The creation of the E.U. countries such as Greece, Portugal, Italy, Ireland and Spain gained the ability to borrow money at all time low. As a result, this fiscally irresponsible countries have absurdly high levels of debt (see Chart 1). Due to the financial meltdown of 2008, these countries became highly insolvent, the costs of borrowing skyrocketed (above 10% for most of P.I.I.G.S.) and economic activity slowed down dramatically therefore, unemployment skyrocketed (see Chart 2). Despite that the E.C.B utilized most of its monetary power to increase confidence in the area, fiscal irresponsibility that these countries took is now an issue that not only the E.U. should be concerned about it but the United States too.
Author: Freddy Tovo
Beyond BRICS, a Financial Times blog, reported today that the black market exchange rate for dollars in Argentina reached an all-time high of US$1.00 = P7.54 pesos. As the article mentions, this black market for dollars surged in 2011 after Cristina Fernandez de Kirchner’s re-election. Once reelected, Mrs. Kirchner approved a ruling that only permitted the official purchase of dollars [by individuals] for holiday reasons. In addition, there is an extra 15% charge on all credit card purchases made abroad. Finally, she banned dollars as a currency to be utilized for savings.