Nearly all the low savings ratio third world runs a trade deficit a budget deficit irrespective of the currency regime. currency stabilisation is required via tight monetary regimes. but recurrent devaluation comes through and invariably leads to inflation. dependence on oda and foreign capital flows is a day to day gospel. any delay in delivery leads to currency crash. this is how anyone can be kept on a short leash. in this environment dolarazation is defacto if not de jure as it is in some cases. when privatisation runs dry as well, will there be a bottom to which the currency can sink. some recommend strong regional arrangements monetary and otherwise, but this remains weak for political, economic (size), and it will be always strapped by the weakest in the group, maybe leading to stronger international divisions. sort of like a race to the bottom. --- Carrol Cox <[EMAIL PROTECTED]> wrote: > Just thought this might be interesting to get a > response to from > economists. > > Carrol > > -------- Original Message -------- > Subject: Re: (Spa) ILO: World recession and rising > joblessness > Date: Mon, 12 Nov 2001 11:44:03 -0300 > From: Gorojovsky <[EMAIL PROTECTED]> > Reply-To: [EMAIL PROTECTED] > To: [EMAIL PROTECTED] > > En relaci�n a Re: (Spa) ILO: World recession and > rising jobless, > el 12 Nov 01, a las 12:06, Jim Drysdale dijo: > > > From Jim Drysdale, > > > > ***** Nestor, should time permit you, I'd be > interested to hear any and all > > commentary of yours on, " Patacones" and "Lecops". > > Since 1991, the amount of money that circulates in > Argentina is not > linked with the productive potential of the country > (not even in > bourgeois terms, that is the "potential" GDP that > could be achieved in > conditions of full employment). It is linked with > the results of the > balance of trade. This is, in the end, what the > currency board scheme > imposed by Cavallo means. > > Since the exchange rate is ludicrously high (one > dollar = one peso), > Argentina has been subsidizing systematically the > imports and punishing > exports. This exchange rate was imposed in order to > make it easier for > the Government to raise the dollars necessary for > the payment of the > foreign debt. > > Thus, the whole economic structure works towards a > growing deficit. > Under these conditions, and since the currency board > system does not > allow to print money that has not backing in foreign > currency, Argentina > has been increasingly dependent on foreign loans to > generate an amount > of M1 (basically, everyday money) that can provide > coverage to the full > amount of production. > > These conditions of strict monetary drought not only > have taken the > interest rate to stratospheric levels, it has > eventually burst as it > could not be otherwise. Once the foreign "creditors" > stop sending money, > the whole edifice crumbles down as the WTC. > > Thus, money begins to disappear within the country. > This is exactly what > is happening. "Patacones" and "Lecops" (and other > bonds and titles) are > the consequence, as well as barter: transactions are > increasingly held > in surrogate quasi-money. The "Patacones" are the > bonds issued by the > strongest province in Argentina, the Province of > Buenos Aires. The > "Lecops" are a kind of bond issued by the national > government with which > Cavallo is trying to "pay" for debts that the > national government has > with the provinces. > > The general idea is that any authentical currency > that exists in > Argentina must go, first and foremost, to our > "creditors". If nothing > remains after these payments, well, sorry, wouldn't > you accept my > promise to pay you sometime in the future, in the > form of a bond? > > Hope to have been clear. > > N�stor Miguel Gorojovsky > [EMAIL PROTECTED] >
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