Take advantage of the BCRA's offer: capitals of the fugue

The alleged loss of autonomy of the BCRA has been criticized – but it would not be as autonomous if it lent itself to gambling – and the loss of credibility of the change. But credibility has been lost: 25% of inflation, for 2016, estimated the BCRA and it's translated by 40%.

Ironically, the already high benchmark rate of 26.25% in September 2017 has been raised to 28.75% and, one year after December 28th, to 60% and At a higher rate, more inflation and more recession.

The other side, the opposite, of the New Keynesian error is what is seen globally. Supposedly, if inflation is low, rates must be reduced to inject money and bring about a recovery. Today, the situation is abnormal: the world's outstanding negative-return debt exceeds 17 billion dollars. 30% of investment grade stocks are underperforming, meaning that people who are in debt at the end of the year lose.

Among the few that remain positive, US Treasury bonds have an increasingly lower and inverted yield curve: the 10-year yields are 1.496% per annum and the two years at 1.50%. There are many ways to look at it, but it is the most didactic: the expansive policies of central banks encourage excessive consumption and entrepreneurs believe that their activities are growing at a higher rate, while lending them cheap money and exaggerating their investments. .

Then the reality falls, the low consumption and the investment are exaggerated, requiring a short-term credit to support the fixed costs and, by the way, they last a few months, then they can not do it and the recession s & # 39; follows. This is why inversion of the curve is a symptom of a recession, although that does not necessarily happen because the market could take it into account.

Thanks to this neo-Keynesian policy in Argentina, the dollar exchanges at $ 62 – the highest of 37.8% in August – the country risk exceeds 2500 and the S & P Merval It experienced its largest monthly monthly decline: 41.7% in pesos and 56% in dollars. The reserves of BCRA they decreased by $ 13,801 million in August and the rate was 83% Leliq.

Today, the BCRA, if it stabilized the dollar, would sell aggressively (Sturzenegger more than a year ago, it was offering $ 5,000m per day), it has established that the big exporters do not would not be able to take credits for more than 1 500 M USD and that banks would prohibit to generate profits without authorization The referent of the opposition, Álvarez Agis, does not help in asking for a greater control capital.

In the end, the leak occurs because the BCRA sells cheap dollars and the market profits, the rates do not try enough and do not raise inflation while encouraging disinvestment given the l & # 39; The impossibility of obtaining a productive credit, then threats such as the imposition of controls. capitals accelerate the flight – increasing the black – and so, when they apply the controls, only parsley will remain in the country. And now, with the latest measures such as the limit of $ 10,000 a month for the purchase will further encourage the escape due to distrust, the "black dollar" will come back – higher than the blue– and more informal activities, going to prices.

The way to avoid leaks is to let the dollar go up until it is profitable or possible. An upward movement that will lead to adjustments in some prices – but this is not inflation, but a relative price adjustment – will make dollar debts more expensive, but to resolve this situation, realistic and sound solutions must be found. to be sought.

Alberto Fernandezhe said at The Wall Street Journal What "The IMF has given money to a compulsive spender" and he is right. But, on the other hand, it seems that his intention is to increase wages and pensions, which is not a bad idea; the problem is how he will do it.

By the way, these are not adjustments in the style of conservative neoclbadical or neo-Keynesian economists – reducing spending by cutting wages and pensions – but adapting the state realistically to the circumstances. Argentina will never develop if it does not do what a serial debtor does: reconfigure the country by liquidating a very large number of annoying properties and deregulating strongly so that the economy finds more money. Opportunities and develops.

* Member of the Advisory Board of the Center on Global Prosperity of Oakland, California