01 The Hour
Saturday
1 December 2001, Buenos Aires. Reconstructed to the day.
The decree was dated that Saturday in Buenos Aires and announced at a press conference the same day. It appeared in the Boletin Oficial on the Monday.
What it prohibited was itemised. Cash withdrawals above 250 pesos or 250 US dollars a week, counted per holder across the total of his accounts at each financial institution. Transfers abroad, other than for foreign trade, for spending and withdrawals made abroad on cards issued in the country, and for cancellations the central bank authorised. Payment by cheque, by card and by transfer inside the country was not restricted.
02 The Sequence
23 Jul Buenos Aires province declares a provincial economic emergency by law and authorises the issue of patacones for the payment of salaries and other obligations.
10 Aug The national executive establishes the LECOP, letters for the cancellation of provincial obligations, by decree.
28 Nov The run across the system accelerates. Over the following two days total deposits fall by 3.6 billion dollars, about 6 per cent of the total.
1 Dec Saturday. Decree 1570/2001 restricts demand deposit withdrawals for an initial period of 90 days, at 250 pesos or 250 dollars a week per holder at each institution. Banks are barred from lending in pesos. Transfers abroad are restricted. The central bank may ease the limits once deposits return to their level of 30 September.
3 Dec Monday. Publication in the Boletin Oficial. The date matters later: cash deposited after it is put outside the weekly limit.
5 Dec Wednesday. Decree 1606/2001 puts outside the limit the withdrawals needed to pay salaries, to meet retirement benefits paid by non-bank entities, and the normal operations of exchange houses, and lets the central bank grant further exemptions. In the province the same day, a decree lets employees choose between taking their pay in patacones and waiting until the province has pesos.
8 Dec Saturday. Queues form outside branches, which open on a Saturday.
19 Dec Wednesday. A state of emergency is declared following protests. Congress repeals the special legislative powers granted to the minister of economy.
20 Dec Thursday. The minister of economy and the president resign. More than twenty demonstrators had been killed in the unrest.
21 Dec Friday. A countrywide bank holiday is declared, running through 26 December. On 23 December, inside the holiday, the interim president announces default on 141 billion dollars of outstanding debt.
9 Jan 2002, Wednesday. The weekly limit rises to 300 pesos per holder at each institution, with 1,500 pesos a month for pensioners and social security recipients. Term deposits are rescheduled. Undrawn allowances accumulate week to week.
2 Dec 2002. The restrictions on demand deposits are lifted, a year and a day after the decree. Term deposits are released in stages into 2003.
03 The Hidden Dependency
The decree left the bank rails alone. Cheques, cards and transfers inside the country went on working, and what was rationed was notes.
That is a narrower cut than it sounds, because notes were what a good part of the wage bill ran on, and some of those wages had already left the peso. Buenos Aires province had been authorised in July to issue patacones for salaries and other obligations, and the national executive had created the LECOP in August for the cancellation of provincial obligations.
Four days into the restrictions the province let its employees choose between taking their pay in patacones and waiting until it had pesos.
Rationing the note while leaving the ledger untouched puts the shortage on whoever is paid in notes.
04 What Still Worked
Cheques, Cards and Domestic Transfers
The prohibitions ran to cash withdrawals above the weekly figure and to transfers abroad. Paying inside the country by cheque, card or transfer sat outside them.
Cards Used Abroad
The ban on transfers abroad expressly excepted the payment of expenses and withdrawals made abroad through credit or debit cards issued in the country.
The Exempted Withdrawals
From 5 December, cash taken out to pay salaries, to meet retirement benefits paid by non-bank entities, and by exchange houses for their normal operations, fell outside the weekly cap.
05 The Document
The Document 1 Dec 2001
Decree 1570/2001, headed Entidades Financieras, issued as a decree of necessity and urgency under Article 99, paragraphs 1, 2 and 3 of the National Constitution, on the ground that there was no time to wait for the ordinary passage of a law. Two of its recitals are worth the reading. One notes that bank money was already compulsory for every transaction above 1,000 pesos under an existing statute. The other holds that use and enjoyment of deposits may be restricted for a brief period, limited to certain cash withdrawals and some transfers abroad, in a way that in no manner affects the working of the economy.
06 The Pattern Library
1
When one retail withdrawal channel closes or fails, demand concentrates on whichever channel is left open, and the capacity of that channel sets what a depositor can obtain.
Observed: Northern Rock 2007, Cyprus 2013, India 2016, Greece 2015, United States 1933, Argentina 2001.
2
A currency replacement can require physical modification of each cash dispensing machine before the new notes can be issued, so the machine estate returns to service site by site rather than at once.
Observed: India 2016.
3
Withdrawal limits imposed on a domestic banking system can be written to exempt cards issued outside it, so one machine dispenses under two rules according to where the card was issued.
Observed: Greece 2015.
4
Domestic payment and deposit channels can continue operating while cross-border payment routes fail, with the central bank standing in as the intermediary for payments to and from the country.
Observed: Iceland 2008.
5
When the institutions that convert payment instruments into cash are closed, wages and checks already received cannot be spent, and merchants and carriers extend their own credit in place of the missing conversion.
Observed: United States 1933.
6
A public employer short of the national currency can pay wages in an instrument it issues itself, which then circulates alongside the currency it stands in for.
Observed: Argentina 2001.
Changed today: Entry 1 gained Argentina 2001, where cash withdrawals were capped at 250 pesos or dollars a week per holder at each institution while cheques, cards and domestic transfers were left alone. Entry 6 added, on wages paid in an instrument the payer issues.