Elections bring out the silliness in everyoneeconomists are no exception. But when economists substitute their political ideas for economic analysis, the results are bad politics and bad economics. Such is the case with two recent open letters, signed by more than 300 economists, about the proposal of Argentine presidential candidate Javier Milei to scrap the Argentine peso and adopt the U.S. dollar as Argentinas official currency.
The first open letter, El espejismo de la dolarización (The Trap of Dollarization), was issued in mid September and signed by more than 200 Argentine economists. The second, The Dangers of Javier Mileis Economic Program in Argentina, was recently published by many news outlets for foreign consumption and signed by more than 100 economists, mostly non-Argentines. It was released just in time for Sundays final round of the presidential election. The letters are remarkable for their sloppy analysis.
Both letters acknowledge Argentinas current biggest problem: Inflation, by my measure, is currently at 239 percent per year, which is significantly higher than Argentinas official inflation measure of 142.7 percent per year. Neither letter identifies the cause of Argentinas inflation: The Central Bank of the Argentine Republic (BCRA) is creating money (M3) at a rate of 115 percent per year, far in excess of the publics demand. Consequently, neither letter presents a cure for Argentinas endemic inflation.