Milei has not bought and sold on the table of commodities, futures, options, currencies, government securities, stocks, derivatives and hedge funds. I already understood about Marra. Nor is the real economy his thing, nor the management of private or public companies. They erred by boasting equivalences, because now we understand that the devaluation rate of 118% in one day represents a TEA of 224.82%. The biggests of the history.
Suppose that an agro-exporter liquidated foreign currency with such a devaluation (224.82%), received the pesos and, the next day, was positioned as a 100% TNA bank, which is 171.45% TEA in dollars. The same interest rate that Bausili pays to a bank for a day. Better to leave it there.
1.IMF: The president said: the organization “continues to accompany us”. In reality, he comes as an escort, like a father protecting a child whose wheels have been removed from his bicycle. The IMF is shaking, because If Argentina falls into “moratorium”default is followed by a “financial crisis” of debt in the hands of private holders, an escalation of country risk, and a social labyrinth of magnitude.
What the president does not sayis that, since before taking office, with Caputo they have been asking the IMF for the difference between Macri’s rating (US$57.5 billion) and the disbursements (US$44.5 billion), some US$ 13,000 million What do they desire to be able to dollarize?. The IMF systematically says NO.
Every time they show him a good result, the president expects a “reward.” No. It doesn’t work like that.
From the first moment they were told: “There is no money”, a motto that they conveyed to society as a whole. Macri ended his administration with a skyrocketing dollar and inflation of 54%, the highest in 3 decades, he doubled Cristina Kirchner’s inflation and quintupled the value of the dollar, precisely because they did not give him the missing $13 billion. .
If Argentina falls into default, there will be a review of the conditions under which the loan was granted. An “express loan” that was granted in just 2 weeks, when the technical staff did not recommend doing so. 13 years had passed without Argentina requesting loans from the IMF. A derailment would hit him squarely. Donald Trump, in the middle of the presidential campaign.
ABOUT THE EVENTUAL program change: Argentina commits the IMF because its “exposure” is enormous. It does not mean that it is going to bring it down, but there will be doubts about the entity’s credit management. No financial institution grants half of its credit portfolio to a single client. It is expressly prohibited, for example, in the Argentine financial system. Caputo probably will not pass the next review, the deficit goal could not be reached, revenue falling, a vicious circle is created. With such a recession: fall in activity in January (-3.8%), industrial GDP, the sustainability of the debt is moving away. The Debt/GDP ratio grows. Above all, with the dollarization of the Treasury from the BCRA pesos. BOPREAL series 2 is here.
- Currency Competition: A New Euphemism for the Discredited Convertibility. Defining fiscal dominance as a criminal offense is the same as the Convertibility Law, without the shot from the 12 steps. The criminal thing is for the tribune. I would demand the vote of a Law that no one is going to vote for. Currency boards do not exist in the contemporary capitalist world. Nobody gives up macroeconomic policy instruments to reverse the cycles.
If the US, the Eurozone or Japan (which are not communists) had done that in the pandemic, they would have bankrupted all the G7 economies, because they expanded money at random.
- If there is no fiscal deficit, is there no need for MORE debt? – To build a port, a route for exports, do you not need credits? – If the debt is maintained and the recession leaves no room for growth, the debt/GDP ratio increases negatively, due to a fall in the latter, and the risk of intertemporal fiscal insolvency increases, the country risk increases, the financial cost increases and default occurs. .
Milei repeats “the assumption,” a soporific rosary from Machinea, López Murphy and Cavallo 2001: “if we lower spending, the country risk lowers, we pay less interest, we lower taxes and we grow. It already failed. That doesn’t happen. When taxes are lowered for companies, shareholders save. The economy does not reactivate without added spending. It’s a slogan like “the spillover theory”. Furthermore, if spending was lowered, he said, to lower taxes, then the effect would be seriously neutral on the deficit.
In short, there was a “trade off”, primary spending temporarily fell due to non-payments and the “social debt”. At some point the pension and cut subsidies will have to be recovered. Remember the cost of the trials for Patricia Bullrich’s pension reduction in 2001. Social debt was contracted. And, they did not lower the 9 points of the BCRA’s quasi-fiscal deficit, they are entrusting it to the Treasury.
They conceived a “bail out” of the banks, without permission from Congress. The banks that have earned fortunes with Lebac and Leliq now earn more. They could have contributed to the reduction of quasi-fiscal spending. Instead, the economic authorities agreed to disarm the Leliq, paying them 100% TNA within 1 day, the TEA is 171.46%. Since the dollar is flat, the yield is 171.46% (-4% devaluation) = profitability 167.4% in dollars. A true mockery paid by savers in pesos and the Treasury.
Results: January was and usually is the best month for the fiscal balance. That said, 0.5% sub surplus was achieved by executing items. It was like stopping paying the credit card in January, electricity, gas, telephone, the club, ABL, etc. There were plenty of pesos, but it was an illusion. Next month, document letters and seizures will arrive at the house. Similar to this are the lawsuits with the Provinces, social movements, the electrodependent, terminally ill people who do not receive remedies, etc.
The supposed sanitation of the BCRA is a coercion to the Treasury. It is a “bail out” or bailout of Leliq’s creditor banks and other debts. – Did the banks lend without risk? – That’s called “moral hazard.” In the US, (2007-2009) in all rounds of Quantitative Easing (quantitative flexibility), although there was “moral hazard”, officials and bankers had to go to Congress to ask for authorization. Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson. Here you don’t ask for permission, we do it “prepo”. Bausili and Caputo without asking anyone anything, once again. They saved the banks from a bad debt in Leliq. They could have “reprofiled” the Leliq, Macri did it with other titles in 2019. Of course, it had to be done without remuneration or with low remuneration, or pay them when due, accompanied by the hyperinflation in dollars that “shot up anyway”. – Why aren’t banks part of the chainsaw and the blender? –
By disassembling the Leliq and leaving them for 1 day, If something happens in the country, the debt in one day would be collected all together. If nothing happens, the banks earn 171.46% TEA in dollars. It is a dispossession of the treasury in favor of the banks.
- Yeah. issued PRESIDENT: To buy dollars the counterpart is to deliver pesos. To cover the “put options” they issued and also printed to meet the paid reserves that represent 14% of GDP.
To all this, remember, banks earn at a TEA of 171.46% in dollars. Caputo and Bausili met alone with the banks on the first day. The same percentage that was generated in Macri’s first year, this time it was achieved in a single quarter. “The same, but faster”. Luckily they didn’t get any more loans.
- Inflation: The government shot it up to (25.5% monthly) more than double Massa’s worst inflation (12%). It is the same phenomenon that Macri achieved. Milei and Macri explained that the causes of inflation are not exclusively monetary. Not only do they confirm what the IMF recognized, but it is the first case of a country where it seems obvious. Inflation They shot her freeing her, but fundamentally increasing rates, fuel and removing subsidies. Contrary to what was claimed.
According to Milei and Caputo, in the first week of January inflation was running at 3,678.34% (TEA), what Caputo missed is that, when ironing the dollar, that percentage of hyperinflation, it was in dollars. Imagine that, in the US, a hot dog and a soda go from $7 to $11 in two months. They would burn down the country. Here it is worse right now, because we have 57% poverty. The same poverty as in the first quarter of 2002, after the outbreak, not before.
This annualized hyperinflation in two months surpassed those of 1989 and 1991 in Argentina, because it is also in dollars. And, Economía and BCRA downloaded it to liquefy pesos and create financial businesses. Even though interest rates are negative, they are extravagant in dollar terms.
- Communication achievement: They managed to explain that a rise of between 2 and 3 times the worst inflation of Massa is a success, to carry Caputo. And, what, if they achieve 15% in February, that is, 20% more than Massa, is extraordinary.
- What does the president call the recomposition of relative prices? It’s anti-academic. The structure is designed. It should say, we change the relative pricing structure on request, or, “a piacere”. Each country, each government, establishes that decision. The price of a good is not theoretical. Each country has its own cost matrix and international prices and rates cannot be normalized or equated, because salaries and incomes around the world are different. They even contradict each other, because there would be no comparative advantages or international trade. France subsidizes the countryside, it cannot compete with our prices.
It is true that there is a hegemonic theoretical conceptualization determined by university power, disseminated and screwed by the Establishment Macro-Ecolobists through their think tanks and private consultants, to give lyrics to the journalists who drink from the “bolepasquin” that they download, so that they repeat hypnotic litanies, until creating “common sense” in ordinary people. Only in this way can we understand that a worker says that the electricity bills were too cheap, and it is good to pay more for them.
CONCLUSION: It could be that President Milei is being mocked by his surroundings, which will not excuse him from his responsibilities in the future. Someone should help him.
Source: Ambito
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