38!!

[rubenpriego]

good thread!
I am wondering why people say that if Hipolito wins, dolar will raise a lot against peso. How is that? why you are so convinced about it??
On the other hand, looks like great for the ones earning dollars, but if dollar is higher, all imported items and food will increase obviously their prices in pesos, so I dont see any profit in this situation.
And what about euro? which are its expectations against peso? Maybe at 60 at the end of the year?
Cheers!

 

[AndyGriffith]

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.

Yes, I see your point. However, remember that the USD is the reserve currency, whereas the DOP and EUR are not. Now contrary to the entire world telling you that the USD is destined to the dustbin of history right at the moment, the fact remains that basic cost inputs are still priced in USD's, not DOP's or EUR's.

In terms of the leverage that the DR Gvt. gains by maintaining a non-convertible domestic currency. Unfortunately, the idea that debt can be issued indefinitely and then inflated out of meaningful size is a complete fallacy perpetrated by present day pseudo Keynsian theorists. Keynes never argued that expanding government deficits was a permanent solution to private sector reconciliation of debt excess and moral hazard (1944).

And let's be quite frank about this. If inflating your way out of deficits was such a great tool for leverage then what is the necessity for the DR Gvt. to impose radical new tax regimes that are gutting the nation's private sector. The reality is that for whatever export advantage that is gained (if any, as the world consumers are retrenching from massive lack of savings and excessive public and private debt levels), the domestic market shrinks as a result of the 'crowding out effect' perpetrated by governments.

There is a much better chance that the wipe out of the USD carry trade will enforce the austerity vs. relying on any government in the DR to begin the process of pairing down spending and deficits.

 

[Criss Colon]

"SOMETHING", Is "Going On" With The Exchange Rate!

If you check the newspapers for the "OFFICIAL" Exchange rate of DR pesos for US dollars,you can clearly see a "straight Line" for over a week! This does not happen. There is always an "Up" or a "Down" albeit small,on a daily basis. I believe that the Government/Banco Central is manipulating the rate ( MORE than usual,that is!) to keep inflation from becoming the main argument against their, and the "IMF's", new inflationary programs!
Watch and see. These measures can only keep things stable for so long, then reality forces a correction .That change will be a further devaluation of the DR peso! "GOOD"! :laugh:

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

 

[rubenpriego]

Devaluation of peso but going to the shops and having same peso prices??????

 

[donP]

3%

Devaluation of peso but going to the shops and having same peso prices??????

EVERYTHING is linked to the exchange rate.
An item that cost 10 pesos changes to 13 pesos overnight.
Mind you, that's only 3% by Dominican calculations... :classic:

donP

 

[DRob]

It was 35 two years ago, 36 last year, 37 a few months back.

I don't think that really qualifies as hyperinflation. Fun historical examples include post WWI Germany, Mugabe's Zimbabwe, and bank-scandal-ridden Argentina.

Odds are that the impact will be comparatively minimal. If Hippo does anything, he'll probably impose a "convertible" peso that is on par with the dollar, just like they do in Jamaica, the Bahamas, and Cuba, to name a few Caribbean countries.

That said the adjustment window will be tiny. Goods and services will be revalued appropriately. I suppose the real question is why people would re-elect someone who has a long record of poor performance, but for most folks, that would definitely be a case of the pot calling the kettle black.

Somehow, I have a sneaking suspicion that most expats who are there complaining will still be there in a few years, but will have found something new to complain about. In a backhanded way, I guess that means that the good still outweighs the bad, which is encouraging.

 

[Criss Colon]

You Either Have A Short Memory,Or Weren't Here During The Last "HIPOLITO"

"MIS"-Administration!
Peso "Sky Rocked" to 56 to one!
I have "confidence" that he can give us a "Repeat Performance"!

"LLEGO PaPa"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!:bandit::bandit::bandit:

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

"Oh!".. I forgot,you don't live in the DR! How's the economy in Atlanta??????????????????????????????
I live in the DR,soooooooooooooooooooo,I won't pretend to know about ATLANTA !!!!!!!!!!!!!!!!!!!!!!!

 

[windeguy]

It was 35 two years ago, 36 last year, 37 a few months back.

I don't think that really qualifies as hyperinflation. Fun historical examples include post WWI Germany, Mugabe's Zimbabwe, and bank-scandal-ridden Argentina.

Odds are that the impact will be comparatively minimal. If Hippo does anything, he'll probably impose a "convertible" peso that is on par with the dollar, just like they do in Jamaica, the Bahamas, and Cuba, to name a few Caribbean countries.

That said the adjustment window will be tiny. Goods and services will be revalued appropriately. I suppose the real question is why people would re-elect someone who has a long record of poor performance, but for most folks, that would definitely be a case of the pot calling the kettle black.

Somehow, I have a sneaking suspicion that most expats who are there complaining will still be there in a few years, but will have found something new to complain about. In a backhanded way, I guess that means that the good still outweighs the bad, which is encouraging.

You are making a huge presumption here. That presumption is that Hippo is intelligent enough to do as you suggested.

 

[MerengueDutchie]

Yes, I see your point. However, remember that the USD is the reserve currency, whereas the DOP and EUR are not. Now contrary to the entire world telling you that the USD is destined to the dustbin of history right at the moment, the fact remains that basic cost inputs are still priced in USD's, not DOP's or EUR's.

In terms of the leverage that the DR Gvt. gains by maintaining a non-convertible domestic currency. Unfortunately, the idea that debt can be issued indefinitely and then inflated out of meaningful size is a complete fallacy perpetrated by present day pseudo Keynsian theorists. Keynes never argued that expanding government deficits was a permanent solution to private sector reconciliation of debt excess and moral hazard (1944).

And let's be quite frank about this. If inflating your way out of deficits was such a great tool for leverage then what is the necessity for the DR Gvt. to impose radical new tax regimes that are gutting the nation's private sector. The reality is that for whatever export advantage that is gained (if any, as the world consumers are retrenching from massive lack of savings and excessive public and private debt levels), the domestic market shrinks as a result of the 'crowding out effect' perpetrated by governments.

There is a much better chance that the wipe out of the USD carry trade will enforce the austerity vs. relying on any government in the DR to begin the process of pairing down spending and deficits.

Andy,

Your points do have some merit, but let's see if I can agree with the conclusions drawn from them.

Let's take for our real world data the latest IMF outlook report http://www.imf.org/external/pubs/ft/scr/2011/cr1170.pdf and go over the arguments point for point:

1. Competetiveness. As can be seen on page 12 fig.4 top right-hand corner, the nominal exchange rate has dereceased over the last years, . Over 2000 till 2009 the nominal exchange rate has more than halved, Thus keeping comptetiveness on par. If the DR dollarises, this effect can no longer occur and competetiveness will suffer.

2. Exchange rate as debt leverage. Projected debt as percent of GDP eoy 2010 was 42.2% of which 21.1% was internally held. Taken in combination with the effect under 1 and assuming average maturity of 9 years then the DR govt has done exactly what I described in my example. This effect is of course not a cure-all but helps alleviate payments significantly. It is also exactly what the Obama govt is doing.

3. Wipe out of the US carry trade is out of the US hands, given the substantial holdings in Chinese, Japanese, Arabic and Euro hands. There is no horizon currently applicable for the US$ carry trade to stop.

Respectfully, I therefore do not agree with conclusions drawn from the points you made.

All the best,

MD

 

[greydread]

Historical Exchange Rates | OANDA

 

[DRob]

Windeguy,

It wasn't meant to be a presumption. I said if he did anything, which in and of itself is questionable. I do regularly appreciate your input, tho.

Wind bag (aka Colonic),

I was there during that time, I do recall what it was like, I spend quite a bit of non-touristy time in DR, and for a guy who doesn't think I should be making assumptions, you sure like to make a few about me. Shame, it's much better to be humbly correct than obnoxiously wrong. Maybe you'll learn that one day.

I'm not a meteorologist either, but that doesn't make me unqualified to realize when it's raining. As I stated in a different thread, the "Do you live here" argument is incredibly weak. I have a fair number of expat clients over there who have been in country for years, yet are blissfully clueless as to the happenings. As long as the beachfront view from the villa is nice, and their Presidentes are served cold by a hottie, they couldn't care less what El Presidente (past and future) is up to.

But you probably know this.

 

[Criss Colon]

Like I Said MANY Times Before;

Live here,eat here,work here,own property here,raise a family here,read the newspapers here,watch "CDN"here,drive here,shop here,orrrrrrrrrrrrrrrrrrrrrrr,"Shut The Phuck Up THERE!!!!!!!!!!

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

You Know,The "Gringo" with more time standing in line at BANCO RESERVAS than you have in the DR!

By-the-way,"FYI" it's raining here,"OH!" you MUST know that!:

"DRBOOB",you must mean "ATLANTABOOB"? Right?

"Expat Clients"??????????? Are you a "SANKY",or WHAT!
How can you possibly advise
Clients" here,when you have no idea what's going on here????????????????

 

[DRob]

"Fuzzy wuzzy wittle teddy bear," indeed....

I "counsel" them regarding their "trusts" and other estate planning "matters." The "world" is a lot bigger than "you" think, Criss. Even bigger than "your" "ego." And you don't know everything, nor should you presume to.

Playing "big bad @ss" on a computer, making simple-minded unsupported statements doesn't take you very far, especially when all you're contributing is arrogance and telling people to simply take it on your say-so. A number of expats on this site have disagreed with you on various topics. Which means that (perish the thought) there may be valid opinions out there other than your own.

That's a big lesson for today, so back on topic. I'm still waiting for you to point out where I was incorrect or unreasonable in my admitted speculation (as we are all effectively doing here). Please respond with something a bit better than "I LIVE here so my wild-ass guesses are better than everyone else's."

After you take a walk around the block, and lower your blood pressure a bit. Not good for the Colon, you know.

 

[RacerX]

OK, you dudes take it easy...I am worried about inflation seriously. If wages move with the cost of living then you have really gained nothing. And for the many people I know they think Mejia is the answer. I dont see how he can give away anymore of the store if the store is broke. All I see is more yolas and sankying. Even still, what happens to those who aspire to immigrate or have immigrated to Europe when Spain defaults as Greece and Portugal will eventually do? Explain that...

 

[Acira]

OK, you dudes take it easy...I am worried about inflation seriously. If wages move with the cost of living then you have really gained nothing. And for the many people I know they think Mejia is the answer. I dont see how he can give away anymore of the store if the store is broke. All I see is more yolas and sankying. Even still, what happens to those who aspire to immigrate or have immigrated to Europe when Spain defaults as Greece and Portugal will eventually do? Explain that...

Stay put wherever you are now? Its not only the DR, its not only Europe, its not only the USA, its the whole world...except for China maybe...

 

[RacerX]

I m not worrrying about myself. I planned on defaulting on everything I owned right before I died. Hahaha! And then mailing my ashes to the bank instead of the final check. Ha!

But I wonder about my friends here who have young children. Stuff like this can only make them more desperate.

 

[Criss Colon]

I,"DO" live here! Soooooooooooooooooooooooooooo,"MY",wildass guesses,"ARE",at least,better than YOURS"

When I was "working",so that "one day", ie. NOW,I could just relax,and "play" on the computer all day, I,"DIDN'T,play on the computer all day !
What's YOUR excuse???
Not too many,"TRUSTS" to "COUNSEL" on these days?????

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

AND, you have "GREATLY",underestimated the size of my EGO !!!!!!!!!!!!!!!!!

 

[rubenpriego]

So finally, if dollar raising, import items prices raising too, we dont get anything good then ... just same ...
well, at least dominican items (fruit, meat, furniture) will be a bit cheaper then, for the ones earning dollars or euros ...
How nice to get a lechosa there for just 1/5 of European price! hahahahah

 

[AndyGriffith]

So finally, if dollar raising, import items prices raising too, we dont get anything good then ... just same ...
well, at least dominican items (fruit, meat, furniture) will be a bit cheaper then, for the ones earning dollars or euros ...
How nice to get a lechosa there for just 1/5 of European price! hahahahah

Here's the kicker- With a population that has been so entirely conditioned with constant out-of-control spending and deficits, thus its subsequent devaluation of the home currency, any deviation in a deflationary spiral would have very deep and profound implications. The nation, as many other nations the same in this world, is not prepared for a period of falling prices. A complete collapse in real estate and other areas would be a foreign anomaly to the general populace at this point in time and that is most likely why it will come to pass. Can you imagine if the DOP went back to 18 to 1 USD? Many of the so called wealthy in the nation would be decimated as costs of debts on their books soars. The use of debt in DR is pervasive and their are real risks when savings has been thrown out the window with the bath water.

 

[Frank the Tank]

I don't a whole lot of economic mumbo jumbo but it would seem to me that as the dollar weakens globally, it makes sense that the peso would react accordingly. I think that within a year the peso will settle in between 40-42 per US Dollar.