Originally Posted by
Gaucho100K
OK.... so Im kinda' of confused.
When the Peso devalues, then the new rate will be higher than the current official rate of 9.XX that we have now. Could you please be so kind as to explain how that would make nominal prices more expensive than what they are now......?????
Second question(s)..... what is your definition of a bargain...? At what level of a synthetic exchange rate do you find Argentina to be a bargain, a good deal, just a normal deal, or expensive...?
I am all ears !!!!!! (actually all eyes)
My train of thought: for example, a steak dinner is about 300 pesos. At the official rate (9:1) that is about $33.30. At the blue rate (14:1) it is about $21.40. So you go out and get some blue pesos and eat the steak for $21.40 instead of $33.30.
When the government devalues the peso to 14:1, restaurants may increase their prices immediately to reflect the devaluation. Now, the steak dinner is priced at 466.67 peso. Since both the official and blue rate are now 14:1, you pay $33.30 regardless, not $21.40 anymore.
You lose.