- Thread starter Hillbilly
- Start date
38!!
You may want to re-read the thread, it will cost more amigo, if goods/services are priced in RD Pesos.
I like that "Dolerization" idea!
I was NEVER good at math anyway!
"LLEGO PaPa"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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I was NEVER good at math anyway!
"LLEGO PaPa"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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Major reason the Central Bank has maintained the dollar stable for so long, the Dollar was devaluing thus making it easier for the CB to maintain it at 36-37, while in reality we were going down..we just were not feeling it as the bulk of the DR's import comes from the USA.
That is correct Pichardo, The DR will have to dollarize before things get out of hand. That is just what has to be done and soon.
Well the same can be said before the beginnings of the 2007-08' decline. The fact is the world is operating on a USD carry trade that is distorting asset prices. In essence, the political will to continue a zero interest rate policy indefinitely is going to run its course-Read about G William Miller for reference. As the new Volcker emerges, the USD carry trade is going to get hammered. It would be better for the DR to dollarize and benefit from a stabilization of its monetary affairs and cost inputs going forward.
Let's not get ahead of ourselves. Dollarization has its costs. When fiscal, monetary and economic determinations are made abroad and the DR populace is suffering as a result, they will demand a return to the old peso system. Also, to dollarize is not a freebie. The dollars have to come from somewhere and that has a price. If the central bank begins exchanging dollars for pesos, they will do so at a rate that will crush the exchanger namely you and me. Also, all bank accounts will get hammered just the same. So, instead of exchanging at 39 or 40 pesos for a dollar, they could hammer you with an exchange rate of 100 to 1. You would effectively pay for dollarization. Lastly, countries like the DR who are dollar strapped might not even be able to effectively dollarize without punishing its citizens severely in the form of massive inflation, loss of purchasing power, massive loans, etc.
I will stick with the idea that staying on the $RD peso is going to be a lot worse than dollarizing. Main reason is the terrific failure of the DR Gvt. to limit their precarious spending. And a 17% minimum wage increase on top of a 17% increase in electricity taxes and other new tax regimes to boot in the paquete fiscal. Poof go the jobs, wages and business creation. If just merely increasing the rate of money were a guaranteed solution to governments gobbling up the private sector with their out-of-control borrowing/spending, than nations such as Zimbabwe would be the strongest economy in the world. Well that just is not the case for the most obvious of reasons.
I anticipate the dollar will be in the low 40's even before Hippo takes possession if he wins. Leonel and his team, having nothing to lose at this point, will accelerate the rate at which they have been borrowing and printing money to try to finish up their metros and pay for their "retirement plans" before they head out the door.
The,"LOW40s", You MUST Be JOKING????
That is about a year and a half from now,Aug. 2013 when Hipolito WILL be inaugurated! The DR peso will be in the "low 40s" before December,or early next year! Should be 80 to 1 after Hipolotos first year!
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That is about a year and a half from now,Aug. 2013 when Hipolito WILL be inaugurated! The DR peso will be in the "low 40s" before December,or early next year! Should be 80 to 1 after Hipolotos first year!
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That is about a year and a half from now,Aug. 2013 when Hipolito WILL be inaugurated! The DR peso will be in the "low 40s" before December,or early next year! Should be 80 to 1 after Hipolotos first year!
I thought the presidential election in the DR is on May 2012! So, if "El Calvo" wins he will be inaugurated on August 2012 NOT 2013.
so wait
I read and see everything going on down there.. Must say i am not in the complete loop... But with that said with alll the so called building of the infristructure, they make it seem like its a carribean Dubai... And what are the odds that the hippo guy wins again? or are the DR1 people the only ones who have a clue...
I read and see everything going on down there.. Must say i am not in the complete loop... But with that said with alll the so called building of the infristructure, they make it seem like its a carribean Dubai... And what are the odds that the hippo guy wins again? or are the DR1 people the only ones who have a clue...
"My Bad!"
Just yet ANOTHER, "Senior Moment"!!
Make that, Aug. 2012!!
But then again,Dominicans are ALWAYS late!
CCC------------ Damn !, I ran out of "Cs"!!!!!!!!!!!!!!!
Just yet ANOTHER, "Senior Moment"!!
Make that, Aug. 2012!!
But then again,Dominicans are ALWAYS late!
CCC------------ Damn !, I ran out of "Cs"!!!!!!!!!!!!!!!
They cannot dollarize the economy -
1. They have no control over the dollar exchange rate thus limiting their ability to inflate or deflate the competitiveness of the Dr economy, by for instance not fully compensating labour for fluctuations in the dollar/peso rate. Look at what happened in Greece and other weaker Euro countries. When they entered the euro, they lost control over their main competitive edge; devaluation of their currencies to maintian cheap exports.
2. DR domestic bonds in dollars would be payable in dollars which the DR cannot print, thus converting the DR debt in a mountain of non-inflation affected debt (at least by the DR). Because the inflation effect is always a big issue in paying off any domestic debt, the govt would loos this leverage too. For instance, if a DR domestic bond of 100,000 pesos would be issued at a 25 parity rate (4,000 US) but paid up at a 50 (2,000 US) parity rate, the govt effectively gains the difference and would only pay half of its debt, compensated of course for intra-term inflationary effects in dollar purchasing power. The reverse structure holds true for buying oil on long-term contracts.
Dollarization imo would be the immediate death knell for the DR, both on an industrial and govt debt level.
1. They have no control over the dollar exchange rate thus limiting their ability to inflate or deflate the competitiveness of the Dr economy, by for instance not fully compensating labour for fluctuations in the dollar/peso rate. Look at what happened in Greece and other weaker Euro countries. When they entered the euro, they lost control over their main competitive edge; devaluation of their currencies to maintian cheap exports.
2. DR domestic bonds in dollars would be payable in dollars which the DR cannot print, thus converting the DR debt in a mountain of non-inflation affected debt (at least by the DR). Because the inflation effect is always a big issue in paying off any domestic debt, the govt would loos this leverage too. For instance, if a DR domestic bond of 100,000 pesos would be issued at a 25 parity rate (4,000 US) but paid up at a 50 (2,000 US) parity rate, the govt effectively gains the difference and would only pay half of its debt, compensated of course for intra-term inflationary effects in dollar purchasing power. The reverse structure holds true for buying oil on long-term contracts.
Dollarization imo would be the immediate death knell for the DR, both on an industrial and govt debt level.