Hyperinflation in the Horizon

DCfred

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Jun 19, 2003
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I spoke with my friend Magda at the World Bank, an economist that deals with Latin America, the one who had told me almost a year ago that what has happened will happen. She says that hyperinflation is on the horizon now and Without the ability to borrow or attract the necessary dollars, the economy will fall into a hyperinflationary spiral.

This is something they can't say publicly due to political and diplomatic sensitivities, but if I lived in the DR I would be preparing for an economic collapse and great social instability. The economic team in the DR is in total denial about the political and economic situation and international agencies are losing their patience with the government's inability to act or implement modest reforms.

Given all the negative press in the US about the Dominican Republic, a bailout is out of the question as people would see that as a bailout of the corrupt elite. The only card the Dominican government can play is the threat of a flotilla of yolas heading to the USA.
 
Last edited:
Oct 13, 2003
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1) The government is about to default on not only domestic but foreign paper as well. This will reduce DR-bonds to junk-bond status.

2) The government is still selling cerificates to the public in a misguided attempt to take money out of circulation (it is actually a trick to pay people back at a later stage with much devalued pesos).

3) The government is amassing funds for re-election so spending will not be cut anytime soon.

4) The government is due to pay back the principal on a number of domestic notes with additional printed money in the coming three months, so the amount of 'inorganicos' will keep growing.


Etc, etc, etc....

Hyperinflation is what happened in similar circumstances in South America, it doesn't surprise me at all.

The only question is when will the government fall, the public revolt or the military install a dictatorship?

MD
 

lhtown

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Jan 8, 2002
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I agree, if the current administration stays or if it is replaced by a similar one, the handwriting is on the wall. How it will play out is what we are waiting to see.