Hello Argentina, Currency Intervention is Counterproductive

Argentina keeps intervening in the currency markets hoping to prop up the Peso. The strategy backfired.

Currency Crisis

MarketWatch notes a New Record Low in the Peso.

The Central Bank of Argentina has been intervening in the exchange rate by selling dollars and buying back local currency, in an attempt to stem the descent of peso against other monetary units. On Tuesday, Buenos Aires requested a $30 billion credit line from the International Monetary Fund, after expending some $5 billion in currency reserves to curb further declines in the peso. Argentina relies on U.S. dollar funding to keep its economy afloat, so rising interest rates in the U.S. spell turmoil, while every new peso sell off reignites worries that Argentina is headed for a currency crisis.

Argentina is not "headed" for a currency crisis; Argentina is in the midst of a full blown currency crisis.

Major Disorder

What a hoot. This is not a disorder "risk"; This is major disorder.

Argentina Debt Burden

I fail to understand the above chart from the preceding link. The "K" makes little sense and I cannot get any numbers to add up to $111 billion.

Currency Intervention Does Not Work

Despite the numbers not adding up, the chart highlights a major problem with interventions.

Argentina desperately needs dollars to at least make make interest payments. The next three years are the most critical. Squandering currency reserves in a foolish defense of the Peso makes matters worse.

Argentina will now need an even bigger loan from the IMF.

Mike "Mish" Shedlock

Comments (10)
No. 1-10
MarkBC
MarkBC

Given that Argentina is just one more sign that the fractional reserve banking system is pushing the world to the breaking point, and I hope it is a given that austerity is not the solution to the fractional reserve banking issue, then what is the solution other than changing the fractional reserve system itself?

abend237-04
abend237-04

I can almost make the nums work if the black is assumed to be total Argentine external debt principal in K millions, USD. It was @$235B y/e 2017 and climbing@$9B/ Qtr. at that time.

abend237-04
abend237-04

Can't resist observing in passing that Argentina is just more Fed road kill. They were doing great until 1929, when the Fed started trying to put out the easy money fire they'd built in the 1920s. The Smoot Hawley idiot's trade act subsequently brained the fledgling global recovery from our Fed's folly and led shortly to the rise of Hitler, Mussolini and ,in 1946, Juan Peron in Argentina. In 1982, thirty six years later, Argentine's military junta head, President Galtieri launched the Falklands War with Britain, mostly to get Argentine minds off their squalor, most of which should be placed at the feet of our helpful Fed and it's enormously powerful and un-elected FOMC...

MaxBnb
MaxBnb

honest money is solution, gold and silver.
free coinage by any one
separation of Deposit and Loan Banking
no fractional reserve
taxes paid only in coins gold or silver
laws to be changed only by referendum ( 99% of all eligible for change )

Bam_Man
Bam_Man

A question for anyone who bought those 100-year Argentine Govt. bonds last year with the 8% coupon. How's that working out for you?