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The Dollar Blue relief valve in Argentinian hyperinflation

Posted by John Reed on

Argentina hyperinflation


Argentina currently has hyperinflation. They sort of always have hyperinflation. Furthermore, millions are not fleeing the country or starving. Why?


Apparently, dolar blue; Dollar Blue in English.


Hyperinflation in a country always results in that country adopting what I call the Five Bad Laws:

• capital controls
• price controls
• rationing
• anti-hoarding laws
• financial-repression laws
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Argentina has capital controls. Capital controls prohibit Argentinian citizens from possessing foreign currency. Actually, Argentinians may exchange pesos for up to $200 USD or other foreign currencies a month. But that is not enough for them to live off of.
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Then there is Dollar Blue. There is an official rate at which the Argentinian government allows Argentinian pesos to be exchanged for foreign currency like the USD. Today, June 15, 2022, one USD buys 122.51 Argentinian pesos at the official Argentina government rate.
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Dollar Blue is the black-market conversion rate. It is illegal. But there are many ways Argentinians convert their pesos to USD at the Dollar Blue rate and the government generally does not prosecute the crime. Today’s June 15, 2022 in the Dollar Blue rate one USD buys 216.26 Argentinian pesos. Roughly speaking, if you pay in USD or buy pesos with your USD, you get everything for half price.
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The existence of Dollar Blue is no secret. I just got today’s rate off the CUEX web site. The Dollar Blue exchange rate is published daily in Argentinian newspapers.
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As a practical matter, certain ways and places give you the lousy official rate and others give you various much better Dollar Blue conversion rates.
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For example if you stick a US debit card into an ATM in Argentina, it will convert USD in your American bank account dollars into pesos which will come out of the ATM at the lousy official rate. But if you buy pesos with your USD at Western Union in Buenos Aires, you get a version of the Dollar Blue rate and you have to pay a fee like $15. There are also other payment-sending services like Xoom that sell you pesos roughly at the Dollar Blue rate. https://www.xoom.com/argentina/send-money
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There is a street in Buenos Aires, Calle Florida, which abounds with people yelling “cambio” (exchange). They take you to a cueva (cave) small store where they will buy your dollars with their pesos. This is a negotiation. They will try to pay you as little as possible. Get the current Dollar Blue price on your cell phone and show it to them to make sure they know you are not ignorant of the proper rate.
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They very much prefer pristine new $100 or $50 not even folded bills. Why? I have no idea. No one in the US gives a damn about such silliness.
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If you exchange your dollars at currency-exchange stores or banks, you will get the lousy official rate. If you pay for anything in Argentina with a US debit card or credit card, you will get the lousy official rate.
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If you pay cash, you often get the much better Dollar Blue rate. Ask what price or conversion rate you get if you pay in dollars. If it is not about half the peso rate, you should probably find a better store or hotel from which to buy what you are buying.
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There are a whole lot of little tips for American tourists going to Argentina on line. Here, I just wanted to tell you that they have to two rates, that they do not seem to be too eager to stop the illegal Dollar Blue, and that some places always give you the lousy official rate and others will often give you the twice as nice Dollar Blue rate.
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I mainly wanted to acknowledge that although they have hyperinflation and capital control laws in Argentina, they do not have the starvation and mass outmigration that they do in, say, Venezuela. They reason is they are not enforcing the capital controls on Western Union and some other payment services or at the cuevas on Calle Florida or other businesses.
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If we get hyperinflation in the US, will the government act like Argentina or Venezuela? Venezuela I expect. As they have with all the draconian covid 19 mask and vaccine mandates. YOU MUST OBEY!
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In time, the US government may switch to an Argentina Dollar Blue look the other way system to ease the pressure. In Germany and Austria in the hyperinflation in the early 1920s, there was no equivalent of dollar blue. Many starved.
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I am also intrigued at the low cost of living for foreigners in Buenos Aires if they live entirely via the Dollar Blue market. Below is a comparison of the cost of living between San Francisco and Buenos Aires. I do not know if these are dollar blue prices or official rate. They are sure cheap. So cheap I wonder why half the population of the US has not gone there on tourist visas (generally you are allowed to stay for 90 days). And adventuresome Americans might want to sort of live for an extended period of time in Argentina on a tourist visa because it is so cheap.
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https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&country2=Argentina&city1=San+Francisco%2C+CA&city2=Buenos+Aires
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https://johntreed.com/collections/john-t-reed-s-book-on-hyperinflation-and-depression/products/how-to-protect-your-life-savings-from-hyperinflation-and-depression


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