Topic: Argentine leading candidate: Pro Bitcoin, anti CentralBank, wants dollarization (Read 476 times)

The world is waiting to see the countries in Latin America slowly adopt bitcoin and begin to use it either as a legal tender or together with their USD which is the most used currency in all of Latin America. But I think that it will be based on several factors such as the rate of inflation and the consensus agreement by the central bankers. As for Javier Milei, Argentines can see what is going on. They know his true motive and it is not bitcoin but to dollarize the Argentine economy. I haven't counted though but I do not think that the times he has mentioned about bitcoin is up to 100.

Assuming Javier Milei wins and he actually follows through with pro-Bitcoin policies, it'd be massive for Argentina and Bitcoin. Triple digit inflation rates are a result of the money printing related to COVID and other matters -- the central banks have been trying to fight bad fiscal policy for years. If he wants to limit central bank influence, that would mean prolonging the inflationary spike and let the economy/prices naturally recover. They would be better off than letting the banks trying to conduct an impossible balancing act of balancing the economy and interest rates.

This would be great if Argentina can get such a forward looking and modern president that might be able turn the country around. Getting rid of the central bank all together might be a bit extreme and will hopefully not going to happen, but reducing the power of the central bank sounds like a good idea. The whole issue of the Argentina economy and currency is that they tried to rely on the US Dollar in the past without securing the value itself. They were supposed to store large amounts of US Dollars when pegging their own currency to a fixed US Dollar amount. Once it became public that there aren't enough foreign exchange reserves the value dropped freely. Even today with capital bans on the US Dollar, most people still hold large amounts of it instead of their own currency. Ditching their own currency might be way too extreme again, but relying on the US Dollar will help to bring down the inflation.  The idea now is to create a foreign entity that will hold a majority of the state-owned companies. Against these assets the government can take out a lot of loans in US Dollar to try and rescue the economy. For foreign investors it's great because their loans are secured and for Argentina it would mean a much higher debt level. The only issue would be if Argentina defaults again then they could lose ownership of their state-owned companies. Not only relying on the US Dollar, but also focusing on Bitcoin is another great idea. El Salvador did it in the past and so far, the country seems on track to recovery.

They're already doing that (I guess you mean interest rates ... they're growing every month or so), but it's not enough. As I wrote in my discussion with DrBeer, the big problem is the "structural" deficit due to corruption. The state loses, I estimate, at least about 5-10% of its budget due to corrupt overpricing of third-party services and low productivity due to "ñoquis" (state employees doing nothing or almost nothing). The "printing" problem is also linked to the inability of Argentinian treasury to issue bonds for reasonable rates. So they recurr to "MMT" instead.

That's actually wrong, I wonder where yo've read it. The other two are correct (he has denied climate change in the past, although it's not part of his official proposals, and anti-abortion, he justifies this one with the libertarian "no-agression" principle, but here he's clearly favouring the right of the unborn child over the right of the woman to not be target of "aggression").

That's what I think too. Dollarization hasn't solved all problems of Ecuador, El Salvador and Panama. Above all Ecuador, which is the largest of these countries and thus the one most comparable with Argentina, has ran into several defaults since 2000 and has enormous problems with organized crime (which is, by some, linked to dollarization, as dollarization decreased the income of poor people with informal jobs, and drug lords are recruiting them easily).

The better alternative in my view is a regional currency with Brazil, the main trade partner. I can think of some alternative ideas which could include a state-sponsored stablecoin based on commodities, but they're not discussed in Argentina (although commodity-backed stablecoins do exist there, for example Agrotoken).

I read more about his economic and political beliefs, and it seems that they align perfectly with a pro-Bitcoin position, so it's not just a random publicity stunt on his part to support Bitcoin. He's a libertarian, supportive of the ideas of the Austrian School of Economics. However, it makes me sad that he's politically radically right-wing (anti-abortion, anti-immigration, denier of climate change), so I wouldn't want Argentina to elect him despite his pro-Bitcoin stance.
Economically, Argentina clearly needs a change, but I'm not sure his radical minimal state idea is what it needs. Sometimes ideas that look interesting on paper turn out to be devastating in practice.

I would understand the pro bitcoin part but I am not entirely sure if ant-central bank is a good idea for them. This is a nation that is already having some trouble and if they lose their central bank as well then it is going to end up with a lot of trouble and I do not think that it will be promising for them in the future.

I do hope that we are going to end up with a solution that would be better for them on the long run, it should be considered different for us on the long run. If Argentina wants to have a more stable currency, they should simply stop printing more, and start giving higher rates, and it will be a high recession period but if they push through it, no matter how long it takes, they are going to be fine eventually.

according to the news I read, Milei has not officially become the new president of Argentina but Milei successfully won the presidential primaries last year, this proves that he is already in the hearts of many Argentinian citizens, besides that there are many citizens who support his ambition to make cryptocurrency a one of the means of payment in argentina.

his journey actually wasn't so smooth because he was linked to the Coinx ponzi scheme (dunno what really happened, I don't really follow the politics in argentina), but I doubt whether his ambition to do "dollarization" will succeed if he is elected because after all USA and Argentina have been a coalition for a long time.

1. The guy's name is Milei, not Maile.
2. You're the second one posting that Milei is connected in some way by the US government (see this post), but I do not agree, see this post and the link I show there.
3. You're wrong about the assumption that Argentina needs any "consent" to make the dollar the national currency.

All what it's needs is a law which allows the dollar to be legal tender in the country. If the US has something against that, it can of course impose sanctions (like penalty tariffs), but it can't prevent the dollar being used elsewhere. History shows that the US had never any problem with other countries like Ecuador, Panama and El Salvador using the dollar, the same happened for example with the Euro in parts of the Balkans.

@DrBeer I completely agree, see my last post (I was criticising this idea that dollarization would solve corruption too, I only showed you the arguments of people believing this.)

Dollarization of your economy isn't the best approach towards building a healthy economy. The politician should know that, increasing your production bases is one major factor to building an economy, also export of finished product too also helps. I agree with you about the the fact that, a politician will say anything just to get elected, because they just promised some of this policy's just to gaslight the people in believing them.

This is where I disagree. "Dollarization" does not solve the problem of corruption. Not at all. Dollarization of the economy is a stabilization mechanism. And corruption is a completely different process. It was there when kauri shells were in circulation, it is there under the dollar, it is there under local currencies, it is there in the crypto world. It's not a question of currency. Corruption is a systemic process inherent to a community, not a financial system.

Javier Maile is a very radical politician who is possibly sponsored by the US government. Without the consent of the American government, the dollar cannot be made the national currency. Argengina applied for membership in the BRICS, and with such a policy there is no need to even make revolutions. American corporations will very quickly become the owners of major assets in the country.

What I meant was that those people who support dollarization mean that this would force the country to more fiscal discipline, and that a side-effect would be a more efficient fight against corruption, because there is less money available to "waste" in corruption.

I add an example. In Argentina it's quite common that some obscure administrative structure or agency is created (often with very general and broad names such as "Citizen's Agency"), only to give work to friends or family members of high-ranked politicians, or long-time party members (we can't really talk about "work" here, more about "income", as these people are usually extremely unproductive, to the point they do not even assist to their offices). Dollarization supporters think that would cease after dollarization because the different ministeries would have to justify the money they spend creating administrative structures, and thus the creation of these "fake agencies" would not be possible anymore.

The first part of the sentence, i.e. that fiscal discipline is incentived, is correct in my opinion, and it somewhat worked in the 1990s. Argentina had a relatively low deficit in the first years after the "currency board" was introduced. (That changed in the mid to late 90s.)

But you wrote approximately in your own answer what I think about the second part (the part about the side-effect). If corruption is deeply rooted in political culture, then it requires additional efforts to fight it. Having 5 or 10% less money to "waste" doesn't guarantee the creation of these dubious administrative structures. They would more likely remove other expenses, like welfare or construction, than to change these practices.

By the way, it seems that Bitcoin regulation in Argentina is moving forward - as I interpret the article, a permissive regulation which "protects the investors" is intended.

I'm going to assume that I didn't quite get your point across... Honestly, I reread it several times, but .... it's kind of hard to take. I will be very grateful if you give your answer in simpler words - English is not my native language, perhaps this is the reason.

But from what I understood, I'll speak about this phrase ""Fans of dollarization", of course, believe that such a step will "dry up" corruption, because there will be less ("printed") money for distribution.".
I disagree, dollarization will not "dry up" corruption. It may "stabilize" it and make it more attractive.  Let me explain.
Dollarization of the economy is an "extreme option". It is more about saving the financial system than fighting corruption. Corruption thrives regardless of the means of payment. Peso, real, dollar - it does not matter for corruption. Corruption is a SYSTEMIC process, it has a different "nature".  But a TIME switch to a secured, albeit "foreign" currency can stabilize the ECONOMY. And as I wrote - the transition to a "foreign currency" is only a temporary solution. Temporary - until adequate politicians come to power and a real fight against corruption.

The "dollarization fans" of course believe that such a move would "dry out" the corruption as there would be less ("printed") money to distribute. But what they miss is that if this move isn't sufficient as the difference isn't that big. If a country has a 5-10% structural fiscal deficit like Argentina today, then only dollarization won't stop the usual suspects to steal their part. If the available money is 5% or 10% less, they won't care. The 1990s, when Argentina had a 1:1 currency board and thus "money printing" was restricted, were probably one of the most corrupt times (together with perhaps ~2008-13 and some of the military dictatorships the country has experienced) of Argentina's history. Its president Menem was even convicted for one case but he fled the country to Chile ...

To be fair, Milei (the Argentine anti-Central-Bank candidate) promises to clean out the country's ministeries and secretaries from inefficient politicians, for example with stricter periodic evaluations of their work. So at least there is a vague anti-corruption plan. However, in the pre-primaries campaign, he and his own party had some scandals (for example, he was accused by a party colleague to have aggressively demanded "positions" in a provincial administration, and candidatures for the Congress were sold to rich people for 50.000 USD). So unfortunately it seems he's not very different from the "normal" corrupt administration, even if he claims so.

@justdimin: I agree somewhat. There are "socialist" countries doing well (Scandinavia, to a lesser extent most of Europe, and also China) and also more "capitalist" ones (USA, Australia). Most have mixed systems anyway with free market and some regulation, I'm not aware of a "pure capitalist" nor a "pure socialist" country (even North Korea has a strongly hierarchic/unequal system). However, I think some policies are objectively bad, like the Soviet bureaucracy, and even a non-corrupt political system probably couldn't have countered its negative incentives.

That is the reason why all these talks of "conservatives vs liberals, socialism vs capitalism" and all that sucks, there is no point on that. You know why? A nation with conservative rulers who are legit and want to make the country a better place will make it a better place, but also a liberal nation with rulers who are not corrupted will be good too, a capitalist nation will be good without corrupt and so will a socialist one.

It is not the political agenda that the rulers have, it's the corruption. If a nation has a government that is not corrupted and actually thinks the best of their citizens, then that nation will be better no matter what their political ideology is, that part is irrelevant and will always be.

I agree. As controversial as it is with all the negative notion Bitcoin have and the move for dollarization, if it is the best and only way to bring temporary yet much-needed stable currency and economy for Argentina, then so be it. Right now, it is a step and it is a good beginning to address the financial, debt, and economic crises Argentina has been facing for decades.

It seems to me that Argentina's Javier's attraction toward Bitcoin is borne out of exasperation. Argentina has been in all kinds of debt crises, banking crises, and other financial crises in many many decades already. Even before I was born, the country has already been through all of this. Milei must have already been fed up with this problem that characterizes the country's economy all his life.

It's not surprising, therefore, that an Argentinian leader would just want to eradicate the highly incompetent, corrupt, and inutile central bank once and for all. It probably explains why, while he is pro-Bitcoin and anti-central bank, he is also compelled to embrace a foreign yet more stable and dependable currency. That to me isn't controversial. That is realistic and practical. That's probably better than just declaring Bitcoin to be the one and only official currency when he becomes president.

While this isn't the solution, this may be a good place to start. This may indeed just be a band-aid solution but it'll at least somehow stabilize the economy. Having a stable currency is a good start.

it will definitely give a good morale boost for his people. because up until now, a lot of people are hesitant to touch this market because of the negative notion that media is portraying for this market. with the back-up of their leader, these people will try their hands on because if this market is only for illegal activities, then, their leader won't participate.

Thanks for your reply, and interesting thoughts !

I believe that corruption and its "derivatives" are at the root of economic problems. No, there are still options, of course... but I will dismiss the global idiocy and dementia of the government
As sad as it may sound - but corruption is the worst poison for the economy. I am not pleased to talk about it, but the truth is more important, in my country, Ukraine, today's government has brought corruption again, almost to the level of "ideology of power", as it was under President Yanukovych.... And this is still at a time when the country is being subjected to external terrorist aggression.
I won't say it, but corruption has penetrated very deeply into the economies of South America.  When I've traveled around the world, I've often been to South American countries. Brazil, Argentina, Chile, Ecuador, Dominican Republic. and others. And everywhere, talking to the local population, I have heard that corruption in their countries is almost "part of the culture". It's very bad. Without the elimination or global reduction of corruption, it will not be possible to "boost" the economy.  If there is corruption, neither the dollar nor bitcoin will help. Corruption is a kind of "black money hole", it drags the budget money with terrible force.... And only "pennies" are left for the economy

While many may be baffled by the combination of Bitcoin enthusiasm and the transition to the USD, Milei gets it, and it's obvious he's on to something. As you noted, the nation needs severely to find a way out of its current financial catastrophe

Getting rid of the central bank? A bold move. I've always believed that central banks have too much authority, and Milei's goal might be the world's needed wake-up call. Some may view full adoption of the USD as a surrender, but let's face it: the peso has been a complete failure. Argentina needs some stability at this point

You make a valid point about how people perceive Bitcoin. It is a ray of optimism in the face of inflationary nightmares, but with a switch to the USD, its function might change. But keep in mind that Bitcoin is more valuable than just money; it represents the direction of finance. Milei notices that. The guy is wiser than most of the current leaders, and I admire him for it