Re: Keynesian Christmas!

[Alan Cibils <abcibils@xxxxxxxxx>]

The Argentine govt. appears to be doing most of what Bill suggested:

a) The current govt. is supposed to call elections on March 3, so it is
therefore transitory. It will not abandon the peg,  but most analysts (from
what I read in the papers) believe that the peso-dollar peg will be
abandoned. The questions are, of course, when and how to abandon them. They
seem to prefer, at least for now, to have an economy that is on its way out
of the recession before floating, or broadening the peg to a currency
basket which would include the real (Brazil). At any rate, Central Bank
reserves right now are considerably less than currency in circulation,
which de facto calls the peg into question.

b) One very debated proposal to make an orderly exit from the
convertibility scheme, is to "pesificar" (i.e. peso-ify, de-dollarize) the
economy. According to this proposal, all current dollar liabilities would
be converted to peso liabilities by decree. The big loosers with such a
scheme would be the banks, however, nobody (including many economists and
serious analysts) other than the banks are worried about this since the
banking sector has had extraordinary profits the last ten years.

c) It was refreshing to hear an Argentine president (even if a transitory
one!) talk about unemployment benefit and a "salario minimo, vital, y
movil" (minimum wage). It had been literally decades since we had heard
such words spoken from those in power.

d) From what I have seen so far, there is no talk of this, though it
wouldn't surprise me if they emerged in a post-float scenario.

e) Fortunately, that seems to be the sentiment of this government and most
withing peronism (except the very discredited Menem), and most business
sectors with the (obvious) exception of banks.

It will be very interesting to see how this develops.

Alan Cibils




At 07:38 AM 12/25/2001 +1000, you wrote:
> Dear PKT
>
> Classic case for a Job  Guarantee...
>
> As long as taxation collections can be made Argentina should:
>
> (a) abandon the currency peg against the dollar.
> (b) renegotiate all foreign contracts held by the govt in the peso. take
> it or leave it.
> (c) introduce a JG with wages in peso.
> (d) introduce short-term price controls if needed.
> (e) absolutely resist dollarisation.
>
> best wishes
> bill


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