Saturday January 23, 2021
  • Venezuela
  • Mexico
  • Colombia
  • Chile
  • Brazil
  • Argentina
  • Podcast
Versión Español
PanAm Post
  • Home
  • Regions
    • South America
    • North America
    • Central America
    • Caribbean
  • Politics
  • Economics
  • Opinion
  • Podcast
  • Authors
  • Contact
No Result
View All Result
  • Home
  • Regions
    • South America
    • North America
    • Central America
    • Caribbean
  • Politics
  • Economics
  • Opinion
  • Podcast
  • Authors
  • Contact
No Result
View All Result
PanAm Post
No Result
View All Result

Home » “It’s Time For The Colombian Government to Dollarize”: Steve Hanke, Inflation Expert

“It’s Time For The Colombian Government to Dollarize”: Steve Hanke, Inflation Expert

Vanessa Vallejo by Vanessa Vallejo
August 16, 2019

0
0
SHARES
0
VIEWS
FacebookTwitterTelegramWhatsapp
“The world operates on a dollar standard. It’s as simple as that” (PanAm Post photo montage).

Spanish – “The Colombian peso is in trouble again. It’s time for the government to officially give up the peso and give Colombians what they want: dollars,” the renowned economist Steve Hanke wrote on Twitter a few days ago. The Johns Hopkins University professor has given Colombia something to talk about with his proposal to dollarize the economy.

#Colombia’s peso is in trouble, again. Against the US #dollar, the #peso has shed 20% of its value in a little more than a year & 7% in the last month. It’s time for the govt. to officially dump the peso and give Colombians what they want: the US dollar.https://t.co/p2BT8W8ETv

— Prof. Steve Hanke (@steve_hanke) August 11, 2019

RelatedArticles

Curiosities and Mysteries of the White House (Part 1/2)

Woman Who Accused Biden of Sexual Abuse Says Watching Him Take Office Was a “Nightmare”

January 22, 2021
Curiosities and Mysteries of the White House (Part 1/2)

With Trump out, Maduro Frontman Manages to Get House Arrest in Cape Verde

January 22, 2021

As Professor Hanke states, in just over a year, the Colombian peso has lost 20% of its value against the dollar. In the last month alone it depreciated 7%. Further, if you look at the performance of the peso since August 2014 to the present, the Colombian currency has depreciated 45% of its value against the U.S. currency.

In Colombia, as in any country, some sectors benefit from the devaluation of the peso. Thus, they push for the currency to lose value, even though this trend harms most Colombians. However, if depreciation is the key to making a country rich, why aren’t Venezuela or Zimbabwe, with their incredibly devalued currencies, prosperous countries?

The reality is that a country’s wealth does not come from devaluing its currency. Money is only a means of exchange, and prosperity comes from production; from creating value. Devaluation allows companies that are not competitive and do not satisfy international buyers to continue operating without having to restructure.

What advocates of monetary interventionism actually propose is to increase exports, not by increasing productivity (which would be appropriate and correct practice), but through devaluation.

Now, intervening to lower the value of the currency may increase exports at first, but sooner than later, those companies that are uncompetitive will have to reinvent themselves or go bankrupt. Devaluing is so easy that soon there will be a country that will lower prices more than we do.

The devaluation benefits a few business clusters that are unwilling to compete. The costs are borne by their workers who experience diminished purchasing power. Moreover, the workers will have to go without buying imported products that become very expensive following currency devaluation.

Professor Steve Hanke recognizes the poor performance of the Colombian peso and reopens the discussion around the need to dollarize the country’s economy.

The PanAm Post asked the economist the reason behind the poor performance of the Colombian peso. His response was the following:

The Colombian peso has shed 20% of its value in a little more than a year because Colombians don’t trust the peso. When they look ahead, they feel much more comfortable holding dollars than pesos. So, they dump their pesos and exchange them for dollars. Furthermore, the US dollar is the world’s international currency. Most commodities and even many manufactured goods are invoiced and priced in dollars. The world works on a dollar standard. It’s as simple as that.

Professor Hanke was also asked what his message would be for those sectors that persist in defending devaluation:

Those who believe that you can devalue your way to competitiveness and prosperity ignore all economic facts and evidence. If devaluation led to competitiveness and prosperity, Latin America would be the most prosperous region in the world.

So, what country is the most competitive and prosperous? It is Switzerland. It is because, since WWI, the Swiss franc has been the strongest currency in the world, appreciating one percent per year in real inflation-adjusted terms. 

This means that businesses in Switzerland do not embrace the devaluation fallacy. They know that they must manufacture superior products and do so in a cost-effective way to remain competitive. That’s precisely what they do, and the result is a steady stream of trade surpluses. In short, those who embrace the weak currency idea are merely not looking at the facts. Instead, they are talking nonsense.

Professor Hanke is a Professor of Applied Economics at the Johns Hopkins University in Baltimore and is one of the world’s experts on measuring and stopping hyperinflations.

Previous Post

Chronicle of a Death Foretold: The Nine Failed Dialogues in Venezuela

Next Post

Argentina’s Crisis Has Already Impacted Brazil And Venezuela

Vanessa Vallejo

Vanessa Vallejo

Vanessa Vallejo is a Colombian economist, columnist, and classical liberal activist. She is a member of Colombia's Libertarian Movement.

Related Posts

Curiosities and Mysteries of the White House (Part 1/2)
Elections

Woman Who Accused Biden of Sexual Abuse Says Watching Him Take Office Was a “Nightmare”

January 22, 2021
Curiosities and Mysteries of the White House (Part 1/2)
News

With Trump out, Maduro Frontman Manages to Get House Arrest in Cape Verde

January 22, 2021
Which Donald Trump policies Should Joe Biden Continue?
Analysis

Which Donald Trump policies Should Joe Biden Continue?

January 21, 2021
Biden Inauguration: Pandemic Show in a Fortified City
Policy

500 Children’s Lives at Risk due to Hospital Closure in Venezuela

January 20, 2021
Biden Inauguration: Pandemic Show in a Fortified City
Argentina

How the San Juan Earthquake Felt in Buenos Aires Triggered Peronism

January 20, 2021
Kirchnerism, Determined to Destroy the Argentine Real Estate Market
International Relations

Rocky Start to Biden-AMLO Relationship

January 19, 2021
Next Post
Argentina’s Crisis, Brazil, Venezuela

Argentina’s Crisis Has Already Impacted Brazil And Venezuela

Discussion about this post

Subscribe free and never miss another breaking story

  • Venezuela
  • Mexico
  • Colombia
  • Chile
  • Brazil
  • Argentina
  • Podcast

© 2020 PanAm Post - Design & Develop by NEW DREAM GLOBAL CORP. - Privacy policy

No Result
View All Result
  • Home
  • Regions
    • South America
    • North America
    • Central America
    • Caribbean
  • Politics
  • Economics
  • Opinion
  • Podcast
  • Authors
  • Contact

© 2020 PanAm Post - Design & Develop by NEW DREAM GLOBAL CORP. - Privacy policy

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. Privacy and Cookie Policy.