In his attack on zero deficit, President Javier Milei said he will promote a bill to jail officials who support the issuance of pesos to finance the government in power.
“The bill will define seigniorage as a criminal offense and in the event that the BCRA finances the exchequer, directly or indirectly, “The president of the BCRA, the board of directors, the president of the country and the officials who vote in favor would end up in prison”Milei spoke out in an interview on the TN signal.
The President announced that he will send this bill to Congress when he is “able to open the market and can do so.” build the foundations of the coin competition system, maintaining its weight“.
With this Milei has added some nuances to his dollarization plan Now he’s not talking about losing weight -currency that he had defined as “excrement” during the election campaign – nor to close the Central Bank.
“We will pass a law that essentially bans the issuing of money and When someone issues money, they will go to prison“Milei noted.
For economists, penalizing emissions can only be successful under very specific conditions.
For economist Aldo Abram, of the Libertad y Progreso Foundation, the reason behind the president’s words is that “those who issue money to finance the treasury deficit are criminals because they apply an inflationary tax when they are not authorized to collect taxes.”
From this perspective “it would be possible for a law to be passed that said this criminally punishable because they are applying a tax that was not approved by Congress. But it is also true that any Congress that wants to allow a government to issue issues to finance the deficit simply has to do so change the law and from then on he will never go to prison again.”
The economist Salvador Vitelli, of Romano Group, explains that the seigniorage to which Milei refers “can be understood through the transfer of income that the Central Bank receives when there is inflation due to the greater demand for real balances of the population or through a inflationary tax that “Is charged on the currency. In these cases the Treasury is not necessarily financed.”
“It seems to me that what Milei will address those who issue to directly finance the Treasury”, he pointed. And he gave as an example what happens in the United States, a country in which when they want to implement an expansionary policy “what they do is buy debt securities to put more dollars on the market, they don’t do it as we usually do here with temporary advances or profit transfer”.
Vitelli also underlined this despite the anti-emissions discourse “today it is issued for the purchase of foreign currency.” According to market estimates, since December the Central Bank has issued approximately 5 billion pesos to buy 8.3 billion dollars. “For this reason it seems to me that they will go further, penalizing emissions to directly finance the Treasury”, reinforces Vitelli.
Vitelli underlines that Milei’s words”In the short term they seem more like an expression of desire than something feasible, especially if it is a law. But in the medium term, with due consensus, it is something that can work.”
Even so, he notes that “it seems to me more like something to show, once again, to those on the ‘opposite sidewalk,’ than something politically feasible.”
Abraham also notes that “The moment this penal law weredollarized, it would cease to make sense, because the Central Bank would lose the ability to issue pesos.”
Abram, however, clarifies that now what the president is talking about is”free choice of currencieswhich will clearly imply that if the whole population wants to Dollarize, they will be able to Dollarize”, but not necessarily, as has happened in other countries. “At a certain exchange rate they will always be able to use the currency given to them. Whatever you want, yes assumes that the majority will use dollars, but if you wanted to have pesos you could have them, which leaves the possibility of transmitting to the Central.
Source: Clarin
