The document of Central Bank that last July presented the Phase 2 of the economic program (BCRA statement 07-23-2024) included some inaccurate concepts that I will comment below, then address some results.
The first imprecision lies in treating the stock of paid liabilities (Lebac, Leliq and passes) As a monetized fiscal deficit, when strictly speaking, these are instruments used To restrict monetary issuance of any originincluding the coverage of their own interests. During the Sturzenegger management in the BCRA they were mainly used to sterilize the issuance caused by the purchase of currencies, which from this phase 2 is carried out by selling a part of them directly in the open market.
Beyond the origin of these stocks, these are imbalances not monetized. The concept of ‘Large monetary base’ (BMA)understanding the paid liabilities, did not represent a properly monetary aggregate, because those do not constitute an emission of primary money (neither monetary circulation nor current account deposits of the entities), but on the contrary restrict it.
It can be admitted that they suppose future broadcast eventualbut the same could be said of any form of public debt in national currency, although it does not appear in the balance of the BCRA. Certainly, It is preferable that state debt instruments be placed in the open market instead of distorting bank intermediation.
But it is also true that with deficit 0 and without exchange interventionpaid liabilities would have stabilized in real terms: refinance their interests would be approximately an adjustment for inflation.
That confusion seems to spread. As a graphic of the statement shows below, when the remunerated liabilities are eliminated, the so -called BMA converged –It identified– With the classical monetary base (BM).
The nominal limit established for issuing ($ 47.7 billion) does not represent a demanding restriction as the document suggests, but a significant discretionary capacity of additional monetary expansion, since at the end of last year the BM did not yet reach the $ 30 billion.
Today some analysts try to estimate the monetary expansion by computing a non -existent BMA (I suppose that adding to the BM the stock of Fiscal Liquidity Letters in the portfolio of the banks, when it really comes to treasure titles; more about Lefis right away).
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However, The statement contributes to clarifying another confusion, since the authorities have often stated that they have advanced in the sanitation of the BCRA balance without ‘Bonex’ plans or contract breakup. The document recognizes that Phase 1 of the program was based on the deliberate fixation of negative interest rates in real terms, reducing the endogenous emission by interest of monetary liabilities. The cost was then suffered by the bank depositors, who saw the real value of their impositions fall … a ‘Bonex Plan’ implicit.
Some lines on the Lefis, the main monetary regulation instrument from the Phase 2. They are Treasury titles that canceled the balance of passive passes of the BCRA (last remaining form of paid monetary liabilities) and accrue the monetary policy rate. These interests are accredited daily by the Treasury in special accounts in the BCRA
Financial entities can have their Lefis, and the BCRA They will immediately liquidate the funds originally sterilized plus the interest accumulated in those special accounts. This disarmament of holdings, according to the terms used in the statement, will result in an increase in bank loans, but due to the monetary expansion caused by the cancellation of the Lefis … exactly the same as if a stock of a stock of passive passes.
The graph of the statement reproduced above includes another striking aspect, since it projects a continuous expansion of the BM in the immediate future, contradicting the presidential objective to definitively abolish the issuance of pesos, including a legal project to criminally punish those who break that prohibition . Let’s look at the verified execution.
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The extraordinary monetary expansion of the second quarter can be appreciated, so contradictory to the announcement of issuance 0 of the government. This caused the Phase 2 and the July statement, and in particular the decision to sell currencies in the MEP and CCL markets to sterilize the issuance caused by the purchase of BCRA reserves.
A moderation of the expansion of the BM onwards is observed in effect, but is not inferior to the one verified in the first quarter, and by the way far removed from the government’s null emission ads. The annual expansion was almost 200%: one thing is the deficit 0, and a different one is monetary and exchange policy.
The quarterly sources of the monetary base expansion
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Without additional details, the comments are risky, but it is striking that most of the currencies bought from the private sector have been acquired by the Treasury, and that it will register at the same time a great expansion of its deposits in the BCRA. Eloquent sample of the great financial surplus obtained by the Government, although the last quarter exhibits an important use of such resources.
The data also show the disappearance of the operation of Leliq, The progressive cancellation of the stock of passes (The last one made through Lefis is noticed in the third quarter) and the reduction of the liquidation of their interests.
Final comment
Despite the impressive public financial turnaround, of the treasure surpluses, the elimination of the quasi-fiscal deficit and the proposals of phase 2, the null monetary emission does not show signs of becoming a reality.
The economic authorities justify the detour with the fact that it corresponds to an increase in the demand for money: true, although it confesses the abandonment of the dogma of an absolute top to the money supply.
But there is a deep and original explanation: The viability and anti-inflationary relevance of the emission 0within the framework of a nominal fixation policy of the exchange rate and passive money, it is at least questionable.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
