Date: Tue, 19 Mar 2002 16:39:14 -0800 From: Bradford DeLong Subject: Naomi Klein in Argentina
>If you have eight different provinces each printing money that
>circulates throughout the country, each province will print a hell of
>a lot of money--the real resources to pay the librarians, teachers,
>and other public sector workers come from reducing the value of money
>balances in the hands of the rest of Argentina's citizens, and so
>printing money is a way for each province to fund its spending by
>taxing others' citizens.
>Seems to me that what Naomi Klein is calling for is an immediate
>hyperinflation in Argentina. Does she know it?
Probably not, because she (and you) haven't really accurately characterised the Argentine provincial scrip system. What the provinces are doing is paying their employees with bonds, not private currencies. In principle, these bonds are redeemable for pesos at some future date; in the meantime, they are negotiable instruments which can be used to buy things like food. I disagree that they have the specific inflationary characteristics which you attribute to them, because the real resources come from future taxation, or future debt default by the provinces. The scrip issued counts toward the rather loose debt ceilings of the provinces.
In general, I don't understand your point relating to real money balances. The currency of Argentina is the peso, which is not running the printing press and thus is not in imminent danger of hyperinflation. Even if the local scrips were fiat money, which they aren't, I don't see how hyperinflating the Buenos Aires currency would lead to a dimunition in the value of money balances held in either pesos or any other province's local currency. I'd also note that the IMF did not object to BA's use of provincial bond scrip last July, when the program started and seemed to accept this analysis at that date.
Brad, mate, you are aware that you and the IMF are calling for an immediate and brutal deflation in Argentina? Remember that this is for all intents and purposes a cash economy at the moment; bank deposits are frozen. Taking the scrip out of circulation would be equivalent to reducing divisia money by about a half. This is not the orthodox Keynesian response ...
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