Milei restored the dollarization with a veneer of scientificity, describing it as endogenous. In monetary theory, money is endogenous when its quantity is determined by market decisions. Julio Olivera preferred to talk about passive money, where endogeneity depended on historical conditions and monetary policy.
Milei’s endogeneity has a more pragmatic origin: it promised dollars and is not getting them. Unlike Macri, he has not been able to obtain either from the vultures or the IMF the modest 15 billion dollars that he considers sufficient to dollarize. After those two attempts at exogenous dollarization failed, He went on to proclaim endogenous dollarization, that is, with ours.
The rate and income policy has been grinding savings in pesos and thus the BCRA – which in the end did not close – grabs the dollars from Argentine savers forced to decapitalize. The other mechanism is extreme laundering, going for undeclared dollars, both in the country and abroad. The President of the Nation explained this by mocking the FATF and vindicating Al Capone.
Some models of exogenous money, sarcastically, postulate that it falls into the economy like manna from heaven, or is dropped from a helicopter. Instead Milei explained his plan: leave the monetary base constant, liquefy the pesos, and let the money laundering dollars enter.
The desert
This would imply a progressive replacement of pesos with dollars in transactions, a Gresham’s Law in reverse. While this manna from the hell of drug trafficking, international terrorism and the undeclared economy is falling, the country is forced to cross the desert drying up the savings and credit plaza in pesos; Well, the other mechanism that he mentioned is to attack the creation of bank money by imposing 100 percent lace, that is, prohibiting banks from providing loans against deposits. This bold measure, unprecedented in capitalist countries, has the coherence of destroying both sides of the bank balance sheet.
The madman is not stupid, Milei runs to Davos on the right but does not dare to take out the trap. As he explained, to dollarize he has to remove the stocks, but first he must get the laundering dollars and change the banking regime for a reckless experiment. It is a chain of promises fleeing forward, one more daring than the other, a Ponzi scheme of economic advertisements.
The thing does not seem very endogenous: the libertarian State steps down on imports, postpones their effects with the BOPREAL, imposes a negative real interest rate on the saver, delays the exchange rate, maintains the stocks, intends to sanction a money laundering law, and thinks impose on banks most extreme bans ever seen.
The dollarization project that attracted voters and seemed shelved (“it is a north”) is now presented as inevitable, a kind of self-dollarization, a dollarization that takes place on its own. When? In the green year.
