What Argentina Can Teach You About the US Dollar

28.02.2017 • Emerging Markets

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By Ivan Carrino – El Diario Del Lunes (Argentina) –

Dear Reader,
These days, the financial news is having a hard time explaining what is happening with the dollar. For years, maybe decades, the U.S. dollar has been “an Argentine obsession.” It seemed like the dollar had only one way to go – UP- forever.
It shouldn’t be surprising. Since every new president and economic minister who came to power was worse than the previous one, Argentines figured the only solution was to dump the national currency.
In fact, national currency is very similar to national debt. Both are government debt.

The National Treasury creates national debt. Its value is a measure of the confidence people have in the government’s ability to meet its commitments and pay capital and interest. The national currency may seem like something different, but it’s essentially the same.

It’s a financial obligation issued by the Central Bank and its value also reflects confidence in an institution.
People hold on to the national currency as long as they think it will keep its value over time. However, if people fear that it will not keep its value, they will choose something else. Something like foreign currencies, gold, or other assets.

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