Argentina loses a third of its dollar deposits

[TerryK]

Argentina loses a third of its dollar deposits


Fri Jun 8, 2012 4:46pm EDT


* Argentines reacting to foreign exchange restrictions

* About $100 mln in dollars withdrawn every day

* Rush toward greenback started in November

By Jorge Otaola

BUENOS AIRES, June 8 (Reuters) - Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions, local banking sources said on Friday.

Depositors withdrew a total of about $100 million per day over the last month in a safe-haven bid fueled by uncertainty over policies that might be adopted as pressure grows to keep U.S. currency in the country.

The chase for dollars is motivated by fear that the government may further toughen its clamp down on access to the U.S. currency as high inflation and lack of faith in government policy erode the local peso.

"Deposits keep going down," said one foreign exchange broker who asked not to be named. "There is a disparity among banks, but in total it's about $80 million to $120 million per day."

U.S. dollar deposits of Argentine banks fell 11.2 percent in the preceding three weeks to $11.5 billion, according to central bank data released on Friday. The run on the greenback has waxed and waned since November, after President Cristina Fernandez won a second term on promises of deepening the state's role in the economy.

From May 11 until Friday, data compiled by Reuters from private banks showed $1.9 billion in U.S. currency had been withdrawn, or about 15 percent of all greenbacks deposited in the country.

Feisty populist leader Fernandez was re-elected in October vowing to "deepen the model" of the interventionist policies associated with her predecessor, Nestor Kirchner, who is also her late husband.

Since then she has limited imports, imposed capital controls and seized a majority stake in top energy company YPF.

A spokesman for the central bank said on Friday that the rate of dollar withdrawal from Argentina's financial system shows signs of slowing.

"We have seen a tendency toward fewer withdrawals, to about $90 million (per day) over the last week from $120 million the week before," the spokesman said a day after the bank lifted daily reserve requirements on dollar deposits to help banks respond to steady drum beat of withdrawals.



DITCHING HER DOLLARS

The near-impossibility of buying dollars at the official rate is driving some savers and investors to pay a hefty premium in the black market.

Many are taking what dollars they can get their hands on and stashing them under the mattress or in safety deposit boxes, fearing moves by the government to forcibly "de-dollarize" the economy. Officials have strongly denied any such plan.

The president's battle to slow capital flight and fatten the central bank reserves needed to pay the public debt has prompted even tighter controls in recent weeks, making it almost impossible to buy dollars at the official rate. The effects have been felt throughout the South American country's economy.

For example. Argentines, who normally pay for new homes with stacks of dollar bills, have been struggling to get their hands on U.S. currency since Fernandez started imposing stringent controls on dollar buying late last year. [ ID :nL1E8H6EZ8]

She wants Argentines to end their love affair with the greenback and start saving in pesos despite inflation clocked by private economists at about 25 percent per year.

Fernandez set an example on Wednesday by vowing to swap her only dollar-denominated savings account for a fixed-term deposit in pesos.

But savers in crisis-prone Argentina are notoriously jittery. Memories of tight limits on bank withdrawals and a sharp currency devaluation remain fresh a decade after the country's massive sovereign debt default.

"There is a lot of fear, considering everything that has happened before," another foreign exchange broker said. "Confronted by risk, whatever kind of doubt, depositors pull their dollars out of the bank and wait to see what happens.

[Housecarl]

IMHO another canary in the coal mine is coughing.

[jesner]

They remember the previous crisis

By the end of November 2001, people fearing the worst began withdrawing large sums of money from their bank accounts, turning pesos into dollars and sending them abroad, causing a run on the banks. On 2 December 2001 the government enacted a set of measures, informally known as the corralito,that effectively froze all bank accounts for twelve months, allowing for only minor sums of cash to be withdrawn, initially announced to be of just $250 a week.
http://en.wikipedia.org/wiki/Argenti...2%80%932002%29

[ittybit]

Problem is that when the government people get away with doing whatever they damn well please including seizing property, etc, you can not trust them in any way, shape or form. They had better be buying gold and silver.

[Dux]

It's like a looking glass into our future.

[Troke]

Odd behavior. Don't they know the $ is a POS? I read it right here on TB2K so it must be true.

BTW, I read that the Euros are buying $ as fast as they can. Another bunch that does not read TB2K. And it is rumored that the Chinese are backing away from anything denominated in Euros.

The brutal truth is that the $ is the only currency game in town. All the others of any significance operate in PHOG (Yuang) or are on their way out. (euro) At least when the Fed decides to trash the $, everybody will know it.

[Hfcomms]

Odd behavior.

The brutal truth is that the $ is the only currency game in town.

For right now...yes. The dollar is the best of the worst. However we are so hopelessly in debt we can never pay it back and sooner or later everyone else will figure it out. In the end our collapse will be the worst of all.

[TerryK]

For right now...yes. The dollar is the best of the worst. However we are so hopelessly in debt we can never pay it back and sooner or later everyone else will figure it out. In the end our collapse will be the worst of all.

If we are the best of the worst, please tell me what currency is the best of the best.

The financial systems across the globe is changing rapidly. Right now the dollar is in demand because the Euro is in deep trouble. So are several other non European countries such as Argentina.
As always for the last half century people are flocking to the dollar because it is perceived as relatively secure compared to just about any currency, so the dollar is up for now.
Yes if the situation in Europe is solved, extremely unlikely, then European investors will ditch their dollars and go back to Europe. I don't think that will happen. Europe will continue to get worse and so will the US as we all selectively circle the drain. Yes I agree with you HF, when the US economy finally does go over the cliff it will be bad here.

If people eventually perceive that no currency is a safe haven in the current economic climate, you can expect to see a hugh spike in PMs.

Right now global investors are fliting from one perceived safe haven to another, driven by the latest rumor. It is a dangerous time for small investors to try to second guess the outcome.
Safest bet is to make sure you are absolutely out of debt, you have a 6 month supply of cash, some of your wealth in PMs, possibly some of it in good land or even foreclosed homes if you think the market has bottomed in your area.

Contrary to what most people say, you should have some money in the bank. Right now I am even thinking of getting back into stocks in a small way. I am trying to figure out what type of businesses will do best in a severe recession. Possible things such as McDonalds, AutoZone, PepBoys, Home Depot, Harbor Freight or other companies that people use more frequently as the economy worsens. I really need to do some serious research on that because right now money in the bank is losing value at an increasing rate. Anybody have any suggestions?

[Jonas Parker]

Odd behavior. Don't they know the $ is a POS? I read it right here on TB2K so it must be true.

BTW, I read that the Euros are buying $ as fast as they can. Another bunch that does not read TB2K. And it is rumored that the Chinese are backing away from anything denominated in Euros.

The brutal truth is that the $ is the only currency game in town. All the others of any significance operate in PHOG (Yuang) or are on their way out. (euro) At least when the Fed decides to trash the $, everybody will know it.

No Troke, FRNs are great - send me all your gold and silver and I'll swap you for FRNs...

[Troke]

No Troke, FRNs are great - send me all your gold and silver and I'll swap you for FRNs...

Better try farm land, it has gone up faster than gold and silver. I may know of some for sale. Better get in line. They will accept FRN's. And if things go to hell, you can raise rutabagas on it. Try that on a mound of gold.

[tanstaafl]

Maybe the Argentine people have good reason to be worried:

2002
Peso removed from 1:1 with US Dollar and promptly depreciated in a big way

1992
1 Peso (new) = 10,000 Australes (old)

1985
1 Austral (new) = 1,000 Pesos Argentinos (old)

1983
1 Peso Argentino (new) = 10,000 New Pesos (old)

1970
1 New Peso (new) = 100 Pesos (old)

I don't actually invest in stocks so take this with a healthy dose of skepticism, but I've been keeping an eye on Fannie Mae (FNMA) as a barometer of the government's reaction to the housing crisis. Check out the six month chart and decide for yourself whether you think it will return to around $0.3150. It closed on Friday at 0.2639, so if it does return to about $0.3150 that would be about a 20% gain. Note that the $0.3150 level has only been in effect since February, so it's also entirely possible that the stock could decline back to the $0.20 level. I think the federal government will probably keep propping up Fannie Mae for as long as it can, and perhaps the stock price will reflect the continuing subsidies. But I don't invest in stocks and I don't really know anything about technical analysis or have any special feel for the stock market.

As an aside about the Dow (and which has NOTHING to do with this thread), here's something odd I've noticed that's been happening significantly more often since the financial crisis began in 2008 (I stopped checking day-by-day at 01/01/2000 so there may be more). Note that it happened twice more just this last week.

[packyderms_wife]

No Troke, FRNs are great - send me all your gold and silver and I'll swap you for FRNs...

Better try farm land, it has gone up faster than gold and silver. I may know of some for sale. Better get in line. They will accept FRN's. And if things go to hell, you can raise rutabagas on it. Try that on a mound of gold.

This^ And the argument of I'll have gold after the crash, yes you will have gold after the crash and you'll also have a big shiney target for seizing you know for the greater good and all.

K-

[tanstaafl]

Note that from my short list of monetary reforms (and excluding the 1985 one), Argentina has had a monetary reform roughly every ten years since 1970. The last monetary reform was in 2002. Ten years from 2002 is ...? Yeah, I'd be nervous, too!

[Flavius Aetius]

If we are the best of the worst, please tell me what currency is the best of the best.

The financial systems across the globe is changing rapidly. Right now the dollar is in demand because the Euro is in deep trouble. So are several other non European countries such as Argentina.
As always for the last half century people are flocking to the dollar because it is perceived as relatively secure compared to just about any currency, so the dollar is up for now.
Yes if the situation in Europe is solved, extremely unlikely, then European investors will ditch their dollars and go back to Europe. I don't think that will happen. Europe will continue to get worse and so will the US as we all selectively circle the drain. Yes I agree with you HF, when the US economy finally does go over the cliff it will be bad here.

If people eventually perceive that no currency is a safe haven in the current economic climate, you can expect to see a hugh spike in PMs.

Right now global investors are fliting from one perceived safe haven to another, driven by the latest rumor. It is a dangerous time for small investors to try to second guess the outcome.
Safest bet is to make sure you are absolutely out of debt, you have a 6 month supply of cash, some of your wealth in PMs, possibly some of it in good land or even foreclosed homes if you think the market has bottomed in your area.

Contrary to what most people say, you should have some money in the bank. Right now I am even thinking of getting back into stocks in a small way. I am trying to figure out what type of businesses will do best in a severe recession. Possible things such as McDonalds, AutoZone, PepBoys, Home Depot, Harbor Freight or other companies that people use more frequently as the economy worsens. I really need to do some serious research on that because right now money in the bank is losing value at an increasing rate. Anybody have any suggestions?

Swiss Francs.

FA

[Dozdoats]

Here's an inflation calculator - http://www.bls.gov/data/inflation_calculator.htm. There are others on the web too if you want to find a different one.

Here are some useful facts:

The Federal Reserve came along in 1913.

The US government stopped allowing the direct exchange of US dollars (gold certificates) for gold in 1933 to US citizens (and outlawed ownership of over $100 in gold) and stopped the direct exchange of US dollars (silver certificates) for silver in 1964. It wasn't legal for Americans to own gold bullion again until 1974. Nixon closed the gold window (cut off the direct exchange of gold for dollars to foreign nations) in 1971.

The US government sets the official price of gold in the US - until 1933 it was $20.67/ounce, in 1933 it was changed to $35/ounce, in 1971 it was changed to $42.22/ounce.

There are long term price charts for free market gold and silver at http://www.chartsrus.com/#PRECIOUS . There are other long term charts available on the web if you want to find different ones.

There's a long term DJIA chart at http://stockcharts.com/freecharts/hi.../djia1900.html .

Pick some dollar amounts. Pick some dates. Compare dollar inflation (or DEflation, if you go back far enough) and the DJIA over time with each other and with gold and silver prices over the same period. Have some fun... learn some things.

Or don't.

[Hansa44]

Truthfully....I think the joke will be on those that are moving their money from place to place.

It's all going to disappear suddenly. Everybody that worships the dollar will probably get a very hard lesson. You know that old saying...."For the love of money is........."

[Richard]

this is probably good, however the dollar is being touted as the marvellous currency in the whole world whereas in reality it is the same as a bad bunch, I repeat all currencies are the same, all central banks act in the same way, the monetary system is the same throughout the world, makes no difference whatsoever

[Southside]

Odd behavior. Don't they know the $ is a POS? I read it right here on TB2K so it must be true.

BTW, I read that the Euros are buying $ as fast as they can. Another bunch that does not read TB2K. And it is rumored that the Chinese are backing away from anything denominated in Euros.

The brutal truth is that the $ is the only currency game in town. All the others of any significance operate in PHOG (Yuang) or are on their way out. (euro) At least when the Fed decides to trash the $, everybody will know it.

As I have heard it said "The dollar is just the best lookin horse at the glue factory"

Seems to fit.

Southside

[Richard]

Truthfully....I think the joke will be on those that are moving their money from place to place.

It's all going to disappear suddenly. Everybody that worships the dollar will probably get a very hard lesson. You know that old saying...."For the love of money is........."

there is no safe investment for money, commodities do not create economic wealth however enterprises can lose money as well as gain, normally there is a balance of losers and gainers in investment, over the past 10 years this has not been the case

[Vegas321]

Man, those poor people are going to go through a collapse twice in just over 20 years.

[Sleeping Cobra]

Imagine "when" that happens in the United States.

[TerryK]

Swiss Francs.

FA

Swiss Francs used to be good. I used to have some through a US bank currency program, but a while back they decided to peg the SF to the Euro. It seems the SF was going up so rapidly that the Swiss coulnd't sell any of their products over seas. As far as I know it is still tied to the Euro.