Thursday , October 21 2021

From the Lebac bomb to Leliq: Dinamiter of the Central Bank?



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In medium-sized developing countries, important functions are Central Bank is ensuring that payment instruments and credit are in line with the expansion of the real economy and, at the same time, appreciate the volume of international reserves protect local currency where the method of payment and credit is expressed against global financial market volatility. Currency and credit for the domestic market and reserve stock I will moderate the external flow.

Since the beginning of his management the national government stepped back, signed by commercial and financial opening into the world in tension, freeing up currency movements and dominance financial income through instruments issued by regulatory agencies that ensure a positive real interest rate in connection with the evolution of exchange rates. High interest rates, free currency movements and large financial income in dollars. Explosive cocktails if there is one, especially in the world high protectionism, the crisis of multilateralism and restrictions on international liquidity.

Sturzenegger, BCRA's first president, dedicated to expanding the issuance of Central Bank (LEBAC) letters on the open market at levels that exceed the monetary base. When the external crisis began, Caputo used the first IMF disbursement of US $ 15,000 million to facilitate the cancellation of most of the LEBAC that had been issued by its predecessor and now Sandleris has used half of the second disbursement from multilateral agents from U $ S 5,631 million to complete LEBAC payments that are outside the financial system. The rest of the letters must be sent to the bank and become a liquidity letter or LELIQ.

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Government celebrating the deactivation of financial instrument pumps the speculative that he makes with his monetary policy, without measuring what the price is U $ S 17,700 million in debt with the IMF As a replacement painful adjustment plus the loss of international reserves is estimated at US $ 10,000 million.

This tour is important to know, in principle, whether the Central Bank's policies promote financial recovery and capital outflows have been completed and, second, if the stability of the exchange between sustainable floating bands.

Said in the previous columnthat the Alliance changed even though it had reached sanctions from the National Adjustment Budget, a favorable vote from the IMF board for the extension of the original agreement and certain "pax" exchanges, cannot compose private offers on foreign currencies. Assessing the behavior of international reserves, it is known that the Sandleris visited the management body with a stock of US $ 49.568 million and until November 16, it was US $ 52,198 million. The increase was US $ 2,630 million. But if the second IMF disbursement of US $ 5,631 million is negated, the loss of reserves in 38 working days is US $ 3,001 million. Capital drainage continues.

X-ray international backup behavior, let's see what happens with weights, the situation described in the following table:

Analyze the policies implemented by the new BCRA authorities, coinciding with Zero Double Planthe monetary base fell by -6.7% while loans to the Private Sector fell by -2.2%. Limiting monetary and credit policies deepen the ongoing recession.

As a replacement, Liquidity Letters (LELIQ) that replaced LEBAC increased by 110.9%, spent $ 355,460 million in just one and a half months with prices starting at around 73% and the final deduction was 10 points below that limit. Changes in the private sector loan assets of the bank due to the very high level of liquidity letters financed by the growth of public long-term deposits in the Ch financial system of $ 190.758 million, 24.7% also in several months and half

Wider growth of monetary aggregate (M3) is then explained by 5%, despite restrictions on monetary policy. All weights are enclosed in the bank with a letter and certificate of deposit.

Sandleris contracted the private monetary and credit base, but at the same time Exponentially expanding speculative financial instruments, concentrating the effects of this policy on the banking system. These do not "loose" the peso to the market to put pressure on international reserves, but "paper" letters of banks with high prices that finance them. it forced the capture of deposits at a high level too. The paper is filled by financial institutions funded by deposits, whose owners see the monthly renewal time of how many dollars are quoted and what interest rates are offered.

There is no more "super monthly fees" with maturity LEBAC that makes the market in tension, but there is overlap in the tension between interest rates / devaluations, where if the first running a bank can be very complicated.

The Central Bank disarms the "LEBAC bomb" but rearms the "LELIQ bomb". The difference is that the last is all in the bank.

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