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Argentina Legitimizes Black-Market Currency With New Dollar-Backed CDs

Tyler Durden's picture




 

Just over a month ago we noted that the black-market (blue-dollar) currency that existed in hyper-inflation-prone Argentina had reached epic proportions of disconnect from the official rate of exchange to the USD. It seems the government did not like this and so has decided to take control of this 'shadow economy' by creating a new payment method. As the FT reports, As of today, Argentines can pay with so-called Cedins (Certificates of Deposit for Investment), which unlike the peso, can be (legally) swapped for much-coveted dollars. Originally designed for real-estate purchases, they are set to be accepted for anything as long as buyer and seller agree. Argentina has a history of resorting to 'funny money' and Cedins will "operate like a national currency... [since] the peso has stooped serving as a savings instrument." While officials dismiss the blue-dollar market, this move clearly signifies there recognition of an un-official exchange dramatically devalued from the the official rates.

 

Via The FT,

Argentina gets a new payment method on Monday that, unlike the peso, can be swapped for much coveted dollars in a country where greenbacks are like gold.

 

Though designed for real estate purchases, officials say the new Certificate of Deposit for Investment, or Cedin, could also be used to buy anything from washing machines to holidays, provided buyer and seller agree.

 

...

 

The Cedin is different: the cash-strapped government, which introduced a strict clamp on legal access to dollars in October 2011 but has still seen central bank reserves decline at an alarming rate, is offering the bonds to people in exchange for dollars that have been held abroad or under the mattress without being declared.

 

...

 

Idesa, a consultancy, says Cedins “will operate like a national currency, convertible into dollars . . . The government is forced to seek alternatives because the Argentine peso has stopped serving as a savings instrument and has many limitations as a transaction instrument”.

 

Argentines have a long-held love affair with the dollar, stemming from decades of painful experience of high or runaway inflation, currency crashes and economic turbulence...

 

...

 

The official dollar rate is now some 5.39 pesos while the parallel rate – dubbed the “blue rate” – has eased to around 8.04 pesos.

 

The government dismisses the blue dollar as a tiny, illegal and illiquid market that has little relevance for most of the 40m population, but the “blue” has become a closely watched economic variable beside the overvalued peso.

 

...

 

Eduardo Levy Yeyati, head of Elypsis, a consultancy, who sees the scheme as a “Venezuela-style” attempt to intervene in the parallel dollar market.

 

...

 

“People who want dollars will want dollars, not Cedins,” he says. “This is obviously a backwards step.”

 

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Mon, 07/01/2013 - 14:29 | 3710867 Dr. Engali
Dr. Engali's picture

In a country where greenbacks are like gold? But I thought gold was a worthless barbaric relic. Are they suggesting the same thing about the dollar?

Mon, 07/01/2013 - 15:06 | 3710995 besnook
besnook's picture

if greenbacks are like gold is gold like greenbacks?

gold is real money and greenbacks are a method of theft so they can never be analogous either way.

Mon, 07/01/2013 - 16:25 | 3711259 Popo
Popo's picture

Dollars are backed by oil.   

Mon, 07/01/2013 - 16:44 | 3711313 Lore
Lore's picture

Dollars are backed by gunboat dipomacy.

Mon, 07/01/2013 - 18:19 | 3711546 malikai
malikai's picture

I thought Dollars were backed by our colonies.

Mon, 07/01/2013 - 19:04 | 3711720 franzpick
franzpick's picture

The new black market will develop tonight with the less than 100% acceptable CDs going at a discount. 

Tue, 07/02/2013 - 01:00 | 3712822 Theosebes Goodfellow
Theosebes Goodfellow's picture

Precisely. It's just what the Argentinians need, another quickly devaluing fiat currency!

Mon, 07/01/2013 - 14:28 | 3710869 Say What Again
Say What Again's picture

Why do they want "dollars?" 

What they need is GOLD

Mon, 07/01/2013 - 14:38 | 3710896 Non Passaran
Non Passaran's picture

Or silver. Especially since they're so unhappy with US bankrupcy courts.

Mon, 07/01/2013 - 15:04 | 3710989 Overflow-admin
Overflow-admin's picture

Exactly. This is why the argentinian government banned gold and silver sales since last september.

 

FUNNY ISN'T IT?

Mon, 07/01/2013 - 17:32 | 3711420 Cacete de Ouro
Cacete de Ouro's picture

I pity THE LOCALS putting faith in one piece of paper and not another.
Give me your Mendoza wines and your estancia beef steaks and your nubile women and I will
Print up more green notes than you know what to do with...obviously when the gig breaks I'll be on the first ferry to Colonia del Sacramento.

Mon, 07/01/2013 - 15:08 | 3711003 BritBob
BritBob's picture

Because their own currency the Arg Peso is becoming worthless.

Mon, 07/01/2013 - 15:58 | 3711165 Ignatius
Ignatius's picture

Cedins will "operate like a national currency... [since] the peso has stopped serving as a savings instrument."

And when the dollar fails as a  'reserve currency', it's gonna be gold.

The article says it -- the peso is failing as savings.

Mon, 07/01/2013 - 14:33 | 3710880 FiatFapper
FiatFapper's picture

signifies there recognition

*their

Mon, 07/01/2013 - 15:02 | 3710988 besnook
besnook's picture

every knows and only you and one other cares. the point is the point, not the grammar or spelling or the proof reader. thaqt pettiness does not belong here.

Mon, 07/01/2013 - 15:08 | 3711002 FiatFapper
FiatFapper's picture

It's not pettiness; 'tis important to maintain a standard above the keyboard-thudding diatribe you'd find on facebook et al.

Mon, 07/01/2013 - 15:44 | 3711121 besnook
besnook's picture

a simple typing error or thought mixup resulting in a misused word has no effect on the standard zh sets. leave that to the nyt for all the bullshit it posts that is fit to print. no one can impugn the honesty of zh, syntax, grammar, spelling and all.

Mon, 07/01/2013 - 16:15 | 3711227 Schmuck Raker
Schmuck Raker's picture

The point, FiatFapper, is that you are wasting valuable comment space on correcting spelling where you should be telling Bernanke to go fuck himself. Poor form, sir.

Mon, 07/01/2013 - 17:18 | 3711384 FiatFapper
FiatFapper's picture

I'm a miserable fucker and you made me chuckle...well done :)

Mon, 07/01/2013 - 14:39 | 3710899 youngman
youngman's picture

What they want is out....they can´t sell their land or properties....they can´t take their monies out..legal of course....illegaly sure...they are stuck now....I don´t know how many times I was told to buy In Argentina..what a great deal it was...not now....the foreigners that did buy and there are many..will soon lose the investments as a foreigner is bad in a socialists world..easy pickens...

Mon, 07/01/2013 - 16:10 | 3711214 americanspirit
americanspirit's picture

Hey - Doug Casey and all his followers are safe. Nobody knows where they've buried their gold. And the really really smart ones gave up their US citizenship and became Argentinians. Too cool.

Mon, 07/01/2013 - 14:39 | 3710902 fonzannoon
fonzannoon's picture

every country is apparently starved for dollars. we can't print enough to keep everyone happy. There is supposedly no inflation and the threat of deflation.

So print up 100k for each taxpaying U.S citizen and send it out. What's the fucking problem.....motherfuckers?

Mon, 07/01/2013 - 14:51 | 3710950 kito
kito's picture

come on now fonz....only bens favored sons get the dollars....everybody else grovels for them......

Mon, 07/01/2013 - 15:11 | 3711016 ZeroPoint
ZeroPoint's picture

It would never be allowed. Struggling, formerly middle class families might unwind their debt instead of blowing it on plasma tvs and cosmetic surgery and become free.

 

Mon, 07/01/2013 - 14:40 | 3710907 ParkAveFlasher
ParkAveFlasher's picture

Hyperinflation by any other name, is still hyperinflation.

Kind of like food stamps, unemployment benefits, fiat currency, etc. it's a piece of paper declared "exchangeable for goods and legal tender".

Mon, 07/01/2013 - 14:46 | 3710936 omi
omi's picture

Greenbacks are like gold in most 2nd and 3rd world countries. Dollar will crash mentality people is just a first world problem. Will dollar be cheaper than it is 10 years from now? Absolutely! It is a function of monetary system. Will gold/silver rise to 5000? No one knows. 

 

In 90s Russia, there were also dollar denominated certificates for investment. Dull people didn't understand what they were and rushed to sell them for something like 7-10 cents. Smart people bought them up and bought real productive assets, they were essentially dollars. I predict same thing will happen.

Mon, 07/01/2013 - 14:56 | 3710971 Smegley Wanxalot
Smegley Wanxalot's picture

A dollar was once worth it's weight in bean burritos.

Now it's only worth a bean or two.

Mon, 07/01/2013 - 15:07 | 3711000 BritBob
BritBob's picture

Only in Argentina where facts are confused by propaganda and the deeds of inept politicians would this sort of thing happen.

Mon, 07/01/2013 - 15:09 | 3711007 ZeroPoint
ZeroPoint's picture

The peso is dead. Long live the peso (Cedin)! Who actually believes you can convert a Cedin back into dollars?

 

Mon, 07/01/2013 - 21:32 | 3712220 Augustus
Augustus's picture

That really is the point, isn't it.  Why would anyone ever give that Arg. Gov. dollars for a different piece of paper issued by that govt.  Who ever would believe that they can get any dollars returned in attempted conversion just going to get a haircut.  All it really amounts to is that the Arg. govt. has been able to identify some of the dollar holders, suspects for prosecution someday, after shakedowns today.

Mon, 07/01/2013 - 15:09 | 3711010 Yen Cross
Yen Cross's picture

   What happened to the 'BMW & MBZ' backed CDs?

Mon, 07/01/2013 - 15:10 | 3711011 Dr. No
Dr. No's picture

 "they are set to be accepted for anything as long as buyer and seller agree."  

Thats the case for anything (bartering).  Once again, the government trying to re-invent the wheel.

Mon, 07/01/2013 - 15:14 | 3711021 toadold
toadold's picture

"JENNY!", "What!" It's your new super smart  Algo won't execute!","Well it probably just recognizes all the factors aren't right, just give it time."

"NO, it states that it won't execute unless we give it its own account in an off shore bank and deposit physical gold in it!"

Mon, 07/01/2013 - 15:48 | 3711137 0b1knob
0b1knob's picture

The last time the argie government allowed dollar denominated accounts it was just a con game.   All the dollars were confiscated shortly afterwards.

Mon, 07/01/2013 - 17:34 | 3711422 Things that go bump
Things that go bump's picture

I think they were converted to pesos on a 1:1 basis. 

Mon, 07/01/2013 - 22:04 | 3712307 0b1knob
0b1knob's picture

The accounts were frozen and converted to pesos at the rate of $1 to1.4 pesos.   The peso was then devalued to $1 to 4 pesos.    Depositors eventually got Argentine government bonds for their cash.  Alhough not an outright confiscation in effect the government took something like 90% of the value of the accounts.  And people only got the balance after many years and litigation.   Some litigation is still going on in the matter.

A little hard to understand but be patient, something similar is coming VERY SOON to a country we all know well.  First hand experience will be a hard teacher.

Mon, 07/01/2013 - 17:25 | 3711408 robnume
robnume's picture

If there's a picture of Ernesto "Che" Guevara on ANY funny money, I'll take a tiny slice, thank you.

Mon, 07/01/2013 - 17:45 | 3711458 q99x2
q99x2's picture

What are they stupid. Why don't they use their own version of BitCoin.

Mon, 07/01/2013 - 18:27 | 3711583 iamgogi
iamgogi's picture

The Cedins? These Cedins?

 

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