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Currency Crisis

MarketWatch notes a New Record Low in the Peso.

The Central Bank of Argentina has been intervening in the exchange rate by selling dollars and buying back local currency, in an attempt to stem the descent of peso against other monetary units. On Tuesday, Buenos Aires requested a $30 billion credit line from the International Monetary Fund, after expending some $5 billion in currency reserves to curb further declines in the peso. Argentina relies on U.S. dollar funding to keep its economy afloat, so rising interest rates in the U.S. spell turmoil, while every new peso sell off reignites worries that Argentina is headed for a currency crisis.

Argentina is not "headed" for a currency crisis; Argentina is in the midst of a full blown currency crisis.

Major Disorder

JPMorgan says Argentine Peso Risks 'Disorder' If Rollover Fails.

What a hoot. This is not a disorder "risk"; This is major disorder.

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Argentina Debt Burden

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I fail to understand the above chart from the preceding link. The "K" makes little sense and I cannot get any numbers to add up to $111 billion.

Currency Intervention Does Not Work

Despite the numbers not adding up, the chart highlights a major problem with interventions.

Argentina desperately needs dollars to at least make make interest payments. The next three years are the most critical. Squandering currency reserves in a foolish defense of the Peso makes matters worse.

Argentina will now need an even bigger loan from the IMF.

Mike "Mish" Shedlock