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From the Lebac bomb to Lelić: dynamite Central Bank?



In a medium-sized developing country, the essential function of Central Bank is to provide a supply of funds for payment and loans in accordance with the expansion of the real economy and, at the same time, cherish the volume of foreign reserves protect the local currency in which these means of payment and credit are expressed against the volatility of the global financial market. Currency and credit for the domestic stock market and reserves of the intervention reserves it I will soften the outer flow.

From the beginning of his management the national government went the opposite way, signed by commercial and financial opening in a world of tension, freeing the movement of currencies and the domination of financial income through instruments issued by the governing body that provides a positive real interest rate in relation to the development of the exchange rate. High interest rate, free movement of currencies and extensive financial revenues in dollars. An explosive cocktail if there is one, especially in a world of high protectionism, a crisis of multilateralism and restrictions on international liquidity.

Sturzenegger, the first president of BCRA, was committed to expanding the issuance of the letter of the Central Bank (LEBAK) to the open market at levels that exceeded the monetary base. When the outbreak began, Caputo used the first IMF $ 15,000m payment to ease the bulk of LEBECK that was issued by its predecessor, and now Sandlerus used half of the second withdrawal of the multilateral agency of U $ S 5.631 million to complete the payment to LEBEK that were outside the financial system. The remaining letters were mandatory submitted to banks and became liquid letters or LELIQ.

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Government celebrates the deactivation of the pump on financial instruments speculative that he created with his monetary policy, without measuring what he was doing U $ S 17.7 billion in debt with the IMF in exchange for painful adjustment plus the loss of foreign exchange reserves that are estimated 10,000 million dollars.

This tour is essential to know, in principle, whether this policy of the central bank that promotes financial recovery and capital outflow is over and, secondly, if the stability of the exchange between floating bands is viable.

That was said in the previous columnsthat the Alliance is changing despite the fact that it has achieved the sanction from the National Budget for adjustment, the favorable vote of the IMF board to extend the original agreement and a certain exchange "pax" could not reconstruct the private offer of foreign currency. Assessing the behavior of the foreign reserves, it was noted that Sandelis came to the Governing Body in the amount of 49,568 million US dollars and by November 16 was 52.198 million dollars. The increase was $ 2,630 million. But if the second IMF payment of $ 5,631 million is denied, loss of reserves in 38 working days was 3,001 million US dollars. Capital drainage continues.

X-ray behavior of foreign exchange reserves, let's see what happens to the weights, the situation described in the following table:

Analyzing the policy pursued by the new BCRA authorities, it coincides with plan for double zero, the monetary base fell by -6.7%, while loans to the private sector declined by -2.2%. The restrictive monetary and credit policies deepen the current recession.

In return, Liquidity Letters (LELIQ) that replaced LEBACs increased by 110.9%, generating an incredible $ 355,460 million in just a month and a half at rates that started at about 73%, and the last cuts are 10 points below that cap. This change in banks' private sector lending assets due to liquidated letters at very high rates is financed by the growth of fixed-term deposits of the public in the financial system of US $ 190,758 million, 24.7% and in several months and a half

The growth of the wider monetary aggregate (M3) is then explained by 5%, despite the restriction of the monetary policy. All weights are closed in banks with letters and certificates of deposits.

Sandleris grants the monetary base and the private loan, but at the same time Expenentially expands speculative financial instruments, concentrating on the effects of this policy in the banking system. Not "loose" on the market to put pressure on foreign exchange reserves, but rather "a letter" to the letter of the high-rate banks it finances. it forces the capture of deposits also at high rates. Documents are filled in financial institutions that are funded by deposits, whose owners see at the time of each monthly renewal how much the dollar is quoted and what is the offered interest rate.

There are no longer "monthly fees" with the maturity of LEBAC that put the market in limbo, but there is a overlap of the tension between the interest rate / rate of devaluation, in which if the first the bank can be very complicated.

The central bank disarmed the bomb "LEBEK", but again reinforced the "LELIK" bomb. The difference is that the second is inside the banks.


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