Courtesy of Mish.
On Tuesday evening, Argentine President Cristina Fernández accused Juan Carlos Fábrega, head of Argentina’s central bank, of “provoking a devaluation of the peso“.
In response Head of Argentine Central Bank Quits.
Without naming Mr Fábrega directly, Ms Fernández accused the central bank during a nationwide address on Tuesday night of failing to control “manoeuvres” by banks and brokers to provoke a devaluation of the peso, and suggested that “privileged information” had been leaked.
After continual clashes over economic policy with Argentina’s economy minister Axel Kicillof, there are fears that Mr Fábrega’s departure may clear the way for greater government control over the central bank.
“Kicillof has increased his power, he will have a bigger say on monetary issues and we should expect an acceleration in the pace of the worsening of financial conditions,” said Miguel Kiguel, who runs the EconViews consultancy.
There was a sharp sell-off in the benchmark Merval stock index after Mr Fábrega’s departure was announced. But Luis Secco, an economist, argues that the central bank has been “absolutely subordinated” to the executive’s decisions “for a long time”.
Mr Fábrega leaves the central bank as annual inflation has climbed to around 40 per cent, and presided over huge monetary emission to finance a growing fiscal deficit, with negative real interest rates of about 20 per cent.
Argentine Central Bank “Absolutely Subordinated”
Inquiring minds may be seeking proof the central bank has been “absolutely subordinated for a long time“.
Here’s a chart that shows just that.
Argentine Peso vs. US Dollar
64% “Official” Decline Since July 2008…
