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]
