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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (36258)	6/29/2008 9:52:36 AM
From: RJA_	Read Replies (2) \| Respond to of 217700

TJ, in several posts you mention the "Argentine outcome"... I just want to be somewhat clearer on what that is. Per this article here: en.wikipedia.org In 1999 - 2002 Argentina currency was tied to USD (1:1). However Peso could not stand on its own due to excessive imports and high external debt. Eventually Peso collapsed with much hardship and loss for those who had not converted to foreign currencies or gotten their funds out of the country. Much social unrest. Value of peso dropped by more than 2/3 but after recovery eventually stabilized around 3:1. As Argentine wages and ag products were then cheap on international market, Argentina could then export its way back to normalcy. Is this essentially what you expect for US? In which case, solution would be investing in any internationally convertible hard asset or well run currency (gold, silver, Swiss Franc, natural gas, oil) and as far out of jurisdiction of perhaps unstable or irrational government as possible. Brief snippets of Wikepidia article follow: "Argentina quickly lost the confidence of investors and the flight of money away from the country increased. In 2001, people fearing the worst began withdrawing large sums of money from their bank accounts, turning pesos into dollars and sending them abroad, causing a run on the banks. The government then enacted a set of measures (informally known as the corralito) that effectively froze all bank accounts for twelve months, allowing for only minor sums of cash to be withdrawn." "Because of this allowance limit and the serious problems it caused in certain cases, many Argentines became enraged and took to the streets of important cities, especially Buenos Aires. They engaged in a form of popular protest that became known as cacerolazo (banging pots and pans). These protests occurred especially during the period of 2001 to 2002. At first the cacerolazos were simply noisy demonstrations, but soon they included property destruction, often directed at banks, foreign privatized companies, and especially big American companies. Many businesses installed metal barriers because windows and glass facades were being broken, and even fires being ignited at their doors. Billboards of such companies as Coca Cola and others were brought down by the masses of demonstrators." The Recovery -- "Eduardo Duhalde finally managed to stabilise the situation to a certain extent, and called for elections. On May 25, 2003 President Néstor Kirchner took charge. Kirchner kept Duhalde's Minister of Economy, Roberto Lavagna, in his post. Lavagna, a respected economist with centrist views, showed a considerable aptitude at managing the crisis, with the help of heterodox measures." Evolution of the Argentine GNP, 1999–2004 "The economic outlook was completely different from that of the 1990s; the devalued peso made Argentine exports cheap and competitive abroad, while discouraging imports. In addition, the high price of soy in the international market produced an injection of massive amounts of foreign currency (with China becoming a major buyer of Argentina's soy products)." "The government encouraged import substitution and accessible credit for businesses, staged an aggressive plan to improve tax collection, and set aside large amounts of money for social welfare, while controlling expenditure in other fields.[citation needed]" "As a result of the administration's productive model and controlling measures (selling reserve dollars in the public market), the peso slowly revalued, reaching a 3-to-1 rate to the dollar. Agricultural exports grew and tourism returned." "The huge trade surplus ultimately caused such an inflow of dollars that the government was forced to begin intervening in order to keep the peso from revaluing further, which would have ruined the tax collection scheme (largely based on imports taxes and royalties) and discourage further reindustrialisation. The central bank started buying dollars in the local market and stocking them as reserves. By December 2005, foreign currency reserves had reached $28 billion (they were greatly reduced by the anticipated payment of the full debt to the IMF in January 2006). The downside of this reserve accumulation strategy is that the dollars have to be bought with freshly-issued pesos, which may induce inflation. The central bank neutralises a part of this monetary emission by selling Treasury letters. In this way the exchange rate has been stabilised near a reference value of 3 pesos to the dollar."