#LEBBASES 18: what happens if the changes become fixed?

We continue with Claudio Borghi's #Lebbasi course, which aims to create awareness and a widespread economic knowledge base, so that you will no longer be fooled by TV.

In this episode we move on to consider the case in which a country renounces exchange rate flexibility: in this case, economic imbalances can no longer be corrected by currency devaluations and revaluations and have repercussions on the real economy. this means closure of factories, unemployment, economic crisis and default. ,

For example, Argentina in the nineties decided to tie itself to the dollar. However, the Argentine economy could not compete with that of the USA, and gradually lost its competitiveness. Eventually unemployment and the economic crisis led to the breakdown of the Peg with the dollar and a violent flare-up of devaluation that compensated for the entire decade, but also caused severe imbalances and made the country go into default also because the debt was all issued in dollars.

Then the Italy of the EMS, ie fixed exchange rates with other European countries, mark in the lead. Also in this case it would have been enough to read the economic data to understand that things were not going well at all, and these data were read by Soros, who forced the crisis on the lira, burning up the bank of Italy's currency reserves, making it that Amato, in order to “rebuild credibility”, snatch current accounts… In short, the exchange rate, when it is forcibly blocked, causes severe economic imbalances.

We thank Inreverent

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The article #LEBBASI 18: what happens if the changes become fixed? comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/lebbasi-18-che-succede-se-i-cambi-diventano-fissi/ on Thu, 20 Aug 2020 06:00:45 +0000.