Posted on 06/01/2002 7:50:06 PM PDT by DeaconBenjamin
The bank freeze has been the focus of public discontent
Argentina's President, Eduardo Duhalde, has signed a decree that outlines a plan to end the controversial and unpopular freeze on bank deposits.
The government imposed restrictions six months ago to stop an anticipated run on bank accounts which would have triggered the collapse of the entire banking system.
The government's new plan comes after six months of bitter complaints about the morality of blocking access to what rightfully belongs to the people.
The banking freeze has kept deposits locked up since last December to protect the nation's fragile banking industry from collapse.
But the government's plan does not give the public unfettered access to its cash, as so many have been demanding in daily protests.
Faith shattered
Instead, President Duhalde has offered to swap 30bn pesos ($8.5bn) of deposits for government bonds that can be converted to cash in either five or 10 years' time.
Deposit holders who do not want the bonds will be given bank certificates that they can use to buy big ticket items such as properties and cars.
The restrictions on cash withdrawals remain in place, but the government is also going to allow exporters to open dollar bank accounts for foreign trade.
The hope is that the package will help stoke consumer demand, which has all but dried up in the country's worst economic crisis in its history.
It also goes at least some of the way towards meeting the conditions the IMF has been demanding before it agrees to another multi-billion dollar aid package.
But it is not likely to be enough to ease the public anger with politicians for enforcing the restrictions in the first place, or enough to restore faith in the banking system.
Polls consistently show that the majority of Argentines now have so little faith in their financial institutions that in future they will stuff their savings under the mattress as soon as they can get access to them.
If I lacked confidence in the banking system, and was receiving my deposits in a currency that had already lost 70-80 percent of its value against the dollar in 6 months, I'm not sure my first choice would be to keep what was left of my savings in that rapidly depreciating currency. Let's see, can anyone think of an alternative?
“Within a few short years, the Reichsmark was inflated away; it was destroyed as a currency. … What really killed the Reichsmark? … Hyperinflation was only the result; it was not the cause. The cause was a `flight from the currency’. No one wanted to hold the currency, and quickly exchanged it for any good or service. That’s why the Reichsmark was losing purchasing power in the first place; the demand for Reichmarks was declining.
“Interestingly, these same circumstances faced by the Reichsbank are what the Federal Reserve is now facing . . .Unfortunately … the governors of the Federal Reserve have learned nothing from the Reichsbank. The Fed is pump-priming like a crazy person. Instead of focussing on building demand for dollars – so that people don’t take flight from it – they instead are pumping more dollars into circulation to overcome what are perceived as deflationary forces in the economy, just like the Reichsbank did. And the end for the dollar will be just as brutal.”FN 10
FN 10 10 Freemarket Gold & Money Report, Box 5002, North Conway, NH 03860. 20 e-letters per year, 24 gold grams or $220. www.fgmr.com. 11/5/01, p. 2.
I guess you're talking about gold DB but I believe what will ease this and all troubled economies long term,
are honest governments that assist by allowing and protecting communities built through free markets.
In post-war Hungary, 'Pengos' were printed on one side only, so as to speed their delivery to banks.
Hint to investors: when the banknotes you receive are still damp from printing, that's a sure sign of inflation!
They aren't 'printing' any more gold. ;^)
The problem is that the Argentinan government has said that people can only withdraw a small amount of money out of their accounts each week (to prevent a run on the banks and a depression). That means that (unlike Japan) people cannot get out of pesos and into gold, silver or the dollar. Another economy destroyed because of funny money. They thought tying it to the dollar would guarantee stability...OOPS!
By the way, in the 1920's Argentina's per capita income was second only to the US. It is not even in the top 50 today. So much for the wonders of Peronism (socialism)...
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