This was on nytimes just a few days ago. Quoting the bits that might be relevant[1]. A lot more in tfa
> Those efforts have been complicated by the fact that major hedge funds, including those led by friends of Mr. Bessent, stand to benefit financially from an Argentina economic lifeline. Funds at investment firms including BlackRock, Fidelity and Pimco are heavily invested in Argentina, as are investors such as Stanley Druckenmiller and Robert Citrone, both of whom worked with Mr. Bessent when he was an investor for George Soros.
> Treasury’s efforts to shore up Argentina’s currency are part of a broader effort by Secretary Scott Bessent to stabilize the South American economy before President Javier Milei’s party faces midterm elections Sunday
Things like this used to be the job of the IMF, stepping in when there were genuine crisis, in theory with experts advising or demanding policy changes to prevent further crisis.
But it seems the crisis here is all self inflicted and the bail out is politically motivated. Is the expectation that after Sunday this won’t be needed and things will stabilized or is this structural and we’ll be on the hook holding the Peso’s peg forever?
FX necessarily trades in pairs. To buy a peso one needs to sell something against it, and the US will sell dollars if acting in the FX space.
Since the USD is one of the core currency crosses and is at the base layer of the financial system, raising the peso/dollar cross is effectively strengthening the currency against all other currencies.
Also, while the specific political circumstances around the pesos swap line are dubious, the US often extends dollar swap lines to other central banks. The other side of the privilege of having the world reserve currency is having the obligation to support the stability of the world financial system (although this example is more off the wall than the typical example).
> raising the peso/dollar cross is effectively strengthening the currency against all other currencies.
If the peso rises against all other currencies, the dollar paying for it must fall against them, not as much but the dollar falls - at least relative to the movement it would experience without the purchase of pesos.
> Since the USD is one of the core currency crosses and is at the base layer of the financial system,
One of the butchers in the Trump regime wrote a book on how we need to devalue USD so we can go back to being competitive making shoes and all the other sort of unskilled factory jobs China did before they developed. So I guess one could consider this in "our" interest as well.
Trying to revert a service-based economy into a manufacturing-based one is an incredibly stupid idea and there is no way this doesn’t blow up in our face. Devaluation of the dollar threatens our reserve currency status, yield rates, and will cause rapid inflation, all to chase some pipe dream that Joe the Factory Worker and his family will be able to live a middle-class life again on a single salary.
In actuality, cash will flow into equities, the rich will benefit and the average American will suffer the consequences of their vote.
It works well when you already want to devalue your currency to improve the competitiveness of your exports (impact on non-diversified consumer's purchasing power and wealth debasement be damned)
$20 billion isn't going to make a dent in the value of the USD. Buying pesos doesn't make the dollar any cheaper for major trading partners like Canada, China or the EU. This is a bailout of Argentina's collapsing currency peg instituted by its "free market libertarian" government.
This was on nytimes just a few days ago. Quoting the bits that might be relevant[1]. A lot more in tfa
> Those efforts have been complicated by the fact that major hedge funds, including those led by friends of Mr. Bessent, stand to benefit financially from an Argentina economic lifeline. Funds at investment firms including BlackRock, Fidelity and Pimco are heavily invested in Argentina, as are investors such as Stanley Druckenmiller and Robert Citrone, both of whom worked with Mr. Bessent when he was an investor for George Soros.
1. https://archive.ph/6bWMv
> Treasury’s efforts to shore up Argentina’s currency are part of a broader effort by Secretary Scott Bessent to stabilize the South American economy before President Javier Milei’s party faces midterm elections Sunday
Things like this used to be the job of the IMF, stepping in when there were genuine crisis, in theory with experts advising or demanding policy changes to prevent further crisis.
But it seems the crisis here is all self inflicted and the bail out is politically motivated. Is the expectation that after Sunday this won’t be needed and things will stabilized or is this structural and we’ll be on the hook holding the Peso’s peg forever?
Didn't Argentina also take 20 billion from the IMF earlier this year?
Yes, before one party plus it's rich owners realized they deserve accolades and further political power for helping fellow fascists and isolationists.
If you're not a fascists or isolationist, you're an enemy of the current political zeitgeist.
https://archive.is/csR4m
Devaluing your currency to help another country?
I don't think I've ever heard of a country doing anything like this for another country?
FX necessarily trades in pairs. To buy a peso one needs to sell something against it, and the US will sell dollars if acting in the FX space.
Since the USD is one of the core currency crosses and is at the base layer of the financial system, raising the peso/dollar cross is effectively strengthening the currency against all other currencies.
Also, while the specific political circumstances around the pesos swap line are dubious, the US often extends dollar swap lines to other central banks. The other side of the privilege of having the world reserve currency is having the obligation to support the stability of the world financial system (although this example is more off the wall than the typical example).
> raising the peso/dollar cross is effectively strengthening the currency against all other currencies.
If the peso rises against all other currencies, the dollar paying for it must fall against them, not as much but the dollar falls - at least relative to the movement it would experience without the purchase of pesos.
> Since the USD is one of the core currency crosses and is at the base layer of the financial system,
Abracadabra isn't an argument.
Right, and the US (presumably) has the mass and stability to weather that impact much better than Argentina does.
Switzerland did that for a few years in 2011, not to help another country but to avoid CHF overvaluation.
Yes, and China allegedly does similar, but in both cases it's to help themselves.
One of the butchers in the Trump regime wrote a book on how we need to devalue USD so we can go back to being competitive making shoes and all the other sort of unskilled factory jobs China did before they developed. So I guess one could consider this in "our" interest as well.
Trying to revert a service-based economy into a manufacturing-based one is an incredibly stupid idea and there is no way this doesn’t blow up in our face. Devaluation of the dollar threatens our reserve currency status, yield rates, and will cause rapid inflation, all to chase some pipe dream that Joe the Factory Worker and his family will be able to live a middle-class life again on a single salary.
In actuality, cash will flow into equities, the rich will benefit and the average American will suffer the consequences of their vote.
It works well when you already want to devalue your currency to improve the competitiveness of your exports (impact on non-diversified consumer's purchasing power and wealth debasement be damned)
$20 billion isn't going to make a dent in the value of the USD. Buying pesos doesn't make the dollar any cheaper for major trading partners like Canada, China or the EU. This is a bailout of Argentina's collapsing currency peg instituted by its "free market libertarian" government.
It's literally a loan to Argentina to support the friendly government there and the US's existing interests in pesos.
If we didn't do it, the peso would probably hyperinflate again and all our investments denominated in pesos would become worthless.
If we do do it, we get back all our money as long as the currency doesn't collapse in the future.
My comment was in response to the parent which hypothesized that this was done to devalue the dollar to make US exports cheaper.
>US Treasury Sells Dollars
Nothing to see here.
They've got plenty.
Plus they'll print more.
Is the US having a stroke?
No, it's an assisted suicide.
Related:
Argentine peso weakens to fresh low despite US interventions
https://news.ycombinator.com/item?id=45651516
U.S. Banks Are Hunting for Collateral to Back $20B Argentina Bailout
https://news.ycombinator.com/item?id=45651516
Does Argentina have a non-redacted version of the Epstein files or something?
It is even worse. Argentina can ask China for help.
There's no way the administration in power thinks that's worse.
Tricky. Yes you'd think that playing China and America against eachother would be a smart move.
But Americans have a proven track record of killing South American leaders and invading their countries.
Perhaps one day, god willing, the Chinese will be in a position to send aircraft carriers to Panama.
Ally for future war w/ venezuela?
Venezuela is pretty far away from Argentina isn't it?
[flagged]
Is propping up a failing currency normally considered "development aid"?
Yes, of course. Argentina is undergoing a huge restructuring. I don't understand why development aid should be limited to the poorest countries only.