Argentina's Economic Catastrophe: How Bad Policies Destroyed a Once Rich Country [video]
This guy straight up goes into quoting Ronald Reagan, Ludwig von Moses and Ayn Rand. Meanwhile no words are lost on the biggest killer of a countries&#x27; economy: an insufficiently independent central bank.<p>It was Turkey&#x27;s undoing and it is Argentina&#x27;s undoing.<p>The thing is. You constantly hear on HN or Reddit how the Fed is printing money. Except what is meant by that &quot;anything the central bank does that loosely has to do with money&quot;. That imprecise terminology puts too many very different things into one category and treats them equivalently. However, they aren&#x27;t the same.<p>There is a one shot irreversible way of &quot;printing money&quot; which just increases positive balances. Once the money is in the economy, there is no mechanism to remove it. The most common implementation is to print physical bills. There is no limit to this and a government can do it indefinitely until hyperinflation sets in. You see this type of &quot;money printing&quot; in the memes, where Jerome Powell is literally operating a money printing press. Except this doesn&#x27;t actually happen at the scale you think it does in the USA, it does in Argentina. They have literally run out of printing press capacity and need to print their money in France now.<p>What does the US or the EU do differently? First of all, QE is a reversible way of &quot;money printing&quot;. For every dollar entering the economy, there is the ability to remove dollars from the economy. The Fed buys treasuries from the large commercial banks, but it can also sell treasuries back. Secondly, the central bank cannot force the treasury to issue more bonds, nor can the treasury force the central bank to buy more bonds. Thirdly, commercial banks only buy treasuries, when there is literally nothing better on the market. This arrangement called QE, that is simplistically depicted as a single guy doing everything is wrong. It takes three parties each following completely different objectives.
Finally, what the central bank does is make it easier to fund treasuries by making them more liquid, which has been described by Jerome Powell as merely changing the duration of treasury bills. Any treasury bond that is issued as a result of a commercial bank buying treasuries to sell to the central bank still has to be paid back. In other words, all QE does is make your bank account an &quot;investment fund&quot; for the government. You still have to put money in your bank account for all of it to happen. It is no different from buying stocks or getting a certificate of deposit.<p>Since every deposit is canceled out by an equivalent debt, the expectation is that the impact of additional money creation is neutral to inflation over the long run. Of course in practice the central bank targets mild inflation but in a vacuum it would be possible to have no inflation at all.<p>So my suggestion is quite simple. The solution for Argentina is to let the central bank be in charge of &quot;money printing&quot; and get rid of all political influence on it.