"Support" for local currencies.
Jay, the most common form of looting, a.k.a, capital flight never fails. First someone concoct with his friends a scenario. Choose a country where most likely this scenario will play well. There is no lack of countries without lousy economic policies to choose from.
Make sure that no one of his friends will get burned and go for it. It doesn't fail: You have capital flight. So lets an Argentina? OK. Lets go. Who's going to be burned is going to be most Spanish investors who invested 'con gusto' in the 90's. Lousy economic policies in Latin America you don't have to seek. You stumble on them as you step out of the plane before passport control!!!
Good. We will do an Argentina, capital will fly out first by those 'on the know'. Cumulatively, dollar stops flying in. Suddenly there is a lack of dollars. Since everyone and his uncle is dumping the local currency, and currency is a product, and products that no one want to have drop in price. So government steps in to "prop" the local currency, via intervening in the market and putting more dollars at the disposition of anyone who wants to have money flying out.
Of course the government is "supporting" the local currency for altruism. It does to make sure that the ones -and those are the rich people, and the companies not J6P- who haven't flown at the first go, are not screwed too much by selling their stock of local currency too low.
Once the country has been depleted of hard currency, the local economy doesn't stop, people move out and switch the lights off. There are a lot of 'descamisados' (shirtless) left behind and the wheels of the local economy has to continue to turn. Without no dollars, economy grounds to a halt, unless, yes you've guessed, the IMF come with fresh money.
The IMF guys tell their secretary: "Rose please dust off the Argentina file for us to fly to Buenos Aires" It is all there. It happens every ten years or so. It is not new. It is just more perfect today than it used to be say, 60 years ago. |
