Former Minister of Economy Domingo Cavallo has questioned the policy of the central bank by the current president, Guido Sandleris, and his predecessor in office, Federico Sturzenegger,
In his personal blog, the former President of the Central Bank also stated that "if strictly adhered to the type of monetary governance announced, Sandleris will be worse that Sturzenegger faces exchange rate"
"In both cases, that is Sturzenegger between December 2015 and June 2018, as in Sandleris from October 1, 2018, almost dogmatic adherence to clean flotation, confirmed in both cases by the IMF, is a a source of vulnerability in the event of an exchange crisis, even greater than fiscal weakness, "he said.
Cavallo stressed that "in the case Sandleris, how do you handle interchange because the courses were scraping the floor "exchange without intervention", it shows prefers very little, in line with the quantitative limits imposed by the International Monetary Fund, so that, in fact, not all of this disturbance of the proposed exchange bands is anything but camouflage clean flotation system ",
But the former minister believed that "this very limited intervention "to prevent enlargement the currency base "is a very bad signal for the future "because, in his opinion, if" eThe course will guard the roof from an area without intervention, selling the currency central bank I would be limited quantitatively, as seems to be devoted to the IMF. "
"In that case, Sandleris would have happened to what happened to Sturzenegger hit the puchitos and do not set the type of change as a targetcompleted is unable to stop the run "warned Cavalla, who did not avert a serious political crisis in this economic context." I'm afraid that it would be put to the entire governmentI hope it never happens! "
For Cavallo, " interest rate is a much more effective tool fight against inflation rather than quantitative control, "although they believe that"effectiveness If combined, it would change a lot interest rates and aggregates currency. "
On the other hand, the economy emphasized it increase bank reserves it is a lot less expensive for BCRA to issue LELIQ, and though "you can not normally they control both the amount of money and the interest rate"in the Argentine case"Yes, it is possible, because there is a third monetary policy instrument, which is bank reserves ".
He criticized that "the central bank is willing pay $ 4 billion a year to banks so two monetary policy instruments, currency bases and interest rates are allowed. "But in his opinion, do not focus on the exchange rate, The money unit will bind "Crass error" disregard "of the possibility that people choose between local money and dollars, or between dollars and goods "leaving the economy"very vulnerable to currency exchange"even" more than it was in Sturzenegger's time. "
COST LELIQ: 160,000 MILLIONS per year
"The Monetary base is not the best guide quantitative impact on inflation. My goal is to help prevent the currency crisis from the elections, "the former Treasury chief said during the presidency Carlos Menem and Fernando de la Rúa,
"In short, the $ 160 billion economy will most likely be at the expense of banks' profitability, but with regard to how much suffer from non-banking, large, medium and small companies, it does not seem to be too unfair that some victims also cause banks, "Cavallo added in a note posted on a personal blog.
He believed that "the definition that is used for the monetary base is not conceptually very adequate." In all banking systems of the world, including our convertibility, The currency base is the sum of all currency liabilities central banks ".
"Like in general, Central banks do not issue debts in the form of securities or bonds, the monetary base is the sum of banknotes and coins held by the public (circulation) plus bank reserves (banknotes and coins held by banks plus bank deposits at the central bank). Always in local currency, it's understandable, "he explained.
In this respect he added: "Like Central Bank (Argentine) Yes, it publishes public titles (formerly LEBAC, now LELIQ), The currency base should include LEBAC and LELIQ shares as well as the balance of money transactions with financial entities. "
"The argument that LEBAC and LELIQ are paid monetary liabilities central banks and are therefore excluded, is not valid. Much of the lace banks in the central bank are actually paid they are rewarded for the costs of taking deposits banks, "he said.
He warned that "this problem with the definition of the monetary base is not only a semantic problem. economic impacts on the deficit fiscal. "