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

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.