Should Argentina Peg its Currency to the Dollar?

QUESTION: What about Argentina willing to peg pesos to USD? THANKS for all you are doing for us! ALL THE BEST TO YOU AND FAMILY

TD

ANSWER: First and foremost, what collapsed Bretton Woods and the gold standard was persistent deficit spending. They fixed the price of gold to $35 but then spent recklessly every year. you CANNOT have a fixed exchange rate, a pegged exchange rate, or any sort of a gold standard as long as you retain a Marxist/Socialist agenda where you spend more than you have.

In addition, any Pegging of a currency is significantly different than a Fixed Exchange Rate. Under a Fixed Exchange Rate, the main purpose is to facilitate trade. However, you are not expressly subordinating your economy to the economic trend of everyone else in the system. Each nation is still independent, and if their balance of payments falls out of line, then they alone have a monetary crisis.

Sir Thomas Gresham was the agent for the English Crown in Amsterdam, the Wall Street of Europe at that time. Henry VIII was debasing the currency, and nobody wanted to lend money to him, fearing that what they would be repaid with was debased. Hence, Gresham’s law.

A Pegged currency is far worse for the host currency’s economic conditions are imported. If Argentina pegs to the USD, then raising or lowering interest rates by the Fed and the boom-bust business cycle are automatically exported to Argentina. It would be better to peg to a basket of currencies that would be a hybrid system closer to a fixed currency regime for trade.

Napoleon had actually summoned the best minds and talents from all over Europe into his service. His court was deliberately filled with able men from all over Europe: Dutch, German, Italian, and even Polish. These foreigners worked in the highest offices of his imperial civil service – not exclusively French.

It was Napoleon who created the first single currency in Europe following the Roman Empire. He standardized the weight of the coins so that 40 francs equaled 40 Lire in Italy and 320 Reales in Spain. This was really Napoleon’s idea of resurrecting the Roman empire. Please take note of his coinage. He is pictured wearing a laurel wreath as a Roman emperor. He was far more than just a general. The new movie was interesting, but they overlooked his economic decisions, which were decades ahead of anyone else in Europe.

The unification of Europe was the accomplishment of Julius Caesar. However, it was Napoleon who standardized the monetary system post-Rome after the Dark Age, which became the inspiration for the Latin Monetary Union by 1865 and later the Gold Standard post World War II.

Even the United States’ $5 gold coinage was equivalent to the standardization of world coinage during the 19th century.