Banking in Argentina

[Brad DeLong]

>  Brad wrote:
>
>>>  Michael Mussa says they don't work.
>
>Well he's fucking wrong then, not to put too fine a point on it.
>
>This isn't a question of macro-policy, or whatever.  It's a matter of the
>difference between two situations:
>
>1.  I walk into a bank in Buenos Aires and say "I'd like to make a deposit
>to my savings account, a withdrawal from my current account and take out a
>loan please".  The person behind the counter says "that might be a bit
>difficult, particularly the loan, but basically OK".
>
>2.  I walk into a bank in Buenos Aires and say "I'd like to make a deposit
>to my savings account, a withdrawal from my current account and take out a
>loan please".  The person behind the counter says "This is a cheese shop;
>all the banks closed down six months ago".
>
>Argentina is much more like 1. than 2.  As a matter of observable fact, the
>banks are carrying on banking business.  Any analysis of Argentina's
>problems which contains the step "and then the banking system collapsed" is
>based on at least one non-fact.  The corralito is coming to an end, and the
>banking system is still there.
>
>dd

"A bit" difficult?

Perhaps a better analogy would be that an Argentinean bank is like a 
cheese shop where you can *buy* the cheese--you just can't take the 
cheese out of the store or eat it inside the store...

A 40% inflation rate coupled with a 90% prime lending rate means that 
your loan comes at a real interest rate of 50% per year: that's not 
supposed to happen after a devaluation--a big devaluation is supposed 
to make real interest rates low, not high, that's the point of it...

Real bank deposits today (measured using Argentina's domestic 
consumer prices) are 2/3 what they were a year ago...

Real bank loans today (measured using Argentina's domestic consumer 
prices) are 57% of what they were a year ago (and that's making no 
correction for the value of distressed debt)...

How will the corralito come to an end?

Brad DeLong