Argentine Peso strengthens for third day running supported by high interest rate for short term debt

Thursday, October 4th 2018 - 08:24 UTC

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Argentina’s peso rallied for a third straight day on Wednesday, after high-interest short-term debt issued by the central bank soaked up liquidity, a strategy that has raised concern about the sustainability of the country’s program. Read full article

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Enrique Massot
After its previous failures in stopping inflation and peso depreciation, the Argentine government is applying a last-resort, scorched-earth solution consisting in sucking up all the pesos from the economy to try and prop up its value.

In the process, sky-high interest rates make any productive activity impossible - only carry trade activity, known in Argentina as “la bicicleta financiera” thrives and allows a few ones to pocket huge amounts of easy money.

Of course, this is a brief respite from which the country's economy will emerge further weakened.

The Macri government, which has governed almost three years blaming everybody else for its failures -- including the previous government's “heavy inheritance,” is well on its way to leave a legacy of debt and disaster that will require time, effort and a competent government to bring Argentina back to some sort of normalcy.
Oct 04th, 2018 - 08:00 pm - Link - Report abuse -1
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