The cost of removing the peso from circulation is $40 billion

The cost of removing the peso from circulation is $40 billion

ArgentinaThere is commotion when Javier Milei, nicknamed “El Loco”, won the presidential elections in . One of Milei’s most radical suggestions regarding the Argentine economy was the closure of the Central Bank of Argentina, which he attributed to the cause of high inflation.

In other words, Milei thinks that the country’s monetary policy should be determined by the US Federal Reserve (Fed). However, with the Central Bank of Argentina’s almost zero foreign exchange reserves, it does not seem possible for the country to move towards full dollarization. According to calculations by economists for the American broadcaster Bloomberg, the country needs about 40 billion dollars to implement Milei’s idea.

‘SHOCK THERAPY’ PLAN

According to a study carried out 10 years ago, Argentine citizens have savings of approximately 50 billion dollars. In Argentina, 1 dollar is equivalent to 357 pesos at the official exchange rate. Milei, who transitioned from television stardom to politics, won with more than 55 percent of the vote. The Milei period in G20 member Argentina will officially begin on December 10. Experts say Milei could apply ‘shock therapy’ in Argentina, which struggles with triple-digit inflation figures and has problems accessing foreign funds because it has often been unable to pay its debts.

ADDRESS PRIVATIZATION

At the center of Milei’s economic promises are reducing taxes, closing the Central Bank and eliminating the Argentine peso from circulation and using the US dollar entirely. Of course, despite all his contradictions, he also states that he will hold a referendum if necessary to make these decisions and that he will not make it a “fait accompli.” Milei’s economic promises are not limited to closing the Central Bank and switching to the US dollar. He advocates that the State participate as little as possible in the economy. For this reason, he argues that all public companies, including health and education, should be gradually privatized.

40 percent of the country is poor.

In October Annual inflation in Argentina reached its historical peak, reaching 142.7 percent. Poverty has also increased in the country, which is struggling with high inflation. According to official data, the poverty rate reached 39.2 percent at the end of 2022. This means that 18.1 million people in the country have incomes below the poverty line. While purchasing power is declining in Argentina, rents are rising faster than incomes in large cities, especially Buenos Aires, creating a real estate crisis.

Printing money is fraud

“Yeah “If the money printing machine is taken away from politicians, inflation will decrease,” said Javier Milei, and added: “Printing money is a fraud because it reduces purchasing power; “It is taking money out of your pocket by force without “Argentina was the richest country in the world when it didn’t have a bank.” center,” he responded.

ELECTORAL PROMISES OF THE NEW PRESIDENT

■ The Central Bank will close.

■ It will remove the Argentine peso from circulation and change its currency to the dollar.

■ It will reduce taxes.

It will privatize public services, including education.

United States Argentina Bloomberg Dollar inflation FED Central Bank money Health

Source: Sozcu

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