Yeah, it seems to have worked as expected. Dollarization works to reduce inflation. Now it comes down to a choice: do you impose capital controls and leave monetary sovereignty to the US? (or something hybrid to facilitate import/export)
Option (a): A stable exchange rate and free capital flows (but not an independent monetary policy because setting a domestic interest rate that is different from the world interest rate would undermine a stable exchange rate due to appreciation or depreciation pressure on the domestic currency).
Option (b): An independent monetary policy and free capital flows (but not a stable exchange rate).
It sounds a bit like being a Eurozone country. Free capital flow, fixed exchange rate, no monetary policy. It can work well if you can keep trade balance, but you will be waiting to see what the Fed does and instead of inflation you may have wage stagnation or actual cuts to services to keep a balanced budget. It all depends on being able to export enough to have liquidity to run the economy?
The EU also took option (a) it says below so you’re dead on.
He doesn’t seem opposed to large cuts on services. Issue is if they can’t produce enough goods will they eventually run out of services to cut 👀.
Also seems like stagnation is already at play:
But Argentine wages have remained stagnant or declined, with the monthly minimum wage for regulated workers just $264 as of this month, with workers in the informal economy often paid less.
Yeah, it seems to have worked as expected. Dollarization works to reduce inflation. Now it comes down to a choice: do you impose capital controls and leave monetary sovereignty to the US? (or something hybrid to facilitate import/export)
https://en.wikipedia.org/wiki/Impossible_trinity
To some it isn’t obvious that free capital flow is a bad idea for multiple reasons.
From the Wikipedia link:
My money is on (a) since capital controls doesn’t align with his libertarian platform. Do we know how quickly he’d have to announce his intentions?
It sounds a bit like being a Eurozone country. Free capital flow, fixed exchange rate, no monetary policy. It can work well if you can keep trade balance, but you will be waiting to see what the Fed does and instead of inflation you may have wage stagnation or actual cuts to services to keep a balanced budget. It all depends on being able to export enough to have liquidity to run the economy?
The EU also took option (a) it says below so you’re dead on.
He doesn’t seem opposed to large cuts on services. Issue is if they can’t produce enough goods will they eventually run out of services to cut 👀.
Also seems like stagnation is already at play:
Source