To get out of the currency trap, you have to attack the causes and eliminate the controls

INFOBAE  – The authorities ruled correctly. A devaluation would further complicate the crisis affecting the economy, because it would further raise domestic prices and exacerbate conflicts. The situation appears very complicated. The supplier of official dollars is the BCRA, whose international reserves are flagging. At the same time, a very wide exchange gap of the order of 100%, between the official dollar and the available prices, attracts more buyers of official dollars. A conflictive situation, which distorts many indicators. Just when the economic recovery would demand more foreign exchange for imports.

In such dire conditions, it is natural to lock yourself up trying to defend yourself. Faced with this scenario, a change of approach can be proposed. Attack the causes of the confrontation. As achieved by Ludwig Erhard, the minister who, after the disaster of a destroyed Germany, after World War II, prevailed over the dictates of the US and UK armies, which occupied and governed their country and sought greater controls. Faced with this gloomy outlook, Erhard reformed the currency, giving confidence to overcome barter with the agility of monetary transactions. He completed the program by removing all the controls that blocked the businesses; and it gave impetus to the German economic and electoral locomotive. Attending to the true individual needs of people benefits the social group.

The initial step is to recognize that the 45 million Argentines as a whole have the individual capacities to resolve their difficulties if the obstacles are removed. “If they give them back their legs,” Maradona would say, if they give them back the means, the resources to agree, hire. This is trust in predictable, fair rules, the same for all, sustained over time.

Accept that the 45 million Argentines gather more intelligence and skills to meet their own needs, creating value, than any group of officials, no matter how capable they are. Free competition from artificial fences, in individual transactions, is the most satisfactory agreement of people’s particular needs. The most creative of value. The initial step is to recognize that the group of 45 million Argentines has the individual capacities to solve their difficulties if the obstacles are removed.

For something, the most advanced nations, those with the highest incomes, are the most democratic, the most respectful of individual and property rights. Such is the power of competition. Despite the extraordinary growth of some regimented countries, they will never reach the income of those respectful of individual rights. Freedom from redundant locks is the state of the art.

The next step to get out of the currency trap is to remove redundant obstacles to activities. Some related to prohibitions to travel throughout the territory of the Nation, between provinces and localities. Restrictions on activities that could be lifted thanks to what was learned during the quarantines of different national jurisdictions and around the world.

The dynamic transaction network relies on the common nexus of the ownership of the income obtained to decide its best disposition, investment, over time. Usurpations, expropriations, regulatory surprises, confuse and squander productive resources. Usurpations, expropriations, regulatory surprises, confuse and squander productive resources (Gentileza Costa de Noticias). News)

Similarly, overspending imposes burdens that contract jobs and productions. Whether they are excessive state spending, funded with taxes, or privileged, when they are private.

Begin to release employment contracts, so that employers can optimize their staffing and employees find more attractive job opportunities. That will not arise with the prohibitions and indemnities in force.

To encourage the most competitive exports, that is, the most taxed with withholdings, it is possible to reduce the costs of inputs and the obstacles to international trade. Cheaper, unlocking imports, to expand exports To encourage more competitive exports, that is, the most taxed with withholdings, it is possible to reduce the costs of inputs and barriers to trade

The contracts must be those agreed between the parties, without impositions, extensions, regulations.

Remove privileges that overwhelm everyone

The most necessary and appropriate National Agreement is to reduce, eliminate, privileges, special deals, obtained by different sectors, entities, through time. Privileges that contract joint income, impoverish Argentines. Leaving the aristocratic country of the special jurisdictions, prohibited by the Constitution, to direct the country of agreements between equals, dreamed of by those who attended the constituent convocation.

The promise of the French Revolution: the same and equal rights and measures for all people and times! They did not stay in words, the conventional French. They ensured the same measures for all times and people sanctioning the Decimal Metric System, the great promoter of trade, individual transactions, eliminating the prevalence of hierarchical patterns, which made all hiring uncertain.

We Argentines learned that the exchange / monetary balance is conditioned by trust in the authorities and the institutional framework. For this reason, more financial assets were accumulated in dollars than in pesos, because it is expected to obtain greater satisfaction with them. More dollars are bought the greater the distrust, disagreement, with government actions. We Argentines learned that the exchange / monetary balance is conditioned by trust in the authorities and the institutional framework (Reuters). We Argentines learned that the exchange / monetary balance It is conditioned by trust in the authorities and the institutional framework (Reuters)

Each purchase of dollars from the BCRA reduces the ability to spend on local goods, contracting the local market. At the same time, the more capital wants to go, the greater the appetite for foreign exchange. The pesos are not demanded abroad.

The 8 determinants of the demand for dollars

Economic agents recognize the following drivers for the purchase of dollars:

  1. The issuance of pesos exceeding the demand. On the other hand, the placement of government bonds to absorb liquidity subtracts funds to acquire foreign exchange and other goods, making interest rates more expensive and depressing the value of these public securities;
  2. The plans, budgets, little transparent government, increase the perceived uncertainty;
  3. Barriers to activities, jobs, property rights, discourage undertaking businesses and increases discouragement;
  4. By privileging, favoring, particular sectors, income is redistributed. The opposite of a transaction: it devalues ​​the income. The injured parties contract their activities and buy foreign exchange;
  5. Uncertain contracts. For example, prohibit layoffs of personnel, duplicate compensation demands, extend the duration of rental contracts, etc .;
  6. Expectations of devaluation and more inflation;
  7. Expropriation of companies, occupation of land, impose changes in regulations, encourages the passage of capital emigration; Y
  8. Surprise overturns of public opinion, elections of less reliable authorities.

The authorities should recognize these causes and avoid them. It is possible to get out of the current difficulties, agreeing on the effective answers claimed.