Argentina: dollarize vs extreme instability. Peronists [representing inefficient populism] were shoehorned out but are fighting violently to get back in power. —Mary Anastasia O’Grady, WSJ editorial board @MaryAnastasiaOG

Sep 15, 03:56 AM

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Bank note: Billete 10 centavos de Peso Moneda Nacional (Argentina)

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Mary Anastasia O’Grady, WSJ editorial board, @MaryAnastasiaOG, anent: Argentina has major budget problems, where the solution is dramatic: in order to roll back the inflation and extreme instability, Mary recommends “dollarizing.” Mauricio Macri finally won the presidency after Kichner. . . His govt went to the IMF for $30 million; at that point, the capital market environment was benign and kind, with low interest rates. Needless to say, that didn’t last. Now they have fiscal and monetary problems. Peronism – a rich word of ambiguous meaning – is essentially a big-govt populism and labor movement: Macri shoehorned them out but, in Congress, they want to get back in power. Problematically, they don’t just block roads—they grow quite violent. Also have a long history of devaluing the peso; then its value drops and they have to issue more pesos. Meanwhile, today Argentine people are in dollars as much as they can be, so the peso is already partially dollarized. Politicians are reluctant to to do this because, once you dollarize formally, you lose the capacity to print pesos and thereby paper over economic woes. Ergo, politicians suffer. Furthermore, Argentina trades a lot with Brazil; if Brazil devalues, it can use the devaluation of the real against Argentina. A central banker’s only job should be to protect the value of the currency.