If the Argentine authorities could not maintain the stability of the peso, they should not impose restrictions on the purchase of foreign currency. They essentially put their citizens in a hopeless position. It is good that Bitcoin is not controlled by any government agencies. The population can at least exchange the rapidly devaluing peso to Bitcoins.
It is without a doubt a very unfair policy, but once you understand that governments are not in place to help people but instead to keep their power and if possible to increase it then it makes complete sense why they are doing that.
They are imposing those restrictions on the ability of people to obtain foreign currency because if they didn't do that then their currency will crash and they do not want that because if that happened not only that will damage the economy and the honest people of Argentina that will also damage their image to the point it will be impossible for them to remain in power.
The government is always blamed for failing to maintain a country's economic and political stability. The failure of the Argentinean government to keep the value of the peso down despite limiting USD purchases is not entirely the fault of the government. Moreover, the new Argentine government underwent a transition from Macri to Fernandez.
Argentina's uncertain domestic conditions include:
- Political conditions through preliminary elections won by opposition groups led to the absence of investment because there was no certainty of political stability.
- Severe drought has cut Argentina's agricultural exports and increased the country's current account deficit. Food commodity exports are Argentina's biggest foreign exchange earner.
- High expectations for leaders who fail, because they receive debt from the IMF even though people refuse.
- Reduced foreign exchange reserves, which are spent to maintain the exchange rate and increase the benchmark interest rate to 45%. Investors were frightened by Argentina's foreign debt heaps which eventually pushed investors to withdraw money from the market.
Actually, the government's move to control the currency is the right action, but the carry trade operation carried out by global investment managers to benefit from the volatility of the Argentine peso causes the Argentine economy to deteriorate and ineffective currency control.
Carry trade refers to borrowing money from sources of low-interest rates (developed countries, especially America), and investing in regions with higher interest rates (developing countries - Argentina). Investors get extraordinary results because Argentina offers a high return investment. In addition, investors in trading bring profits in other ways. When investors borrow in USD and invest in the Peso, they tend to make more money when the USD depreciates or the Peso expands. through the risk of 'foreign exchange exposure', if the Peso strengthens or the USD depreciates during the investment period, then the investor will benefit because he will get more USD back when he liquidates his investment.
Carry trade can still be profitable as long as the interest rate differential is higher than the dollar's appreciation. When America implements Quantitative Tightening (QT) the impact will result in the stagnation of the money supply in Argentina and thus cause appreciation of the USD due to shortages.
