00:00We've been on watch here for a few days. Now we get the confirmation that the U.S. is coming in, intervening in these markets. What do we know so far?
00:08So we know what Besant tweeted, right, that they finalized talks for this 20 billion swap line, which the Argentine economic team has been in D.C. for a few days discussing.
00:20I think they flew in Friday. And he also made this, I think, a bit surprising and extraordinary step to say we we stepped into currency markets and bought pesos directly, which I think caught everyone a little bit by surprise.
00:34Yeah, absolutely. And you can see the reaction in those markets right now. But we know that when it comes to FX intervention, particularly unilateral FX intervention, as you pointed out in the break, it has a mixed history of success.
00:47So even though we're seeing this knee jerk reaction now, Mike, there's no guarantee that this will stick.
00:52Well, the U.S. has only done this three times before. Once was 1998 when they bought yen. And in 2000, they bought euros to try to strengthen both of those currencies.
01:03But they did it in concert with other G7 countries. And then in 2011, the U.S. and other G7 countries sold yen after the Japanese earthquake.
01:13And that was less an intervention for manipulating the currency than it was to make sure that the Japanese economy stayed on a level basis.
01:22But the Japanese have been the people who intervene all the time on their own. And it worked for a while in the 1990s, but it just got to be almost impossible to do because the amount you can buy in a currency market that trades nine trillion dollars of currency a day is so small that unless you get the markets believing that the currency is going to go in the direction you want, you basically spent money for a few days worth of reaction.
01:50Yeah, it's like throwing pennies into the ocean. But to that point, Julia, I mean, how committed is the U.S. here? Because you think about the Argentinian side of things, the Argentine Treasury has all but drained its reserves at this point.
02:03So, I mean, is it in for a penny, in for a pound for the U.S.?
02:07That's a great question. And we I think we have been seeing for the past, you know, three weeks, a month, which is when Argentina's market started going off track.
02:17Every show of support, be it a tweet, be it, you know, a Trump comment in favor of Milley, it doesn't move the local market, particularly on the bonds, because there is this expectation like, oh, the U.S. can come in and stop me out of this bearish trade.
02:34Right. So there is a willingness of markets to test it. And I think today we saw the first real show of we actually did come in and there's something behind just what we've been saying.
02:45So it could give us a little bit more stability until the elections, the midterm elections on October 26th, which are really key here for the next, you know, two years of Argentina and Milley's government.
02:57There is a little bit of a background to this in that in 1994, Mexican peso crisis, when Mexico couldn't roll over its bonds because the peso had lost so much value.
03:08And the Treasury Secretary then, well, Bob Rubin wasn't Treasury Secretary yet, but he arranged it as the National Economic Council director.
03:18They guaranteed Mexican debt. Right.
03:22So and they use the money from the exchange stabilization fund, as they did this time.
03:25They didn't directly buy pesos, but they stabilized the debt and Mexico paid all the money back.
03:30It'll be interesting to see to the extent we have a swap line use that whether that money comes back or not.
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