“The stocks are an immoral measure taken by a liberticidal government. It implies restricting what your consumption is, what is the set of goods that you can consume or demand ”. It is the first answer of the economist Javier Milei on the impact of the new exchange restrictions announced Tuesday by the Central Bank. “If you earned your money honestly, who is the government to say what goods you can buy and what not. It is a restriction on your individual freedoms”, He added.
For Milei, yesterday’s measure is a disguised devaluation.
When this explodes, you will be in the presence of the worst economic crisis in Argentine history. In terms of the drop in activity, we are close to 12%. In 2002 the fall was 10.9%
– What effect does this measure have on the pocket of savers in the short term?
– They put the stocks on you so you can’t buy dollars. And the other side is that you keep a greater amount of pesos in your pocket. The government is making you artificially increase the tax base of the inflation tax. It is a kind of tax increase. It has all the violent burden of a tax increase. They increase your tax base to collect more taxes and to finance the tax disaster. The stocks is a scam. The inflation tax does not go through Congress. It is a non-legislated tax, therefore it is illegal and it is a scam.
The government is making you artificially increase the tax base of the inflation tax. It’s a kind of tax increase
– What alternatives did the Government have, in the midst of a fall in reserves?
—The least important is the measure. There are underlying issues that make the measure perverse. At bottom, it is a disguised devaluation. When you have an excess demand in a market, the system answers you with a rise in that price. Not only do the quantities demanded fall, but those supplied increase. The problem is that The Government, faced with what it has already squandered from reserves, so that the price does not change, comes out with a stick to punish and penalize those who want to demand dollars.. You will have fewer quantities in the market and a much larger excess demand in that market. Those who could offer are not going to offer it. They are going with the club to try to lower the demand.
– And what are the consequences of restricting demand?
—Deepen the imbalance in the exchange market. You will have more excess demand in the exchange market. The flip side is an excess supply in the rest of the economy. It implies more depressed bond prices, therefore higher interest rates, less demand for goods, impact on the level of activity, excess supply in the labor market. Therefore, it punishes job creation and, at the same time, it deepens the money supply effect that puts pressure on the price level.
The country is busted and covered with taxes with the most anti-business system in the world, we are among the worst in economic freedom
– More inflation?
— The exchange rate has a trajectory and then you have the stocks. Inflation is always and everywhere a monetary phenomenon. When you have an excess supply of money (or because you issue money and / or because the demand for money falls) it generates an excess supply, purchasing power falls and all prices rise. The dollar is one more price, what happens is that it is a financial asset and it bites first. But it is a matter of timing. The trend, the trajectory of the exchange rate, has to do with the monetary policy they are carrying out. With the stocks, you jump down, but the trajectory remains. Continue restricting the official exchange rate, sooner or later, the gap will reappear. The excess demand in the exchange market generates a disaster in the rest of the economy.
Miguel Pesce is immoral when he says that those who operate in the blue market are criminals. Criminals are politicians who want to charge you inflation tax
– Then, it ends up affecting the most vulnerable sectors, which are not those who buy dollars.
– Those sectors have no defense. The inflation tax is going to hit them much harder. It is re-regressive. He is going to hit those who have the least more, as usual. The rest, in some way, will try to avoid the inflation tax. Miguel Pesce is immoral when he says that those who operate in the blue market are criminals. Criminals are politicians who want to charge you inflation tax. You do not keep the pesos because you know that the politicians are going to scam you. The real criminal is the Central Bank. People try to preserve the fruit of their labor.
– What are the numbers of the monetary problem that Argentina has?
— The Government has a cave-dwelling view, ignorant, about inflation, which considers that the price level has to do with the exchange rate. So all the effort is trying to control the exchange rate and not all the things that do to the monetary and exchange rate imbalance. They have been in trouble since they won the PASO, when the exchange rate was $ 40 and recently reached $ 140, and now at $ 145. You have a 250% devaluation, an underlying problem of 250% inflation. Staple goods, which have to do with food, are determined by the exchange rate because they are derived from commodities. We are going to have an explosion of poverty and destitution. The real wage is destroyed. The social damage they cause is enormous. As a consequence of the fiscal deficit, so far this year, the BCRA issued $ 1.5 trillion to finance the treasury. 70% of that issuance was not seen in the market because $ 850,000 million were sterilized with Leliqs and passes. And some 200,000 million were sterilized via the sale of dollars. You have imbalances in stock and in flows. In stock, a monetary base for the equivalent of USD 31,000 million at the official exchange rate. Leliq for USD 36,000 million and passes for USD 9,000 million. Monetary liabilities of USD 76,000 million and freely available reserves of USD 2,500 at most. A raging imbalance.
They have been in trouble since they won the PASO, when the exchange rate was $ 40 and recently reached $ 140, and now at $ 145. You have a 250% devaluation, an underlying problem of 250% inflation
– And when does that explode?
– It’s exploding. The stocks they put in, which practically prohibits buying dollars, is that they exploited you. If you remove all these restrictions, you will see the exchange rate in the clouds. It is a monetary disaster of capital proportions. Explode, it will explode for sure.
– Is it comparable to any other economic crisis in Argentine history?
— It combines elements of the 2002 crisis at the real level, but a monetary disaster like the one you had in Raúl Alfonsín’s hyperinflation in 1989. When this explodes, you will be in the presence of the worst economic crisis in Argentine history. In terms of the drop in activity, we are close to 12%. In 2002 the drop was 10.9%. Today you have the unemployment rate at 15%, but that number is fictitious because an unemployed person is someone who is looking for work and cannot find it. In the case of a waiter, who had a job in a bar that closed, what job will he look for? You have a grosser discouragement effect. 400,000 jobs were lost in the formal sector and 600,000 in the informal sector. It is going to see an explosion of poverty and tremendous destitution. The 8.9 million IFEs are financed with monetary issuance. In all parts of the world, you have a temporary retraction of the job offer and after the effect of the cave-dwelling quarantines promoted by the WHO, economies rebound and the more flexible, the more they rebound. The United States is expected to have the economy recovered by October. The difference is that in Argentina, companies died in the middle. The government’s strategy was to strangle companies in order not to touch the benefits of the political caste. A company slaughter. Now everyone is surprised by the companies that leave? We will not even be able to go back to the GDP we had in 2011. In terms of per capita income it is a disaster. The “V” that Argentina can make is going to be smaller than the rest of the world. When the monetary problem explodes, you have more and more restrictions, but the moment comes that you can not do anything else and the explosion ends up being worse.
If you remove all these restrictions, you will see the exchange rate in the clouds. It is a monetary disaster of capital proportions. Explode, it will explode for sure.
– Could you take another path?
— TOcarding the price system is an advance against freedom. Prices do not arise out of nowhere, they arise from voluntary exchanges between individuals. Government intervention is a violent act that seeks to rob you and generates distortion in the system. You have to correct the underlying factors of the economy. Argentina should have a consistent program that is sustainable so that it can pay the debt and that the method you choose does not exploit you socially. The country is busted and covered with taxes with the most anti-business system in the world, we are among the worst in economic freedom. Look at all the things to do. When the thermometer tells you that you have a fever, they break the thermometer. That consistent program, which they do not have, should build confidence for individuals to begin making decisions for the future that contribute to economic growth. That is not going to happen because there is no trust. Martin Guzman Two days ago he said they were not going to change the stocks. Some time ago it was said that there was going to be a fiscal adjustment and taxes were raised. This is functional to the political corporation. And also rogue economists who are accomplices and take these liberticidal measures to him. Since politicians from the state have a monopoly on violence, they impose it on you. How is the fiscal imbalance that the country is going to end this year to correct? With more taxes. Forget about growing up.
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