Market Reviews

Argentina may switch to the US dollar



Argentina may become the first country in a long time to switch to the US dollar.

When inflation goes off scale beyond a critical level, the country’s economy cannot get out of the debt hole, then in such cases a default is declared with a transition to a new or world settlement currency – the US dollar.

In simple words, the country needs a reboot, and it is sold or colonized by a more economically powerful country with new investments, up to changing the constitution and adopting a new legal order.

Such a transition to another currency is not the first in world economic history.

Ecuador and Zimbabwe switched to the US dollar due to high inflation.

In Ecuador, it reached 91% at the time of the transition, and it took the country four years to bring it to 1.9%.

In Zimbabwe, inflation reached 79.6 billion percent per month in 2008, but already in 2009 the country moved to annual deflation of 7.7%.

At the same time, the use of the dollar did not save the country from a new round of price increases that began in 2018. Then inflation accelerated 12 times.

The Zimbabwean government even tried to phase out the dollar in 2019, but ended up extending its use until 2030. In Argentina, inflation was 142.7% per annum in October.