of ownership, they're utterly meaningless.

cashless = no privacy and lots of govt control

[ciaran2014]

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.

Re:socialism's benefits

[Tailhook]

It's all lies. Argentina has no reason to seek alternatives; they have a fair, equitable socialist government that would never manipulate its fiat currency to raid savings.

We must outlaw these robber baron digital schemes right away. These digital currencies are a threat to The Good and the Great's ability to provide the fair and just governance the people of the world deserve.

Re:socialism's benefits

[TWX]

Given that we just had this discussion within the last few weeks and most of the armchair solutions completely ignored Argentina's history with its currency, hyperinflation, being artificially pegged to the US Dollar, and then the problems that had to be addressed when they chose to top artificially pairing with the Dollar, I don't think it'll help at all.

Currencies only work when everyone trusts them. People trust them when their governments and banks engage in responsible monetary policy. If monetary policy gets so out-of-whack that the people don't trust the currency then the government itself is in jeopardy the state-issued fiat currency is how it conducts business.

I expect that most Argentines don't want violent or protracted revolution, they want the system to be repaired. Most solutions that were offered last time were based on circumventing the government, which would bring about the downfall of anything resembling the status quo, rather than correcting minor to moderate problems.

This isn't Greece or Venezuela or Somalia, there's the ability to fix it if people are willing to commit themselves to it and to not syphon-off all of the gains for themselves.

Greetings from Argentina

[ericlondaits]

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.

Re:The solution for Argentina is competent governa

[MightyMartian]

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.

Re:Democracy

[bobbied]

When 51% figure out that they can keep voting themselves resources by electing the right people, the end is near. Venezuela is an example of how this works. Once it was a thriving economic power house in south America, resource rich and hard working. Now, though the "reforms" of Chavez and his successor the country's economic engine has been running on sugared gasoline while the politicians poured fine sand in the crankcase and tried to floor the accelerator. Democracy voted itself out of existence as the popular "Let me make sure you get your share!" refrain echoed through the ever swelling ranks of the poor and dependent.

Revolution is at the door, because eventually the government and the politicians that run it won't be able to cash the checks they've written. And the people who voted out of greed, to get something now and a promise of more to come, and those who objected to the perversion of their government, will ALL pay along with their children, grand children and great grand children, many with their lives.

The sad part is that history clearly shows how this will progress, and even so, there are many countries on the same path...

Re:The IMF should be worried

[TheGavster]

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.

Bitcoin? Nonsense

[cachimaster]

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.

Maybe people are not desperate

[gwolf]

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.