Re: money in Mexican banks
Posted by Don Binkley on September 23, 2008, 11:02 am, in reply to "Re: money in Mexican banks"
Mexico's monetary policy is in disarray. Although Mexicans yearn for a sound peso, politicians from the three major parties and the technocrats who advise them have not been able to agree on a well defined exchange rate policy. The Banco de Mexico has allowed the peso to collapse during the last four presidential election periods and consequently has the distinction of being one the world's worst central banks (101st out of 108), judged on the basis of currency stability (Deane and Pringle, 1994, pp. 353-354). Given this, it is not surprising that the Banco has been unable to establish a transparent exchange rate policy. |
The Banco de Mexico's monetary policy remains incoherent. Indeed, the numbers contained in the Banco's monetary plan for 1996 are not plausible. The Banco assumes that real GDP and inflation will increase by 3 percent and 20.5 percent, respectively, and that the monetary base will increase by 28.6 percent during 1996. This implies that the demand for pesos will dramatically increase and that the velocity of money will dramatically decline to -5 percent. Given the historical record in Mexico, this is highly unlikely (I.D.E. A. and the London School of Economics, 1995). Indeed, for velocity to decline to -5 percent, inflation would have to decline from 53 percent in 1995 to around 20 percent in 1996, and more important, such a drop in inflation and a stable exchange rate would have to be the prevailing expectation. Such a shift in expectations is highly unlikely, particularly given the central bank's low level of credibility.
More can be found at this website: http://www.heritage.org/Research/LatinAmerica/HL552.cfm
I included the first 2 paragraphs to give you an idea of this foundation which is kinda to the economic RIGHTWING. However let's not forget, the peso was devaluated in the 80's and new currency issued. I am looking right now at a worthless 10,000 peso note.
I have been connected to mexican banks since I was a kid as my folks lived in the Federal DIstrict for 20 years and I was always getting introduced to bankers and where my folks savings was at in case of emergency, Well the banks were paying 13-15% interest and then the shit hit the fan and many gringos lost their life savings in pesos so beware. Don B
Oh yeah, Mexico got into trouble in the 90's with the banks buying up junk bonds and history repeats itself with US banks buying up junk mortgages!!!
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