Taps Coogan – November 20th, 2023
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Steve Hanke, professor of applied economics at Johns Hopkins University and expert on emerging market inflation, recently spoke with CNBC in light of Javier Milei’s victory in Argentina. Specifically, he discusses Milei’s goal of ‘dollarizing’ Argentina: replacing the Peso with the US Dollar and eliminating the nation’s central bank to combat decades of runaway inflation which currently clocks in at 140%. Steve Hanke was formally involved in dollarizations of Montenegro (since replaced by the Euro) and Ecuador and claims to be an informal advisor to Milei.
Steve Hanke:
“The key problem in Argentina since 1876 has been the peso. One currency crisis after another, one recession after another, defaults on debt – one right after another. They’ve had three defaults on sovereign debt since the year 2000 and the current inflation rate, I just measured it today, is 220% (this is Steve Hanke’s calculation not the official CPI)…”
“Milei has the right idea. You’ve got to dollarize and many of these arguments against dollarization are absolute rubbish. The idea that somehow they don’t have enough dollars to dollarize is ridiculous. There is $265 billion worth of greenback notes stashed away in Argentina. That’s right behind the US…”
There is more to the interview so enjoy it above.
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Argentina has dollarized before. It didnt work. Of course, you cant have a political leader suggesting a link to precious metals.
Milei is proposing eliminating the Argentina Peso entirely, along with the central bank, and exclusively using dollars. While Argentina has had widespread unofficial dollarization, they’ve never tried that before. As for PMs, nobody would trust a link by the Argentine central bank. It would be a complete joke. As for PMs being directly currency, better idea, but PM prices are currently way too volatile to be useful. Price of gold in dollars, oil, wages, etc.. can vary 10% in a week. Bitcoin has this problem. It’s a big deal. We need radically higher gold market cap-to global GDP ratio to… Read more »