a thread in which ilx interprets economics and finance, sometimes linen by linen*, and disagrees a lot (probably)

there are other 'capitalist types'

my next person or image, is a (more or less invented) Syrian merchant in Cádiz, standing on a typical Gaditana tower each morning, spying for news of the ships they'd invested in or insured.

https://www.espanaguide.com/images/cadiz/torre-tavira/torres-de-cadiz.jpg

The investment of capital is the investment of your capital in a risky enterprise. The higher the risk, the more likely you will lose your money, the higher the return should your ship come home. Insurance enabled the spreading of that risk, and provoked people to speculate and travel beyond their home. This ofc eventually led to colonialism, but I'm not clear the mechanism by which you refuse a person making a buck, other than by insulating your realm.

Break to cite a curiously oracular utterance by JM Keynes:

The premium we pay the insurance company is only one of many certain costs we incur in order to avoid the possibility of a larger, uncertain loss, and we go to great lengths to protect ourselves from the consequences of being wrong. Keynes once asked, “[Why] should anyone outside a lunatic asylum wish to hold money as a store of wealth?” His answer: “The possession of actual money lulls our disquietude; and the premium we require to make us part with money is the measure of our disquietude.”

Bernstein, Peter L.. Against the Gods (pp. 275-276). Wiley. Kindle Edition.

Maybe I'm skipping, because inherent in this is the notion of trust. A remarkable invention is the promissory note, an early version of the bank note, whereby its very existence assures the possessor that should it be required they will be paid the sum represented. The bedrock of trade and of banking is that you do not need to carry a sum in goods around with you in order to transfer wealth. The ability to carry out transactions but at a distance is, again, a remarkable invention. But at a distance doesn't just require trust in people or institutions you do not know, but also the fates - the storms on the sea, the barbary corsairs, the sunk with all hands and vanished without a trace.

However, without these structures of financial trust 'at a distance' you are left with the world represented in Diego Gambatta's The Codes of the Underworld, or also explored in Dan Davies' book on fraud, Lying for Money – if you don't have trust relationships at a distance, you are heavily reliant on familial and local relationships (such as the mafia). the extension of trust beyond personal relationships is a significant capability of that original capitalist urge. power and wealth remains tightly controlled in a circle of familiarity.

more wine.

the big problem is the management of externalities. what happens when the reward is available to one person, but the risk is carried by others? A simple example of externalities would be driving - the driver has the reward of getting from a to b at a speed and level of comfort that they enjoy. the pollution their car emits while doing so is borne by the people who they pass on their journey. They get the reward, but do not bear the risk.

in my examples of the 'exciting and speculative wonders of capitalism' the risk and the reward is borne by the same group of people.

2008 and the global financial crisis, followed by the bailout was this model on a huge scale. High risk taking bankers got the reward, society bore the risk to a massive degree.

so, if you can't stop capitalism with the muleteer, or the merchant, when does this all become so out-of-control that *someone or something* needs to draw a line? I think we're really talking about national governments here, and the birth of constitutional liberalism.

Governments, by one definition, are there to manage problems of co-ordination and externalities.

This is the capitalist, liberal, democratic mode.

But is it sufficient? I'm an instinctive social democrat - I don't like the trade-offs in freedom you get with communism - of the loss of 'spending on your balls what you earn by your pen' to quote byron, but 2008 has to tell us it's not at all clear that social democracy is capable of balancing the interests of the wealth and capital owning classes with those of the wage earning classes (which btw goes v high up the salary scale - as modern marxists like Erik Olin Wright have said, this very much includes middle classes.

none of this is helping this thread i know. and i hope a load of people come along and demolish my pub handwaving here.

reconsider communism

my basic mode is that all people deserve good quality of four things
housing
transport and other communications generally (ie including broadband)
healthcare
education

and work or sufficient welfare to lead civilised within whatever definition you like of civilised there.

i think countries are sufficiently wealthy to achieve that, so my preference is socialism over communism. but i think speculative capitalism has a place as long as the risk is borne by the risk takers.

n my examples of the 'exciting and speculative wonders of capitalism' the risk and the reward is borne by the same group of people.

Maybe I missed something, but what about all the sailors who died on those boats? I'm also wondering where transatlantic slavery and settler colonialism fit in to these stories.

sorry, this is a really unhelpful tangent, and it *really* wouldnt be helpful to go down a “preferences of economic distribution” route. but i am fascinated by capitalism as a mode of human being, and don’t think it’s easy or even desirable to prohibit, though the extent to which it should be regulated or canalised is definitely an urgent question.

transatlantic slavery, colonialism and sailors drowning are ofc all part of it - essentially they are again externalities, where other people bore the risk of indivual’s reward. that sounds morally dry. i’m not defending it. but i’m not sure what process or desirable form of regulation could have prevented it prior to democratic or popular institutions. and even then, there is no sign that democratic or popular institutions on the national level desire to prevent it.

im speaking in purely economic terms. morally many of the consequences are foul. the desire to trade over borders is not inherently evil tho.

god i’m posting waaaay beyond courtesy or utility here, apologies. i dislike corporatism and financialisation, public private partnerships and other forms of “high finance knowledge at the expense of everyday living” intensely. but the history and value of the market remains interesting.

I don't understand most of this thread because it's econ but capitalism isn't an inevitable natural phenomenon or transhistorical expression of human nature it has a specific history

my biggest problem with social democracy is the nationalism which in practice seems to preclude international solidarity due to demand for border controls and reliance on colonial/neocolonial extraction to fund welfare states (which always seem to end up being broken down by capital anyway)

i think i agree with both of those points.

my intention, if i had a clear intention in those rambling posts, was to suggest that the foundations of some of the opaque terminologies and transactional processes that exist around us now are fascinating, absolutely not inevitable, and are effectively technical *inventions* based on trust and risk, really coming back to mark s' box of quality street. they exist for a reason, and it's hard to consider how they might not exist, without significantly constraining a natural desire for exchange - that creation of value cited upthread.

it is not - just in case it isn't clear - a case of moral advocacy. just one of fascination.

That makes sense and to be sure, lots of marxists are equally obsessed with the origins of capitalism.

I find early trade history that excludes Europe especially interesting (e.g., Indian Ocean trade routes in antiquity). I would be into one that detailed pre-1492 american history

i was watching some Tiktok recently (lol) where somebody was "explaining banks" in a way that i have encountered before, mainly just after the financial crisis of 2007/8, where the structuring argument is that governments don't create money, banks create it out of thin air. i think that is actually right as far as it goes but then it's inevitable that the person saying this will then start talking about how the City of London is "not actually in the United Kingdom" and i start questioning everything they've said but i think the kernel is true, that banks create money out of thin air every time somebody takes out a mortgage. they've extracted a promise from you, and gotten you to write it down in contractual form, that you will pay them a certain amount over a certain number of years, and that promise is worth something, it has a very definable value, and can then be traded and sold to other entities as if it were a barrel of oil or a sack of fish. again i'd heard this stuff before but it helps hearing it again to understand it. the promise becomes a tradeable asset.

the other thing this guy said which kind of blew my mind was that you don't deposit money in a bank. the word "deposit" has no legal meaning. when your paycheck lands into your bank account what you're actually doing, legally, is loaning the bank money. and you can ask them to make good on that loan at any time, theoretically. (by "withdrawing".) they pay you interest on that loan. at an extremely pitiful rate, often something like 0.75%. but guess how much interest they want if they loan YOU money though, eh??

xp Rob, the new Graeber and Wengrow book is interesting and persuasive about the many means *other than* trade by which goods circulated in pre-Colombian america. Games of chance were very popular, especially among women!

if you don't have trust relationships at a distance, you are heavily reliant on familial and local relationships (such as the mafia). the extension of trust beyond personal relationships is a significant capability of that original capitalist urge. power and wealth remains tightly controlled in a circle of familiarity

I wonder if there are any good books on how "capitalism" works in criminal enterprises. I imagine there is very little trust involved, and if someone breaks their end of a deal, the only recourse is violence. A judicial system that enforces contracts seems one of the necessary underpinnings of any capitalist system of sufficient scale.

the other thing this guy said which kind of blew my mind was that you don't deposit money in a bank. the word "deposit" has no legal meaning. when your paycheck lands into your bank account what you're actually doing, legally, is loaning the bank money. and you can ask them to make good on that loan at any time, theoretically. (by "withdrawing".) they pay you interest on that loan. at an extremely pitiful rate, often something like 0.75%. but guess how much interest they want if they loan YOU money though, eh??

― Tracer Hand,

Hence why I safely deposit under my mattress. When my paycheck goes in, I lend the mattress money.

xp Rob, the new Graeber and Wengrow book is interesting and persuasive about the many means *other than* trade by which goods circulated in pre-Colombian america. Games of chance were very popular, especially among women!

― My name is Mike Cyclops. I work for (bernard snowy), Tuesday, October 25, 2022 8:04 PM (two days ago)

thanks! I was already planning on reading that eventually, so that's great to know

can't read all the tl;dr posts itt but i'm currently in my last year (give or take) of a phd in economics and if anyone wants to ask questions about topics they are confused about i can try my best to answer them. i didn't specialize in finance or monetary areas so i don't have any particular insight to some of the current discussions, but it may be useful to get a perspective that is a bit more "mainstream" than the other povs in this thread (read braudel/graber, watch tiktok, consider communism, etc). i only check ilx 1-2 times per week but will keep an eye on this thread

I think I'd rather read anyone else in this thread other than a complete fucking tool like thee!

?

no idea who you are + don't recall ever interacting, sorry

i like all the posters itt fwiw

sorry probably harsh, but I won't be asking you any questions.

I read your post as very contemptuous of the thread on my first read, but it was probably an overreaction

this thread was started because pinefox was asking questions about economics/finance concepts in the ILB thread

The (S)word in the Autumn Stone: What Are You Reading, Fall 2022?

most people itt get their econ from popular journalism and/or more left-heterodox writers. if people want an inside pov on the mainstream academic econ take on various issues, i'd be happy to help try and give it

didn't mean to be presumptuous that people want to hear my opinion, just offering in the spirit in which the thread was started

xp- not intended contemptuous. i was mostly just teasing fizzles with the tl;dr comment

when your paycheck lands into your bank account what you're actually doing, legally, is loaning the bank money

I guess that's true, but in the US at least, there is the concept of federal deposit insurance, so even if you don't trust your bank to stay liquid, your "loan" is guaranteed by the government up to some dollar amount (in the low hundreds of thousands, IIRC).

same in the uk thanks to the fscs, up to about £85k per person per bank(ing group).

can't read all the tl;dr posts itt but i'm currently in my last year (give or take) of a phd in economics and if anyone wants to ask questions about topics they are confused about i can try my best to answer them

I'm confused about Erdogans continued policy of lowering interest rates as inflation increases. The oft-given reason given of 'Islamic economics' seems unconvincing. Other reasons given are aims to reduce unemployment, and reduce bond yields.

Either way lowering interest rates when there is high inflation runs counter to orthodoxy, right. So where does this end up, is there a rabbit to be pulled out of the hat here in the next 6 months or so?

FDIC insurance is $250k (per account w/ limits - like you can't have 10 Wells Fargo checking accounts with $250k each to stash your $2.5mn)

xp- not intended contemptuous. i was mostly just teasing fizzles with the tl;dr comment

Haven't got to the end of this piece though you could possibly insert a few funny phrases and...maybe it could work in a novel.

This is a solid critique of Diamond-Dybvig. Firstly, the Nobel Committee got the model's central insight wrong. Secondly, even if that flaw is fixed, the model still has no relevance to modern banking!https://t.co/YniFNjf10t

— Rethinking Economics (@rethinkecon) October 21, 2022

Either way lowering interest rates when there is high inflation runs counter to orthodoxy, right.

I don't believe there is an accepted model of inflation in mainstream economics, in the sense that everyone agrees on what factors affect it and to what degree, like in the form of a mathematical formula. It does seem fairly widely accepted though that in "normal times" raising interest rates lowers inflation and vice versa. However, there are famous counter-examples, such as the recent experience of central banks lowering interest rates to even negative numbers in an effort to generate inflation which failed to materialize.

hi teenwolf's dad

I'm confused about Erdogans continued policy of lowering interest rates as inflation increases. The oft-given reason given of 'Islamic economics' seems unconvincing. Other reasons given are aims to reduce unemployment, and reduce bond yields.

Either way lowering interest rates when there is high inflation runs counter to orthodoxy, right. So where does this end up, is there a rabbit to be pulled out of the hat here in the next 6 months or so?

― anvil, Friday, October 28, 2022 12:34 AM (one hour ago) bookmarkflaglink

yes, it's extremely unorthodox. however, there is one quasi-orthodox-adjacent theory that recommends cutting interest rates to fight inflation: neo-fisherism

it's kind of a weird theory and doesn't really have any contemporary proponents. for a brief period during the econ blogosphere era it was associated with Steve Williamson and John Cochrane, but i believe both have renounced or distanced themselves from it (at least, i haven't seen either of them cheer on Erdogan's policies recently—though here's a video of Williamson on Bloomberg TV defending Turkey's monetary policy back in 2018)

i'll try to explain the gist of it

neo-fisherism derives from a relationship known as the "fisher equation" (after Irving Fisher) which states that the nominal interest rate equals the real interest rate plus expected inflation

the real interest is the return on investment in units of goods (as opposed to prices denoted in dollars). i.e., if i invest 10 linens today, in a week i get 11 linens back, real interest rate is 10%

expected inflation is the expected rate of growth of prices. i.e., i expect that linen will cost 2% more in dollars next week

the fisher equation says that if the real interest rate is 10% and the expected inflation rate is 2%, then the lowest nominal interest i would agree to is 12%. if i lend you 10$, you need to promise to give me at least 11.20$ next week.

the fisher equation is a "no arbitrage" condition. if i had the option to invest in linen at the real interest rate of 10% or to buy a bond at a nominal rate of 13%, then i could get a risk-free profit by exploiting the difference in prices. no arbitrage assumes prices have adjusted so that all such risk-free profit opportunities exist. when the fisher equation holds, i am indifferent between investing in linen and buying the nominal bond

the fisher equation holds in the data very robustly over the long run. the neo-fisherian proposition, however, comes from interpreting the fisher equation causally. the central bank manipulating nominal interest rates to be lower will reduce inflation

my understanding is that it is somewhere in the jump from "a pattern that holds in the long-run" to "a manipulable relationship policymakers can exploit" that things fall apart

it's also not entirely clear just how wrong neo-fisherism is. japan has had rock bottom rates and under-target inflation for decades. episodes like the volcker shock would seem to reject it, but central banks at that time didn't target nominal interest rates directly. turkey's experiment is probably the strongest evidence against it

mainstream academic macro has mostly not engaged with neo-fisherism. there are two exceptions i'm aware of that published in top journals

one is a paper by leading new keynesian macro-economist Michael Wooldridge. the idea is to study the "stability" of the neo-fisherian equilibrium when people in the economy don't immediately converge on the correct values of future prices. rather than have "perfect foresight", they have to grope around, guess, adjust, etc. it turns out that neo-fisherism is very sensitive to the slightest relaxations of perfect foresight

the other is an empirical paper by Martin Uribe. the paper makes the distinction between transitory (short-term) increases in nominal interest rates and permanent (long-term) changes. transitory increases should have negative short-term effects on inflation, but no long-term effect. permanent increases should have positive long-run effects on inflation (consistent with the fisher effect). the author does some sketchy macro-econometrics (nothing against his technical skills, but macro-econometrics is a fundamentally sketchy endeavor) and finds this to be the case in the data

for the most part, people ignore it and think anyone who believes it is a bit crazy

Interesting to see this thread developing. I wasn't understanding it well back when Mark S was talking, charmingly, about Quality Street, so I would probably understand less now.

It does seem like the meta-issue is how something seemingly so important, which ought to refer logically to real things we can recognise, is so incomprehensible.

But then lots of idioms that try to describe reality are, to me, also incomprehensible - most of science for instance.

if/when i have time my plan is to continue to drag at least certain topics towards small attempts at pinefox-friendly translation! (i hope others also attempt this, including ppl far more deftly familiar than me with the rebarbative topics at hand)

i also plan to explore why such translation often fails and what's going on when probably needful jargons congeal into multiple alienating monoliths

I am reminded that I actually read Lanchester's LRB short cuts on the mini-budget yesterday. It was full of swearing and blokeishness, in the Lanchester way I do not like. But again, overall, I did not comprehend it.

pinefox it could be fun if you'd c/p some stuff you read and didn't understand into the thread and ppl can try to talk about it in plainest terms

It does seem like the meta-issue is how something seemingly so important, which ought to refer logically to real things we can recognise, is so incomprehensible.

the level of economics which is recognizable to someone based on their day-to-day experience is a very small part of what economics considers. most people only have to make decisions about how they spend their time and deal with their personal finances. there is a part of economics that is concerned with this, but it's small--and arguably a bit boring

most of economics implicitly takes the perspective of a government setting laws and regulations, or a central bank setting interest rates

unlike an individual person's day-to-day choices, the choices of these large systemic actors will affect all aspects of the economy, and taking these into account requires thinking about all kinds of concepts that just don't matter to an individual person

if i buy 4 yards of linen or 5, that won't have any effect on the price of linen. but if the government imposes a tax on linen, it'll affect the price of linen, the price of other goods similar to linen, the wages of workers who are employed making linen, and so on, in ways that are hard to predict or discern ex post

it's a pretty unnatural and alien point of view to anyone imo. i don't think one should expect their day-to-day life to give them insight or intuition into how it works

FDIC insurance is $250k (per account w/ limits

this is why a lot of affluent people in the US (at least back in the early 2000s, most of these were also old people, so idk if this is still a thing) would have accounts at many banks, so they can have the FDIC insurance on all of their income.

unlike an individual person's day-to-day choices, the choices of these large systemic actors will affect all aspects of the economy, and taking these into account requires thinking about all kinds of concepts that just don't matter to an individual person

idk there are certain aspects of economic policy (e.g. tax policy) that have moral/ethical assumptions built into them, as well as making moral/ethical judgments. These things definitely affect an individual's day-to-day choices and they do kinda matter, if the person were to think about it, or be in a position where they had to think about it?

I'm only interested in individual persons. All the markets, the political managers who make hideous macroeconomic decisions subservient to the markets - that ultimately impoverish or kill millions of people, the billionaires that own them - they all need to be liquidated in a BIG death pit. Along with all the hideous posh wanker think-tank ghouls who constantly speak like this is the only way to manage economies.

idk there are certain aspects of economic policy (e.g. tax policy) that have moral/ethical assumptions built into them, as well as making moral/ethical judgments. These things definitely affect an individual's day-to-day choices and they do kinda matter, if the person were to think about it, or be in a position where they had to think about it?

i 100% agree w this and didn't mean to imply otherwise

the decisions policy makers make affect people's day-to-day lives/choices, but for the most part any individual normal person's day-to-day choices don't affect the broader economy. so the choices people make in their own lives are different from the choices governments or central banks make, in the chains of cause and effect they have to consider

Poster flopson: since you asked:

I didn't understand this:

Under normal circumstances, the fall of sterling would have limited immediate consequences for most citizens. (Big stress on ‘immediate’.) Bad news if you’re going on holiday, and likely to lead to higher interest rates in the undistant future, but not a systemic crisis. What was different this time was that thanks to innovations in the UK pension system, pension funds were exposed to derivatives risks linked to UK bond prices.

Or this:

During QE, the government printed electronic money and used it to buy back its own bonds – that is, its own debt. That made the price of bonds go up, which in turn made the yield on bonds – the interest rate, in effect – go down. This policy had upsides and downsides. One principal criticism of QE has always been that it would be difficult to undo. The bank’s plan was – officially, still is – to divest itself of £80 billion of QE-bought bonds a year. But now the bank is overwhelmingly likely to raise interest rates. A crash in the currency is a sign that people don’t want to invest in your country. Unfortunately, the government needs to borrow money to pay its bills. To get doubters to lend you money, you have to pay them more – and when you raise interest rates that’s effectively what you’re doing. It’s the opposite of buying your own debt; the opposite of QE, which makes interest rates go down.

same

if you folks don’t mind me adding: i think i lack even just the most primitive understanding of how bond markets work. i know that they are essentially loans. governments can “issue” bonds. the buyers of these bonds are either private individuals, or investment firms, or pension funds, or whatever. and the reason they’re buying them is because after a set period of time they will get back the money they paid for them plus an agreed percentage (the bond’s “yield”). what i don’t understand is how the yields can fluctuate. i thought when you bought the bond it came with a guarantee on its yield. if it’s a 5-year bond the yield will be (x). which is why bonds are safer than stocks, whose prices can rise and fall on the basis of, like, what elon musk happens to be tweeting that day. but during the truss debacle people were talking about bond yields changing by the minute! so.. what is that about?

i THINK the answer is: all of that is right, but: people can buy and sell bonds they hold, and the price they're buying and selling can certainly change based on demand etc. and if the price goes up, the yield, in effect, goes down.

I THINK

Casino economics!

I have trouble formulating my basic question coherently, but it think it is:

what is/are 'the markets'?

With sub-questions:

- do they really give an instant reaction to political decisions that is easily interpreted/understood?
- how free are we politically to develop policies that 'the markets' don't like?
- do/does 'the markets' understand long-term policies or are they always focussed on immediate actions.
- can you develop a coherent economic policy if you have an instant market judgement each day?
- do 'the markets' understand that without some kind of net zero/sustainability policy, economies are likely to collapse in the medium/long term?

I agree with poster Schlosser. I do not know what 'the markets' are.

in the old days the "markets" were the various big-city stock exchanges -- the london stock exchange, the new york stock exchange, the tokyo stock exchange -- where sellers physically gathered duting opening hours to find ppl who wd buy what they were selling*, and buyers gathered to find ppl who selling what they wished to buy. different spaces focused on different kinds of ware (hence markets)

there's a scene in the film trading places which gives you sense of such a space (hubbub verging on hell: one of the villains literally has a heart attack)

from the late 19th century some of the buy and selling switched to the telephone and a layer of stock brokers came to the fore who had the requisite knolwdge of prices and relevant movement of prices and (for a fee) handled the exchanges in question, at which point the "markets" began to move off into a virtual and even a conceptual space, and also an ever more unified and connected space

in the digital age the physical element is no longer especially of consequence: the markets take place on-line and never really sleep (the nikkei is awake when london sleeps and vice versa) and tho human stockbrokers still play a role, many active brokers are now basically robots and algorithms programmed to repond to minute fluctuations: again different "types" of market can still respond in different ways but they are ever more tighly integrated -- asymptotically we are always approaching just one single cap-M market (and the smaller, specifics-dedicated markets are no longer able to behave untouched by the activity of the single cap-M market)

*(commodities in paper form akak stocks, bonds etc, rather than actual barrels of apples or whatever)

tl;dr: *a* market is any space where buying and selling is happening, "the market" is the (still perhaps imagined, or anyway not-yet-measurable) totality of all buying and selling, "the markets" is the sum of the first as it tends towards the second

https://www.newyorker.com/news/persons-of-interest/what-if-were-thinking-about-inflation-all-wrong

I'm going to read that in a second, but in the meantime can someone (flopson?) explain to me why you would raise interest rates to "fight inflation" in this context: https://www150.statcan.gc.ca/n1/daily-quotidien/230516/t005a-eng.htm

just a weird quirk in how inflation is measured in canada. including mortgage payments in CPI means rate rises mechanically increase inflation. most (all?) other countries don’t do this, and instead measure some concept like owners equivalent rent, where they try to impute what homeowners would be paying in rent would they be renting their house. a general consequence of this is that canadian inflation is somewhat overstated in international comparisons

thank you!

I'm uncertain what to think about Argentina's plan to potentially dollarize the economy. I understand the rationale but not whether it would work or not, or why a currency peg would be a more manageable approach

Ecuador dollarized their economy, but would Greece or Italy be better comparisons? Argentina always seems confusing though, for a country with such high economic potential to be in this kind of position

I guess the problem with a currency peg is that no one would believe that Argentina would stick to it. Even Switzerland, a country with a much better track record for fiscal prudence, broke their peg to the euro when it became inconvenient. Not sure if dollarization would really work for a country of the size of Argentina. Seems logistically tricky.

i don’t think argentina will dollarize. to dollarize you need to back pesos with dollars and they don’t have dollars. so the only way they can do it is to sharply devalue the peso. but the only dollars argentina has are in deposits as bank reserve requirements which can’t be used for any other purpose. china has given them a “swap line” which lets them make payments in yuan but they could pull back on that at any moment. i think it’s more likely we see peso depreciation and some default but no dollarization. the extent of default precipitated by real dollarization would be extreme

I guess if Argentina did dollarize it would be similar to the scenario of countries joining the eurozone. This has happened a few times since the introduction of the euro, but all smaller economies: mostly the Baltics and small countries like Slovenia, Slovakia and Malta. Usually the conversion to the euro happened at a rate at which the converting currency had been pegged for some preliminary period.

Why similar to the countries you mention and not Italy or Greece? Italy's economy being bigger than Argentina's

I guess it is similar to that too. I was thinking of the difference between joining an existing currency and forming a new one. But I guess they are basically the same.