Cryptocurrency: Argentina Prints Itself Into Oblivion, Again

[grarpamp]

https://bitcoinmagazine.com/business/block-investor-day-2022-talks-bitcoin


Not to mention Peronist failure, corruption from
govt, letting itself be raped by the IMF etc...


Argentina's Inflation Problem

https://www.youngmoney.co/p/argentinas-inflation-problem

This article is based on a combination of my own experiences in
Argentina and my subsequent research after I came back to the US. I
know some of my readers are from Argentina, and others are probably
much more knowledgeable than me on this topic. If I'm dead wrong about
something, or if you have a good personal anecdote, let me know. I
would love to learn more about my favorite South American nation.

What Inflation?

In March 2022, the US CPI reading showed an 8.5% year-over-year
inflation print, the highest since 1981. Pretty rough, right? Well in
March 2022, Argentina recorded a 6.7% month-over-month inflation
print. The country's year-over-year print was 55.1%.

Argentine bank accounts pay 45% interest on deposits, which sounds
great if the value of your currency isn't getting cut in half every
year. Used cars, a depreciating asset in most of the world, are
investments that retain value better than the national currency in
Argentina.

Trust in the government is minimal at best, and the ultra-wealthy
store their capital in international bank accounts.

What does everyone else do? Hoard dollars. When you are dealing with
50% inflation every year, 8% inflation is a dream come true. Those
that have enough money to save extra cash exchange their pesos for
dollars as quickly as possible, as the dollar is the best inflation
hedge they have.

These dollars aren't stored in bank accounts. They're kept in safes,
under mattresses, and anywhere else that the government can't touch
them.

The constant exchanging of pesos for dollars has created a vicious
cycle: an already weak currency continues to lose value as consumers
dump it as quickly as possible.

Two years ago, the Argentine government sought to stop this flight to
dollars by instituting a $200 peso-dollar monthly exchange limit, but
this rule simply expanded the black market for dollars.

Argentina now has two currency exchange rates:

    The quoted rate
    The informal rate

The quoted rate, which sits around 100 pesos per dollar right now, is
what any bank will pay you for your dollars. However, demand for
dollars is so high that the unofficial exchange rate trades at a 100%
premium: 200 pesos per dollar. Because inflation is so rampant, the
local population will pay double the market price to get their hands
on dollars.

If you are an American tourist, it's a great deal. Bring a few
thousand bucks and you can live like a king. If you are a local
Argentine, this exchange is born out of desperation. Without access to
dollars, your purchasing power will quickly diminish.

So how did we get here?
What Went Wrong

Argentina is a unique case study in economic development, because as
recently as 80 years ago it was poised to rival the US in global
influence. During the first three decades of the 20th century, the
South American nation outgrew both Canada and Australia in population,
total income, and per capita income. In fact, in 1913 Argentina was
the 10th wealthiest country per capita. (For perspective, Argentina
was 89th in 2020, and the United States was 10th).

Yet the rest of the world has largely flourished since the end of
World War II, while Argentina has floundered. What went wrong?

In the 1940s, it seemed like the South American nation would be a
superpower for the rest of the 20th century. Argentina was one of the
world's leading agriculture exporters, the country was industrializing
quickly, and unlike war-torn Europe, it had remained relatively stable
since gaining its independence. Italians, Spaniards, and other
Europeans immigrated to Argentina by the millions, seeking opportunity
in a new land. Buenos Aires was becoming the New York of the southern
hemisphere.

However, in 1946 Juan Perón came to power, setting in motion 75 years
of decline and stagnation. On a global scale, the first four decades
of the 20th century were filled with war and economic depression. As a
result, Perón implemented a series of import substitution policies,
such as high tariffs, to make the country less dependent on
international markets.

However, the timing couldn't have been worse, as the post-WW2 era
brought us an explosion of international trade. Consumers around the
world benefited from cheap imports, while businesses had access to
exponentially larger customer bases. Argentina missed the bus.

 While the goal was to make Argentina an independent nation, the
reality was a blossoming world power exited international markets
before the biggest expansion of global trade in history.

The consequences of protectionism cannot be overstated. Argentina was
previously an agriculture superpower, but protectionist policies
forced the country to divert resources away from its strongest sector
to increase industrial production. Domestic production couldn't
compete with the lower prices of international goods, and consumers
suffered.

Peronist economic policy didn't stop here. Rent and price controls
were pervasive, with the government going as far as setting menu price
limits for restaurants.

Government spending exploded as companies across a variety of sectors
were nationalized, and Perón distorted property rights and the freedom
to contract.

Heavy government spending, widespread nationalization, and minimal
international trade were a recipe for disaster.

Peronist policies stifled economic growth, locked Argentina out of
international markets, sowed seeds of distrust, destroyed their
currency, and created a 70+ year cycle of hyperinflation and economic
stagnation.

Perón was overthrown after a decade in power, but Argentina's fate had
been sealed.

Over the next 50 years, governing power shifted hands several times
through coups and "elections," the nation repeatedly defaulted on its
debts and changed currencies, and inflation wreaked havoc on the
purchasing power of local consumers.
Perspective

8% inflation sucks. Inept government policies suck. But our problems
in the US are minute compared to elsewhere in the world. The reality
is that we live in a country with a stable currency, a stable
government, and unlimited opportunities.

In the US, we are worried about whether the market is going to
maintain its 9% annual returns. In Argentina, they worry about whether
or not their currency will exist tomorrow. Americans invest in stocks,
bonds, index funds, and real estate. Argentines hoard dollars under
their mattresses and buy used vehicles as investments to fight
hyperinflation.

The craziest part about this whole thing? There is an alternative
timeline where Argentina rivals the US in global influence in 2022.

Just a few generations ago, Argentina was poised to be the world power
of the southern hemisphere. The peso was as stable as the US dollar
and British pound, Buenos Aires was one of the world's premier cities,
and immigrants moved to the nation by the millions in search of
opportunity.

However, a single decade of government incompetence led to generations
of decline.

Despite the issues that we do have in the US, we won the lottery of
opportunity by being born here. We don't have to worry about our
dollars being worthless or our government being overthrown by a coup.
Had a few events in history been different, we could be looking at a
different reality right now.

Life in the US isn't perfect, but it's important to have a little
perspective about this stuff. If our biggest problem is 8% inflation,
are our problems really all that big?