I’ve purchased your book, but have not read it yet. I enjoy your insight and stories from your
experience in Argentina and look forward to reading your book.
lot of post-crash purchases of large items, like a house or car, are primarily
in US dollars cash. Before the crash in
2001 did people use mortgage loans or cars loans? If a loan was written in 1999 in Argentine
dollars were the loan payments still accepted in the debased currency because
of the contract? Did the banks or
lenders just write off the loans or did they try to force payment in US dollars
or Euros? Did the government force loans
to be forgiven?
contract. I think the US will be seeing
similar problems in the near future and I’d like an idea of what it may look
like to carry any debt. The US situation
may not play out like Argentina, but I wouldn’t put it passed US officials to
look at other countries handling of these issues.
reply if you have one, but please do not publish my e-mail address.
collapse or significant economic crisis like the world is seeing now the importance
of correct contracting becomes even more significant. On one side frauds become
more common and you really have to cover your back from any possible legal
loophole, on the other the rules by which you do business chance constantly in
times of turmoil so you have to keep up to date on everything.
have to keep this in mind. When doing a two year contract we would adjust for
inflation, the second year price being 20 or 25% higher than the first
one. Some people did contracts that
included an increase if inflation reached say, 10% in 12 months (just an
example) but these lost their meaning as soon as the government started cooking
the books. Officially the inflation may be 4% a year, but on the street the
real inflation is 25% per year. When such a situation presents itself your
contracts can hardly go along the lines of official figures because they don’t
mean much at all anymore so you have to be careful.
not like in USA, but some people that owed money in USD did benefit from the
new rules, in many cases paying back just a fraction of what they owed. In
others, especially for deals between individuals, either an in between point
was agreed or they went to the justice to settle the matter. In general yes,
you benefited if you had to pay a loan in USd. When it came to banks you had to
repay at an official 1.4 rate, then a little higher, but always less than the street
price. Paying back at a 1.4 peso to dollar rate is actually a great deal when
the street price is 3 pesos per Usd. Why
did banks allow this? Because on the other hand they were being allowed by the government
to steal everyone’s Usd savings, taking away basically 75% of people’s savings,
with a similarly low conversion rate during the “pesification” period (turning
people’s Usd savings to pesos). Getting
in debt to take advantage of such circumstances is still a high risk deal. If
the timing isn’t just right you’re just losing money so I would recommend
people staying out of debt as much as possible. I avoid debt that piles up in a
snowball effect. Buying a cell phone, smart TV, etc, all in monthly payments is
an awful idea under most circumstances. In a free falling economy like
Argentina with a 25% inflation it is a pretty safe bet, that’s why people don’t
think much of it and jump right in. The TV is going to cost 50% more by the end
of the year anyway, but for normal countries getting into debt isn’t recommended.
Having said this, an especially for people thinking of buying real estate, if
you find the right property at a low enough price it might be worth getting
into debt. In many places property has reached an all time low.