Argentina announces a 50% devaluation of its currency as part of shock economic measures
Argentina announces a 50% devaluation of its currency as part of shock economic measures
The sharp devaluation of its currency and other cuts are needed to deal with an economic "emergency," said President Javier Milei.
I am not in any way qualified to ask this question, but wouldn't devaluing your currency by half cause 100% inflation on all imports, and effectively double all foreign denominated debts?
Yes in normal countries. But Argentina has an official fixed rates that is unrelated to reality. This means there are two exchange rates, the official one and the real one. Thie measure just puts the official one closer to the real one. And as Argentina uses gov money to pay the official rate thus this reduces the gov expenses and in the long term it stabilises the currency. Yes, in the short term its a shock to the economy making some thins more expensive (for those that had access to the gov rate) but its just bc before the gov subsidised those things indirectly.
Most of the ideas of this president are actually good. Its just a shame that he has to insult and act to apply them. He's just doing what the IMF has proposed for years and telling everyone it's a revolution.
Correct. Usually when governments devalue currency, it's a move to find equilibrium slightly above the black market value of that currency.
I read that the official rate was 380 to the dollar and is now 800, while black market rate was 1000.
So this devaluation is still 20% higher than the black market rate.
Yes, but, it looks good on a certain internal report so no matter how much damage it does to poor People, go go austerity!
But never fear, the wealthy are already protected from any loss.More and more I notice these economic failings only occur because a nation's ruling class is desperate to keep up with other nation's ruling classes.
Adding to the other answers, there is also a 100% or so tax on any purchases done outside of the country, this tax is meant to push the cost when using official dollar to match the actual value.
The main problem here is that the tax is not going away so official dollar is going from 365(actually 730) to 800(actually 1600) when the street value is around 1000.
I just read on a Spanish headline that with this little trick (and aid cuts) he just multiplied Argentinians electric bill by 6x
Nobody tell this guy who brought us up to this point then
magic!
Oh, "shock therapy," eh?
That worked so great for Russia in the 90s... just ask any Russian oligarch!