I'd assume that it's a disaster is why it produces a lot of outstanding economists.

(remember that an economist is someone that, if you ask him to study horses, sit down and think really hard "what would I do if I was a horse?")

In this book, Varoufakis, which was Greece Finance Ministry at the time, explains how he was tasked to negotiate with EU institutions and IMF to alleviate Greece debts. While he proposes restructuring plans after restructuring plans, nobody even try to argue with him on the plans. They all say that there should be a strong austerity, it is the way to go. At one point, he managed to get a glimpse of what is presented to him as a very complex economical model that he (phd in economy) could not understand and, by looking into the code, discover that it is utterly stupid: the whole agenda of austerity is based on the fallacy that you could raise taxes without affecting consumption.

You could say that my example is only saying that there are good and bad economists and that things go wrong when politicians listen to bad economists.

Well, it turns out that politicians only listen to bad economists (because that’s what they want to hear) which make any influential economist a bad one (because you can’t really make a career as a good one who say things like "give more money to the poor" or "tax the rich").

Varoufakis is an exception here but not so much: he was quickly removed from office once people understood that he would not agree to become a bad economists to stay in power.

That was Uni. Then I started read pieces by "economists" in the popular press. They written "pop science" style, where the science being discussed is economics. But where pop science is often a genuine attempt to educate, these articles by "economists" were invariably little better than opinion pieces. To this engineer they often read like near pure bullshit. Worse, after a while, it because obvious it was paid by the word bullshit. As in, if you look at the job description for "Chief Economist" at a bank it reads like a PR position, not someone paid to predict economic outcomes.

I do feel sorry for the academic discipline. The tarnish painted by the brushes held by the colleagues paid by politicians and PR services reeks, which in turn means they go through life wearing the snide comments you see about their efforts here. Balancing that is things like the current interest rate. If I believe what I read, the worlds reserve banks kept interest rates low because the worlds top economists told them the COVID cash bazooka would not lead to inflation. WTF? I have no idea if this was just another case of economists saying what they were paid to say, or it really was the underlying academic consensus. But the independent reserve banks acted on that advice, and if they can't pick the paid bullshitters from the those doing true research then I've got no hope.

Well, they just forgot one aspect: people are not rationales. They never are. The whole advertising business relies on people not being slightly rationale at all. There’s no even a point in making people rationales. And this is not always bad: people will sometimes act kindly despise their own interest.

The whole "people act rationally for their own selfish short-term interest" is what gave us most economical theology from Smith to this day (cheers to Ayn Rand for writing the fairy tales about it). It’s mostly as reliable as astrology: sounds mathematics applied on a completely false hypothesis.

And, yes, politicians have been using it exactly like astrology with similar results because one of the key principle is that it justifies the existence of rich people (those are who acted the more rationally and thus are rewarded. Did I say that everyone acts rationally? Well, yes, that’s the hypothesis. Don’t try to confuse me).

Just to highlight how far fetched mainstream economical "science" is, just consider that there is a new field called "behavioral economy". Behavioral economy introduces a whole new paradigm: "what if, instead of assuming that people are rational selfish, we actually observes and make theory from observations".

Which is, you know, what we call "science". And, unsurprizingly, every behavioral economist start to say thing like "hey, if we tax the rich, it works!" "hey, we can help the poor by handing them money". "hey, we should not let banks create money and then hand them the money they created and lost themselves".

It’s a bit like a few astrologists started to consider "what if really tried to look at the starts?" and invented astronomy. But every king, every government was laughing at them for being young and naives.

This is, as we all know, true to the "first order" approximation. We know it in business - you get what you incentivise - it's behind Goodhart's law (when a measure becomes a target, it stops being a good measure).

It is however, an incomplete description of human behaviour, again, as we all know. But since "second and higher" approximations of human behaviour are hard to model... they don't do it.

And just so you know, it's just as easy to do bad, "left wing", Lysenkoist economics.

The Argentina Paradox: microexplanations and macropuzzles by Taylor et al https://latinaer.springeropen.com/articles/10.1007/s40503-01...

Why do they need reserves? Abolish all federal obligations. Let the exporters accept only USD for their goods and allow them to figure out how it gets distributed through the Argentinian economy.

this would result in the country having no money to pay for a proper functioning goverment.

who is going to pay all govermental employees? the police, the army etc if the country has no reserve currency?

1. Retirements funds 2. Health care 3. Education

No program that seriously contemplates cost reductions can do without cutting back with these. Guess who the beneficiaries of these expenses are.

Note, India has its own currency and was able to print alternative notes. However, because the government, against all the advice from its economists decided to do this in secret, it did not have enough of the new notes to replace the old notes for at least a few months after making this decision.

This simple act, which only involved replacing old notes with new ones, in a currency that the Indian government controlled, led conservatively to tens of thousands of deaths, arrested economic growth in a fast growing country immediately, destroyed hundreds of thousands of businesses, and set the economy back conservatively by 5-10 years, although the significantly reduced growth in the subsequent years since (at least until the pandemic...it's likely the pandemic where India enforced amongst the strictest lockdowns in the world would have reset the economies in both cases) probably has a continued compounding effect on economic growth.

Of course, a large part of the damage to India was a result of the massive size of the informal sector relative to most other countries in the world and Argentine may not be anything like that, but I think it's a very relative comparison as to how easily such a transition can go bad if not handled extremely carefully.

Yet Modi is still in office. Amazing.

If Argentina actually had honest exchange rates they would have about the right reserves. However they are using a false rate for most and so switching will force them to use the real rates which would devalue specific things. (They have export restrictions on many products because they can't control the exchange rate)

Bonus question: Why not Euros?

Euro is far, also Euro is far more left leaning (I guess) than the US (even democrats in the US would be considered right form the center in Europe). But the real issue would be the lack of currency reserves - least I'd think Argentina might have more Dollar notes than Euro ones.

I don't know how this helps, though.

Argentina's peso ("left-leaning fact-based" currency) went from worth 0.35 US dollars to now 0.0029 US dollars in less than 5 years.

The elected president is on the quite right side of the spectrum, so associating with any left wing policies/countries would be very unlikely, given Argentina's currency dropped massively during the last years. He won vs a candidate who used to be a financial minister overseeing several hundreds percent inflation.

Technically, from a geography point of view, euro-using countries as official currency are closer than USD: https://eur-lex.europa.eu/EN/legal-content/glossary/outermos...

(I.e. French guiana's currency is the Euro)

The distance - far/close matters when it comes to the trading partners more than anything. The US and Brazil being the biggest ones[0], and the trade is in USD.

[0] https://www.indec.gob.ar/uploads/informesdeprensa/i_argent_0...

That used to be the case but it is true no longer, current 'Democrats' (between quotes because the DNC seems to be as democratic as the DRC from what I've seen) are comparable to centre-left parties in north-western Europe. The more activist wing of the 'Democrats' is comparable to socialist and communist parties in e.g. Sweden and the Netherlands.

Pro-Euro: Euro already is controlled by a wider range of countries and there is some incentive to match monetary policy to accommodate those wider circumstances. So a policy is less likely to just support a single countries unique situation and conflict with Argentina's situation.

Pro-USD: USD is already more widespread in South America and actively being used in Argentina right now. This advantage is very practical and concrete right now and trump's all else

I presume by Fed you mean the not-government 'federal reserve' which is a contractor to Congress which tinkers with monetary policy and sets the price of money. Federal Reserve quietly provided bailouts to Europe in 2008.

New York Times article,

  '“an open facility where European banks could come and get dollars.”
  So began what would become the biggest United States government bailout that most people do not know anything about.'

Argentina or Panama having a bit of an economic slowdown whilst the US is growing nicely isn't the Fed's problem: the monetary policy decisions will only take into account to the monetary policy needs of the US, and it's not particularly in the interests of the Fed to bail out Argentine bank reserve shortfalls unless the contagion is likely to hit the Us either.

this needs to be repeated. USD is already the way of doing business in the ARG, and this is essentially just calling it what it is.

this is also seen as a way to stabilize the back-and-forth economic choices that make the currency terrible.

makes sense in theory, but they're an export economy, and a strong USD will make it hard sell beef and mining products.

I've been in favor of abolishing the minting of physical US pennies, but I suppose this is one argument against it: other countries that use the dollar might actually find pennies to be useful.

Notes as money is bizarre share-cropping, and USA people would be reasonable to advocate for coins in larger denominations like 10 50 and 500 to avoid borrowing notes into existence.

https://www.usmint.gov/news/inside-the-mint/how-coins-are-ma...

"Federal Reserve Banks buy coins from the Mint at face value."

Even if it's not recorded as such, money is always a liability to its issuer, otherwise there would be no point issuing it.

Not in USA. US coins are fiat without a liability. This leads to people every few years thinking they discovered that coins are just fiat and then recycling the idea of minting some $1 trillion coins and paying off the federal debt. It is technically possible, there would be no debt for the coin issuance, and would likely lead to nobody willing to purchase future USA debt issuances.

https://www.investopedia.com/terms/t/trillion-dollar-coin.as...

Really bizarre are the gift shops at the US Treasury's Bureau of Engraving and Printing where they have tours to watch the printing presses. They sell to tourists uncut sheets of dollars that they print. But they first buy the sheets at face value plus the printing costs from 'federal reserve' who bought the sheets at pennies per _sheet_ that Treasury just printed.

https://www.federalreserve.gov/aboutthefed/chapter-5-federal...

  "When purchasing the notes, the BEP authorizes the Reserve Banks to charge Treasury's general account for the face value of the notes plus the cost of printing."

No, though prove me wrong and show us the coin liabilities on USA balance sheet somewhere.

In practice a coin is a token that represents a liability at the Fed much like a deposit. That token can be used to claim an actual deposit at the Fed (by agents, not little people, obviously).

I'm not aware of a law that requires a coin be bought by the fed at face value. It just seems to be the historical norm. If you're aware of such a requirement please let me know.

In summary, the coins are not the "money", they're just tokens that for historical reasons the fed buys from the treasury at face value and can record at face value in their balance sheet. It could in principle just as easily be the case the fed is not required to balance with anything from the treasury (e.g. not T-bills) against new money creation - they're just forced to hand over the deposits to the control of the treasury. The net effect would be exactly like the coin case (hence the trillion dollar coin nonsense).

National debt is a primary tool to support growth.

Breaking glass windows also increases growth (or GDP) because it forces spending to replace the broken windows. Similar GDP increase when USA builds missiles to blow up bridges (over there somewhere) and later provides funds to US contractors to rebuild those bridges. GDP number go up, along with debt and interest costs.

It lasted about 10 years and was eventually abandoned. TLDR: "Simply put, the dollar peg overvalued the peso in the rest of the world, especially against a weak euro and the Brazilian real, reducing Argentina's competitiveness and compounding the account deficit."

https://www.statista.com/statistics/1331248/main-trade-partn...

Pegging to the yuan might be the more interesting option since that has considerable risk but also I’d imagine China would look very favorably on it.

https://bluedollar.net/

https://es-m-wikipedia-org.translate.goog/wiki/Mercado_negro...

You can exchange dollars in any country and in many you can directly pay in stores if the storekeeper is flexible. You wouldn't call that a parallel dollar economy.

The only additional point in Argentina is thay they have an official exchange rate that is way way different from the true exchange rate (ie the one that arises from demand and supply). That's why you can exchange dollars through the official channels and get, say, 500 pesos, or you can exchange from an unofficial one and get 1000 pesos

This is Latin America we are talking about.

To be clear, I do generally agree with your comment. Just saying, don't be surprised.

Argentina is a country with great natural and people resources that was utterly decimated by a legacy of mismanagement and corruption going back to the Spanish era. Not something that is easy to fix.

On top of that, when over 40% of the population works, in some way, for the government the problem is much harder to fix. A huge percentage of these people are nothing less than parasites, in that they do nothing of value to anyone. How do you take a parasite whos skill set amounts to moving sheets of paper from one pile to the next and turn them into useful members of society? How do you do that when your industry has been decimated and you haven't fostered a more productive culture? It's nearly impossible.

I am not a economics person by any sort, but why does that matter? If China is buying say minerals at $4 a ton or something, versus 1415.41 Pesos how does that change. If US is strong and the Yuan dips, it now costs X% more to convert to $ then before, that just means you decrease price of export by X %? If we are speaking entirely on a 1 to 1 partner.

But on the plus side it also opens you up to buyers who trade in USD, they no longer need to trade to a bunch of Peso first. And since most export companies probably already accept USD for trades, I don't see what the negative is.

I ask because I lived there for 5 years, and anytime I sold dollars for pesos, the cuevas (the place that does the exchange) were extremely picky as to which $100 bills they would take.

"generally not a great idea economically" is true, but this specific case is one of the few where it could be a fantastic idea.

Control over one's currency > pegging to or using USD >>>> historic Argentinian monetary policy. If (1) is impossible, then (2) would represent monumental improvement over the status quo.

How is it under America's control?

Acknowledge the contact political printing and chaos, poverty and institutional collapse that being able to control the currency has, ans you'll come out with the conclusion that USD as the currency, which what has been used de facto and aggressively attempted to stop by the gov, would be the ideal solution if achievable.

If you don't mention peronism in your analysis or inflation or debt or the transition to democracy it's very hard to see how you're qualified to speak and be at the top of HN about this.

But I guess I have to thank that it's the typical "he's a crazy organ salesman!1!1!1"