Argentina’s libertarian president, Javier Milei, is the lucky winner of $40 billion that Donald Trump managed to conjure from thin air. Less lucky are the Americans who rely on the government programs Trump has gutted to be able to “save” that sum.
Argentina’s libertarian president, Javier Milei, is the lucky winner of $40 billion that Donald Trump managed to conjure from thin air. Less lucky are the Americans who rely on the government programs Trump has gutted to be able to “save” that sum.
Can somebody please clarify the actual transaction here? We’re not simply giving Argentina this money. It’s a swap or a loan, right? Who know if/when they’ll pay it back, but I think it should be clarified.
It’s a currency swap. Basically, we give them dollars and they give us pesos. Eventually, they could theoretically be swapped back.
Holding dollars is good for them because it shows foreign investors’ confidence in their economy, and allows them to shore up the peso if necessary by using dollars to prop it up through central bank buybacks.
Holding pesos is a high risk for us because the inflation rate has historically been extremely high. $1 US was like 300 pesos five years ago, and it’s more like 1500 today. So if we swap them back down the road, we will probably lose money, since we swapped dollars at $1 = 1500 pesos, but may swap back later at $1 = 2000+ pesos.
In a way it’s like we gave them an interest free loan. Or actually: more like we gave them a loan with a negative interest rate. Because we likely lose money the longer they hold it.
Why would we do this? Because Milei says lots of nice things about the orange man on TV.
No interest paid to US when swapping back?
People are saying there’s some billionaire that Trump is bailing out.
So, I haven’t been getting any answer here myself but in general here’s what has been happening.
Aregentina’s…idk president? Has been cutting their social program funding and regulation for the last year or two. It’s wildly unpopular in his country.
Those cuts in regulation inflated their currency value for a bit but it was temporary.
Now, Aregentina is coming up on an election and the president is at risk of loosing and having his policies reversed.
So this money…it’s not actually going anywhere or for anything specific. It’s a currency swap. We are kind of giving them a loan. Just giving them money.
Because. Again. The Argentinian President cut tons of stuff and artificially inflated his currency with deregulation.
So Trump sending him money is like a bandaid to get him through his election.
He can point to this influx to show that “his policies are working.” They’re not. Argentina has had unstable currency for ages.
He’s stealing from Peter to pay Paul.
But this is complicated money science and I can’t explain in technical terms but that is the jist of it.
I mean, it could work. Javier Milei, The Argentinian President, is trying to get external investors to pump money into he economy so, if nothing else Trump giving him this money signals that he has America’s support.
Argentinia also just had a big win with soybean contracts and China.
But in the short term he’s essentially doubling down using a loan from his American pal.
Thanks for the details but as I understand it it’s swapping US for Argentinian currency that then needs to be paid back? So I guess it’s technically giving money in the sense that Argentinian currency is trash?
Yeah pretty much. See this is where it starts getting into money theory and I’m a few years out of my economics and finance classes.
But much like stocks and bonds currency swap also deals with interest and growth rates. It’s a high-scale ‘loan.’ (But not technically a loan.) Loan-like.
It doesn’t need paid back exactly but if one parties money becomes garbage then it does start to feel like a loan.
We are getting pesos in exchange, but again. The peso is risky. If it grows then you can argue we didn’t loose any money. But we have to hold the pesos to help stabilize it’s value.
Hell we don’t even know where the money is coming from (our Government is shut down right now, remember?) let alone what form the transfer will take.
Since it’s Trump, I’m guessing it’s buying support. Or Argentina got a copy of that Russian video where Trump is urinating on a child in a hotel room and they decided to blackmail him.