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[log in to unmask] wrote:  "There has been no mention in the press about how 
the Argentinoes will get into circulation. It seems the government prefers 
it to be a mystery." 
 
The Financial Times has been reporting over the last week on a number of 
ways that the new currency will get into circulation.  Presuming the plan 
is still on the table (given resignation of Saa), allow me to summarize: 
 
1. Some argentino issue will be used to soak up the various quasi-monies 
issued by provinces to meet the cash shortage, also the low denomination 
federal debt issued for same purpose. I have seen no report on the price at 
which this swap will take place, but presume that it will be at or near 
par, meaning one argentino for one peso (face value). 
 
2. Some argentino issue will be used to pay out bank deposits in cash. The 
FT reports that peso deposits will be paid out in argentinos at a rate that 
will protect their real value. Hence likely more than one argentino for one 
peso. 
 
3. Wages and salaries will also be paid in argentinos. Early reports 
suggested an exchange rate of one argentino for one peso, so a decrease in 
real wages given likely devaluation. I take it this is a critical political 
stumbling block, given protection of real value of savings. 
 
4. Argentinos will be the liability of the central bank. Presumably the 
currency board pesos are backed one for one by dollars, hence the available 
foreign reserves for making the argentino convertible in international 
markets. 
 
All this makes me conclude that devaluation is inevitable. Presuming that 
the currency board protects the real value of cash pesos, the question 
remains what happens to the value of promises to pay cash pesos, promises 
issued by banks, provinces, and other bodies. Who gets protected, and who 
does not, is the political question that stands in the way. In a way, it is 
the same political question that got us to this point (as Larry Moss 
reminded us in his earlier post). 
 
Perry Mehrling 
 
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