Golden Flow to Argentina

Most U.S. citizens smugly regard their dollar as the solidest, most invulnerable currency in the world. The somewhat shocking fact is that the U.S. dollar now sells at a discount in relation to practically every other currency in which there is still a free market. The cause is simple. For once in its long, protectionist history, the U.S. is buying from much of the rest of the world more than it is exporting in return. (Lend-Lease arms for the United Nations and exports to U.S. armed forces naturally do not affect the balance of trade in terms of foreign exchange.)

Last week Argentina underlined this state of international monetary affairs with two new fiscal decrees:

>The official rate of the peso used for "products not regularly exported" (e.g., novelties, furniture, etc.) was raised from 23.7-c- to 25.2-c- (the rate for "regular" exports like wheat and beef remains at 29.8-c-). This brought the "non-regular" peso into line with the booming "free" peso (the unregulated exchange now used for capital movements not connected with exports and imports).

> The Finance Ministry forbade movement into the country of all capital not destined for bona fide commercial uses: i.e., no more "hot money." U.S. bankers guessed that this decree would still allow foreigners to put their funds into "conservative" securities, such as Government and industrial bonds, but that investments in stocks would be carefully watched.

Both moves had the same base: Argentina, with her own 65-ship (382,000-ton) merchant marine, has been able to ship far more than the world is willing or able to send back to her. The U.S. in particular has cold-shouldered neutral Argentina. As a result Argentina's reserves of gold and foreign currency stood at 2.2 billion pesos at the end of 1942, by last week were up to 2.5 billion as gold and exchange flowed in to balance her export surplus. But an important fraction of this increase came from speculators--particularly European refugees wise in the ways of foreign exchange--anxious to convert from dollars (which Argentina cannot convert into U.S. goods) into pesos (which rose in terms of dollars).

Pure money movements (as distinguished from gold and currency moving to pay for goods) can be stopped by simple decree by a strong central bank. But so long as the underlying causes remain, all the fiscal curbs in the world will not stop Argentina's incoming golden flow.

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