Co-Creator Explains Javier Milei's Plan to Abolish the Central Bank

Nicolás Cachanosky was a co-author on the dollarization proposal for Argentina that Javier Milei publicly endorsed.

Nicolás explains to Bob the outlines of the proposal, which involves replacing pesos with USD for bank deposits, currency in circulation, and central bank liabilities.

[sav]

Time is right time for "Austrian Boys" 😊
Now we need to support Mile and Argentina as much as we can.

[PoetFisherman]

This is so exciting. It's not like his position is all-powerful so he's going to need the rest of the government to at least not actively hampering him. Hang in there, people of Argentina. This is the ripping the bandaid off process. It won't be easy but this is the right direction.

[genegreigh]

"Dollarization" sounds like a band-aid, but band-aids sometimes have their uses. Milei also proposes legalizing competitive currency, which would be a much more substantive measure.

[maambomumba]

Man I’m so looking forward to see what happens in Argentina. Please get Doug Casey on for an episode. I believe he spends a lot of time in Argentina and is quite libertarian.

[DerrickJLive]

Trust Mises to bring the best Milei content.

[marktovey]

The dollarised Latin American nations are much smaller than Argentina and all have the US as their number one trading partner. Argentina's top trading partners by contrast are Brazil and China. For these reasons, I'm not convinced that the comparisons are like for like.

I'm curious as to why someone of Milei's persuasion wouldn't prefer to try tying the peso to a basket of commodities that Argentina produces. After all, Austrian economists are hardly friends of the Federal Reserve and the USD, and it seems like it could put Argentina in a position of weakness and dependence geopolitically on the US.

On a basic and practical note, my experience when visiting Ecuador was that it was hard to transact with dollars, because often shopkeepers seemed to lack coins in the appropriate denominations. I imagine that is related to trying to transplant a much richer nation's currency onto a developing nation, where goods are likely to be priced much more cheaply in dollar terms.

[DF-ssep]

I had to listen to the last part again and again, and it's still hazy to me, but it's interesting, and several thoughts come to mind. I read somewhere that Argentina's government is not doing that badly fiscally, actually, so if I got that right, the issue of gov funding was transferred into the central bank, a situation that doesn't seem that dissimilar to that of the US Fed.

[notchristianhodges]

I'm in favor of them abolishing their central bank, but won't dolarization just turn the US federal reserve into their central bank?

[ShahryarSaigol]

It will work in an economy which is running persistent trade surpluses. But in an economy that has a trade deficit, it will eventually run out of dollars. So the US FED will become its de-facto central bank.

[dameanvil]

02:38 🇦🇷 Nicolás Cachanosky discusses Javier Milei's proposal to dollarize Argentina, shutting down the Central Bank and adopting the US dollar as legal tender.
03:58 📚 Cachanosky and co-author Atilio Castelpoggio developed a dollarization proposal for Argentina before Milei's presidential candidacy, gaining significant attention when Milei endorsed it.
05:51 💡 Cachanosky's "How to Dollarize Argentina" substack offers insights into the proposal, discussing updates, criticisms, and specifics of the plan's implementation.
08:19 💸 Dollarization involves using a foreign currency as the legal tender; Argentina's existing de facto dollarization forms the basis for this transition to the US dollar.
13:09 🏦 Cachanosky outlines three categories for dollarization: bank deposits, currency in circulation, and Central Bank liabilities, each requiring distinct strategies for dollarization.
18:42 💵 Implementing dollarization faces challenges in managing the transition of bank deposits into dollars, necessitating attention to prevent potential bank runs.
21:30 🔄 The transition from peso to dollar reserves in banks involves handling the conversion process and managing the nominal exchange rate effectively.
22:53 💱 Dollarizing physical currency circulation in Argentina requires the Central Bank to exchange pesos for dollars, possibly adopting strategies used by Ecuador or El Salvador.
24:03 ⏳ A staged approach to converting remaining pesos after a voluntary period provides advantages in managing the transition to a dollarized economy in Argentina.
24:18 🇦🇷 Dollarizing Argentina proposes eliminating the peso and preventing government intervention, considering two approaches: Salvador way and Ecuador way.
25:51 🏦 Bank deposits in dollars can contribute significantly to dollarization, not solely reliant on the Central Bank.
26:32 📚 Dollarization proposals offer a blueprint; implementation specifics require adaptation to current economic changes.
27:57 📊 The fate of the peso's validity in the future remains uncertain, dependent on the proposed implementation and evolving economic factors.
28:38 💵 Central Bank liabilitiesrepresent the most complex aspect of dollarization, requiring intricate strategies to prevent defaults and market turmoil.
34:07 📉 Replacing Argentine peso-denominated liabilities with USD commercial papers through an international trust is a pivotal step in dollarizing without default risks.
38:51 🏛 Legislative approval is essential for currency change or Central Bank shutdown, potentially involving a referendum for public opinion as a political pressure tactic.
40:27 💰 Argentina's economic state is not experiencing a boom but stagnant per capita growth, facing the risk of hyperinflation rather than a typical Austrian business cycle scenario.
43:29 📈 Dollarization could generate a positive shock in Argentina's economy, potentially leading to a significant economic upturn if implemented with confidence and clarity.

[Alvvaro_fdz]

All libertarians around the world are praying for Argentina…if they fail, they will use this case to end all libertarian options abroad
Good luck brothers🫡

[basado_definitivo]

Emilio Ocampo was replaced yesterday!!

[ricardorojasoliva]

Thank you for this valuable podcast guess. I am really hope Argentina would end this crisis. As a Libertarian, I have huge expectations to see this happens in Latin America.

[englishpayerofgermantaxes]

The USD is also fast approaching junk status. Why not go the whole way and price things directly in gold. Micrograms, milligrams, grams etc.

[RobertojavierSilvaharth-ubpz]

Economically, this is Brain Salad Surgery. I am not an economist, but I did take Economics and Banking courses at Uni, and I passed the first level exam as a CFA candidate, and I understood very little his explanation of the plan to better Argentina's economy. In my defence, the Senior Fellow from the Mises Institute, a renound economic organization, looked befuddled at the end and explicitely asked for clarification several times during the interview. Good luck Argentina and if I was Milei I would take my time to understand carefuly all aspects of this experiment. One hundred years ago Argentina was among the best nations in the world, and then the gringos meddled with reforms that brought Argentina to the bottom of the G-20 and now the second biggest economy in Latin America will use the US$ as it's currency... "Alguien te USA" volvera a ser el eslogan de preferencia?

[MariaFolsom]

My questions will reveal my ignorance: what exactly happens to all these pesos that get "exchamged" for the dollar? Who wants them? Also, why "dollarize" when the US dollar itself is now a fiat currency and has its own inflation problems?

[killingjoke]

Maybe I missed it, but how does the Argentinan government get all the dollars for the transition? By taxing their exports in dollars? And issuing more debt in dollars?

[tensortab]

Is this very much different than all those European countries using the Euro and not having their own central banks?

[AMildCaseOfCovid]

38:51 This video really buries the lead, doesn't it? Milei needs the legislature to change currency or shut down the central bank. Now we'll wait and see if he can accomplish that.

[jamesmoreno]

It helps when Murphy asks questions because I was thinking the same thing