Hmmm. Argentina and the US have no beef. Not even historically. The US didn't even officially take the UK's side during the Falklands War. And that's despite the fact that the US/UK alliance is probably the strongest one.
The US did provide military assistance to the UK and none to us, so I'd say they definitely took the UK's side [1].
Complicating things, of course, is the fact the US saw our military junta as a bulwark against communism, and so provided some support to them [2] (and, it is argued, our military dictators thought they saw indications the US would support us in our war against the UK, which is just as deranged as it sounds. Then again, our dictatorship was as incompetent as it was bloodthirsty).
> "The United States provided military assistance to the junta and, at the start of the Dirty War, Secretary of State Henry Kissinger gave them a "green light" to engage in political repression of real or perceived opponents."
> "The US Congress approved a request by the Ford Administration, to grant $50,000,000 in security assistance to the junta. In 1977 and 1978 the United States sold more than $120,000,000 in spare military parts to Argentina, and in 1977 the US Department of Defense granted $700,000 to train 217 Argentine military officers."
Figuring out how to stop a country with a history of corrupt government from being a country with a future of corrupt government is one of the biggest problems in human civilization.
The problem with the dollar in Argentina is not just about corruption, though it does have some of its roots in our dictatorship from the 70s. Later governments and businessmen did their part, of course.
Sometimes there's an incentive for a government, or voter base, to not learn their lessons.
Using US examples because those are the ones I'm most familiar with, just look at how long there's been a "housing crisis" due to insufficient housing in some US cities. There's been plenty of time to fix it, but policy changes just nibble at the edges. Why? Because some people don't want to fix it, or don't care, or there are some downsides to fixing it properly.
Similarly, the US has a high rate of traffic fatalities among developed nations. The fixes for this are well understood, but they involve tradeoffs or design changes that many people do not want. (The US is getting better at safe road/street design, but very slowly)
It's not just the government. There's a broader problem, including unpayable loans from the IMF, lack of dollars leading to restrictions, some things are traded in dollars since our last dictatorship (e.g. real estate) and this is difficult to change, and widespread speculation of our agricultural sector (one of the most powerful groups in Argentina).
Also: the black market of dollars is relatively small and also easily manipulated, but generates panic in people's minds.
As this comment illustrates, partisan propaganda in Argentina is effective at getting much of the population to blame anybody except the ruling party, who somehow believe that "widespread speculation" is something that doesn't happen in countries like the US, the UK, Taiwan, Japan, etc.
The current ruling party (the one that likes to blame the agricultural sector) just signed up for some new unpayable loans from the IMF last month.
I've no particular respect for the current government, and I did mention "it's not just the government", meaning I believe part of the blame is theirs.
Do you deny the agricultural sector is one of the most powerful in Argentina, and one that speculates on the dollar and has a vested interest in it going higher?
Do you deny the illegal dollar market is relatively small but has a high impact in people's minds?
Do you deny the real estate sector trades in dollars?
> As this comment illustrates, partisan propaganda
Prices of commodities are expressed in dollars and are global. The agricultural sector thinks in dollars, not in pesos. It's not that the dollar goes higher: the peso goes down.
The illegal dollar market is not small, and its prices change similarly to the legal dolar market (mep, ccl).
The illegal dollar market is not where major operations are done, and so, it doesn't affect anything to a great degree. It's small in the sense a few big whales can manipulate it.
> It's not that the dollar goes higher: the peso goes down.
Well, yes. If you are from Argentina, you know what I meant. If the agricultural sector only "thinks in dollars", then why do they regularly push for a peso devaluation, talk about "competitivity" of the peso vs the dollar, and must be forced to liquidate their dollars in a reasonable time? They obviously care about the relative value of the peso vs the dollar.
Why "must" the agricultural sector be forced to "liquidate" their dollars "in a reasonable time"? By "liquidate" you presumably mean "sell for pesos", and the answer is that pesos are an irresponsible speculative investment that nobody would invest in voluntarily. It only goes down, and it does so with enormous volatility. The only reasonable time to do this is less than one day before spending the pesos.
So the answer is the same as if a mugger asks why you must be forced to give me all the money in your wallet, receiving nothing in return. The implied necessity is an invention of the speaker.
I don't believe you have reliable information about the size of the illegal dollar market.
To quibble a bit, they're actually not being forced to sell the grains and oilseeds, which for the time being they are free to stockpile; but if they do sell them, they are being forced to sell the dollars they get in exchange, at a fraudulent exchange rate, in order to subsidize imports and the overseas travel of the Argentine upper class.
Surely it is true that my own views are also influenced by partisan propaganda. :) However, I think a much stronger influence is that I understand elementary economics, have lived outside Argentina, have operated an Argentine corporation, and have traded forex futures in real markets.
Certainly it is true that the agricultural sector is one of the most powerful in Argentina and that the real estate sector trades in dollars, but most of the rest of your comment is not even wrong, reflecting fundamental misunderstandings of a flat-earth level.
The assertion that the agricultural sector in Argentina is "speculating on the dollar" is incoherent. Speculating on the dollar is an activity dominated by big international investment banks and hedge funds, which make enormous leveraged bets on whether the dollar, the yen, the euro, or other real currencies will go up or down by 0.05%. The agricultural sector in Argentina is not able to do this because of legal prohibitions, and at any rate does not have nearly enough money to engage in the activity profitably.
When people in Argentina talk about the dollar "going higher" what they mean is that the fake Monopoly money we call the Argentine peso is losing value relative to the dollar, whose own changes in value are usually a rounding error by comparison, though not this year. Argentine pesos are an irresponsible speculative investment that are guaranteed to lose value; no prudent investor would hold them.
Anybody who owes debts denominated in Argentine pesos—most notably, the government—has a vested interest in inflation, the devaluation of the peso ("the dollar going higher"). Conversely, anyone who is owed debts denominated in Argentine pesos has a vested interest in the peso appreciating, or, since that's not going to happen, in the peso losing value more slowly. However, overall, the rampant inflation of the peso is one of the factors that makes the Argentine economy unstable and unproductive, which is the bigger factor in play here.
I suspect your reasoning is something along the lines of "the agricultural sector is a big exporter, so they get paid in dollars, so if those dollars are worth AR$600 instead of AR$300 then they make more money." But that is nonsense; if a dollar is "worth" AR$600 instead of AR$300, that's because the peso has lost half its value, so that AR$600 only buys you roughly the same amount of fertilizer, Monsanto seeds, farmhand labor, silage bags, etc., that you could have bought with the AR$300 without the additional inflation. Moreover when inflation is fast enough it becomes difficult to carry out any transactions at all.
It's relevant to point out to other readers that the official dollar, the fake value the exporters of agricultural as well as other goods get paid, is AR$129.25 × AR$137.25 today. That means that for every dollar of soybeans you export legally, you get paid AR$129.25, which is "worth" US$0.41. That is, the central bank confiscates 59% of your revenues (not your profits!) in order to subsidize imports and rich people going abroad for vacations. Unfortunately, soybeans are too bulky to smuggle out of the country.
Government confiscation of 59% of export revenues in order to subsidize Chinese imports goes a long way to explaining how we have ended up in such a terrible economic situation. Argentine makers trying to compete with Chinese imports have the central bank subsidizing 57% of the price of their foreign competition; Argentine consumers only pay 43% (137.25/316). So a hypothetical Argentine product of the same quality must be 57% cheaper than the Chinese product in order to compete. Government mandates of "Industria Argentina" result in companies importing fully manufactured products in kit form from China or Korea and paying unskilled workers a minimal amount to assemble the kits.
Export-led industrialization was the key policy that replaced poverty with prosperity in Taiwan, Japan, PRC, Kore...
How can you say that the agricultural sector in Argentina speculating on the dollar is incoherent?
For starters, if the dollar goes up, the inflation doesn't necessarily follow. Otherwise that means that the salaries (among other things) follow the dollar, and that's not true at all.
Second, this whole week there were talks about a special exchange rate for the sector to tempt them to export more, because the government needs more dollars for energy imports. So by just waiting they get a better deal, that's clearly speculation.
You can argue if this is right or wrong, if it's good or bad for the economy or the people, but speculation it is.
We're talking about exporters' reluctance to engage in transactions where they reduce a long position in the dollar in order to take a long position in the peso. The peso is an unstable speculative asset with extremely poor prospects of producing a return even in the short term. The dollar is, by contrast, a relatively stable currency, though much less so this year than for the previous 35 years, and though it, too, faces a continuous decline in its value.
Holding pesos is speculative. It's not just speculation — it's speculation done badly and irresponsibly, like buying a lottery ticket, because the peso's prospects for increasing in value are quite poor indeed. Holding dollars is, by comparison, not speculative at all.
We are facing a piece of absurd doublespeak in which "speculation" is being used to mean "refusing to foolishly invest in an unstable commodity", namely, the peso.
Speculation in dollars is not impossible. You need servers in London, New York, or Tokyo that respond to second-by-second price changes, and you need access to forex markets with very, very tight spreads — otherwise the spread will give all of your potential speculative profits to market makers, because forex price movements in real currencies are fractions of a tenth of a percent most days.
This is not what the agriculture sector in Argentina is doing.
(Let's leave aside for the moment that this is also a transaction in which the central bank confiscates 59% of the value of the currency being traded in order to subsidize vacations abroad for the rich, and to subsidize imports so that they are impossible for Argentine domestic industry to compete with.)
— ⁂ —
Salaries and other prices do follow the dollar relatively closely, though there is both volatility and a secular decline in Argentina's productivity over time. The current salario mínimo is $45540 per month, which was US$210 earlier this month, though now it's US$150. (Presumably that will change in the next month or two.) When I moved to Argentina in 02006 it was $800, equal to about US$260. See https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A....
The minimum wage did not track the dollar perfectly; US$210 differs from US$260 by 24% (or 19% calculated the other way round — a 1.3% decline per year), but $800 would now be worth US$2.61, or US$3.70 earlier this month, and US$210 differs from US$3.70 by 5600%. 24% is a significant tracking error but it's insignificant compared to 5600%.
This calculation understates the decline of the salario mínimo in real terms, because the dollar has experienced a total of 47% inflation since 02006, according to the US BLS CPI. US$1 in 02006 is US$1.47 today; 1.47 · US$260 · AR$216/US$ gives AR$82600 as the equivalent salario mínimo at the blue dollar rate earlier this month, and using today's mid-market blue dollar rate of AR$306/US$ it would be AR$117000. Over 16 years that's a 5.7% decline per year in the buying power of the salario mínimo, though obviously that's a very noisy estimate.
I would welcome other salary data. For example, how has the median Argentine salary changed over this time? How about the mean salary, which is essentially the per capita GDP?
"Refusing to foolishly invest in an unstable commodity" is the only thing they can do: they either export or not. The question is, when will they do it? Waiting for the best moment is speculation.
And about salaries, that was my point, they are 24% lower than in 2006. Considering the dollar's 47% inflation since that year, those USD 260 would be ~USD 380 now, so 68% lower.
But it is, just the government. They refuse to cut down on deficit spending, keep a hopelessly intractable tax system, and they keep the money printer running non-stop to keep up. It doesn't help that they keep one of the most unenviable levels of corruption, either.
And it's not limited to the current government, their previous one was woefully incompetent at fixing deficit spending. But it can't also be denied that the party in power is the one that refuses under any circumstance to address the underlying cause.
Everything else you mentioned: Loans, bank runs, rampant inflation impacting land value, and business trying to protect their investments from the governments' byzantine rules and outright thievery through price controls that expects them to produce at a loss, is just a byproduct of government policy that is rotten to the core and a population that keeps electing the same incompetent buffoons that do not dare or desire to make the necessary changes.
I really don't think it is just the government, nor is it the lack of cutting down deficit spending, nor the tax system. I try to take a more historically grounded view. I don't think there are easy answers though.
I believe the view that "there's the government, and there's this bunch of innocent businessmen at the mercy of big bad government" is not very compelling, for various reasons. One is that democratic governments in Argentina are pretty weak, all things considered; they aren't all-powerful, they usually have an opposition running interference at every step, US-style. Another is that when some businessmen had their chance to run their own government (you mentioned one recent occasion, the dictatorship was another) they still screwed up.
The dictatorship is 'some businessmen' to you? That's an strange interpretation.
And Macri's business become big thanks to its links to government (you can check the story of 'grupo macri' in wikipedia).
Yes. The actual men in green uniforms were just the visible face of the dictatorship. There were actual businessmen behind their economic policies. Not for nothing the dictatorship is called the civic-military dictatorship, as you well know if you are from Argentina.
> And Macri's business become big thanks to its links to government
I'm well aware of Macri's corruption and its links to the government. It's ironic, really -- those who benefited the most from government ties are so quick to decry "government corruption". Such is the history of corruption, too: one foot in the government, one foot outside of it. Both parts are important. I think, historically, the government is the weaker part in Argentina, at the beck and call of those actually calling the shots.
The answers are suprisingly easy. And the people to blame are obvious. There's little nuance to be had and no "historical context" is needed beyond "it's been fucked for a while because spending has been fucked for a while".
If you want to choose to believe that this is an "us vs greedy capitalists/the opposition/whatever" problem, that Argentina's problem is highly complex, multi-layered, too hard to deal with, and that the devil is in the details like the government tells people to believe on the TV, don't be surprised or angry by the results.
I've also never implied the solution is to let "some businessmen" run the country, and in fact implied that clearly not to be the case with my statement on Macri's government. Argentina is in such a dire state of emergency that it matters none if it's a right-wing, left-wing or whatever kind of government that's running the show because given basic competent human beings willing to fix the country that kind of "detail" only matters once you have surplus money to expend and you have to decide what to do with it. There's only one way out of this and it's to fix the budget by cutting spending to reasonable levels in one go, do away with inflationary practices, and make it possible for productive people to produce without having to worry about arcane tax rules. And again, tax-wise it's not so much the tax rate that matters (although in the short term it does, because Argentina has fucked over investors time and again and needs to do a lot to seduce money back in) as it is the amount and complexity of the tax system that leads people to evade them.
There are many political situations where information is scarce and there's room for honest discussion. In this one, there is none. I just hope that the only person stating basic truths over there looking and acting like a clown doesn't ruin your chances of not becoming another Venezuela.
> The answers are suprisingly easy. And the people to blame are obvious. There's little nuance to be had and no "historical context" is needed beyond "it's been fucked for a while because spending has been fucked for a while".
I obviously disagree with this. Whatever else our differences are, I don't think anyone thinks "the answers are surprisingly easy".
> There are many political situations where information is scarce and there's room for honest discussion. In this one, there is none.
I... well, I'm glad you have this level of certainty that you think there's no room for honest discussion.
> I just hope that the only person stating basic truths over there looking and acting like a clown doesn't ruin your chances of not becoming another Venezuela.
I'm afraid I know who you are talking about. "Basic truths" :facepalm:
The most important thing is that major operations are not done in this market, obviously.
Also, bizarrely enough the location of all "cuevas" (which is what we call the physical places where the illegal market operates) are well known by the authorities and could be shut down if they so wished. So there is definitely that in favor of the "the government is corrupt" argument.
Crypto advocates on this forum frequently list Argentina as a specific use case ( ie getting around foreign currency rules/restrictions ), that would imply that the market doesn’t just happen in “Cuevas”
I admit I'm not too familiar with the (illegal) crypto thing. I wouldn't be surprised if it was run by the same cuevas. In any case, the situation I describe is historic; the cuevas have existed for decades and nobody does anything about them.
As for the size: again, major operations -- the kinds that actually "move the needle" -- are done in the legal market. I seriously doubt crypto has any impact in Argentina.
Another way to look at it is that crypto is strengthening the dollar’s foothold in Argentina and weakening the state’s ability to manage their own currency, to extremely detrimental effects.
There is the official rate, the black dollar rate, and also the Western Union rate, which is much higher than the official, but usually not as good as the black rate
With the exception of a few of the mass murderers of the 01970s, the people who have caused our currency to be so volatile over the last 50 years have all retired to enjoy their wealth. Some of them died at a ripe old age. The people currently running the government definitely did learn a lesson from that: they learned that they, too, will retire to enjoy their wealth, even if they impoverish the country in the process.
However, a number of presidents and finance ministers have had to resign in disgrace when their policies (or those of their predecessors) provoked immediate crises. Printing money is a common way to postpone an immediate crisis.
That would be nice if it were the case, because it would mean that things are going to start improving soon. But no, the current generation is at least as bad, which was a main point of my comment that seems to have been less obvious than I thought.
I lived for 20 years there. In my opinion the root of all problems there is that it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way.
People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can at their level or what is close to their hands. From bit paying taxes to actually pocketing others money, etc.
I know it is not everyone, but it is the majority of the people that are like this, politician or not.
I still have a friend there, always complaining public services don't work (healthcare, police, etc) but then in the same conversation he says with a straight face that he prefers not to pay with credit cards or bank accounts because then he'd have to pay taxes and declare the money.
There are people like this all over the world, but the proportion in Argentina is huge, a big majority I'd say. It's part of the culture.
Exchange rates are indirect measures of the country's production vs. others. ex: 1 usd is worth more because its population has a higher output (GDP) relative to Argentina
I can’t comment on Argentina specifically but something I find people often forget is that government is downstream from culture. It doesn’t matter what your structure of government is or the text of your laws are if the culture they sit within is corrupt and/or decadent.
If you want to make whatever point you're trying to make here, you have to write it a lot more carefully than this. Imputing negative traits to entire nations or cultures is explicitly not OK on HN:
This site is full of harsh criticisms of the USA. Not just of the government but of the citizens themselves.
You're correct about what the policy says, but enforcement doesn't seem to back it up in many cases.
Personally I don't see an issue with critiquing the dominant culture in any nation. GP made plenty of caveats about "not everyone" and the like.
I find such caveats to be nauseating, but they tend to be quite effective at preemptively disarming the type of insinuations of national or racial chauvinism that are exemplified by your comment.
Even for those who are not from the U.S.? Europeans in particular frequently vent their frustrations about the U.S., both realistic and unrealistic, in this space.
Would you feel better or worse if I elucidated my criticisms of Argentina en Español on an Argentinian website?
My intuition is that would be seen as aggressive or chauvanistic.
I get where you're coming from. But I wonder how familiar you are with Argentina, though.
I was born and raised in Uruguay, a smaller neighboring country that shares a lot of traits with Argentina. I'd bet a lot of people from either country will not only agree with OP's characterization, but embrace it. This kind of behavior even has a name that carries positive connotations: "viveza criolla", loosely translated as "local wit". Behaving this way is considered the smart thing to do. Not behaving this way makes you an idiot.
I hated this mentality growing up. I never felt like I fit. I've now lived in Europe for the last 12 years and it feels a lot more like home.
Maybe he could have worded it better, but what he's saying rings true to me, an Argentinian living in Argentina.
Note I mostly disagree on politics with 99% of all other Argies posting here (let's say the kind of Argies who post on HN are self-selecting for the kind of politics I disagree with), but this bit is true: we are, at least in Buenos Aires, a selfish, cheating people. Nobody ever in Argentina thinks the rules and laws apply to us, we want to take every advantage we want, pull whatever lever from friends in useful positions, but we always, ALWAYS, complain when somebody else bends or breaks the rules.
"The politicians are all corrupt!" -- but never me.
"That guy drives terribly and jumped a red light!" -- but never me.
"He's cheating me on the price of this!" -- but I never do this myself.
"My employer is exploiting me!" -- but I, of course, always legally employ cleaning ladies for my own house.
This defines our national identity and it needs to be said.
Normally I'd agree, but isn't "culture" basically by definition a common subset? Race and ethnicity are born into and I cannot do anything about it. Culture though is explicitly a descriptor of common traits one can generalize about.
Either way. I hail from a particular (different) country and I will make fairly confidently proclamations about cultural every-day ingrained corruption there. I have explicitly, consciously and purposely changed my culture as I vehemently disagreed with common negative traits of my previous and original culture.
This sounds very familiar to a person from an ex-Warsaw-Pact state.
My family told me similar stories about our communist times, when I was growing up.
> it is embedded in the culture to be as egoist as possible and to steal as much as you can from everyone else in the most ruthless and shameless possible way
This sounds like an issue with capitalism and the rest of your comment aligns with that too. You also pointed out the dissonance between the complaints people have about the govt and the similar actions they take - I think a lot of that has the same cause. We have bad incentives at multiple levels because it's the water we're all swimming in
This is a common argentinian conception, and it is a big misconception. Gov corruption is a lot worse in the united states. It's just that corruption is not a 1-1 correlation with the success of an economy.
Argentina has a poor economy because it is a half-capitalist half-socialist country.
Many of the European social democracies are also half-cap, half-soc countries, and they have far fewer economic problems.
They have a very different monetary system, though, and some of them are successful because the Euro lets them export their economic problems to their poorer neighbours.
Argentina is way more socialist as measured in a controlled economy than europeans - some taxes are higher than 80% of net income and often exceeding gross income as well.
It is also way more capitalist than the US by having a large part of the population paying less than 5% income taxes.
The country is hard enough to explain without the constraints of a browser textbox.
Free markets usually direct selfish interests of people to create overall benefits for the society as a whole (with the occasional exceptions of course). Immoral behavior and excessive egoism usually are the result of bad economic policies that act to hamper individual freedom. The behavior you observed in Argentina is most likely the outcome of generations of short-sighted government policies that empower a small clique but deprive a majority of their economic well-being. Tax evasion, corruption and social inequality are the direct result.
Im Argentinian and lived here almost my whole life (30y) except a for 5 years in the Netherlands.
I Agree with your comment, it is embedded in the culture. But I disagree that people are the same at their own level, on the contrary. The problem is that this is not a new issue, we have the same goverment for the last 20 years and inflation and corruption is always getting worst. During the 90s we had 1USD == 1Peso. Nowadays 1USD == 320Pesos, and thats 24% more than two weeks ago, and usually inflation is at least 5% per month!.
I have no problem with high taxes if those reflect to the services goverment gives back (like the nordic countries). But if you pay 50% taxes on paycheck, then 20% on everything you buy, then 5% per month on inflation, and the result is an insecure unstable shithole is totally not fair.
I promote paying and reciving paymentes on cash or crypto, and do my very best to avoid taxes, credit cards, bank accounts, etc. Because the politicians are destroying my country and I dont want to finance that.
We haven't had the same government for the last 20 years, and furthermore, we've had corruption and economic problems for far longer than the past two decades (where, in fact, we experienced a limited recovery).
In my opinion, people are destroying the country, not just politicians (they're people too, after all) because they would do the same the politicians do if they have the chance, for the same reasons you have (if I don't do it, I'm the only idiot).
It is a "positive reinforcement" loop with negative consequences for everyone and there is no easy way out of it.
I agree that you cannot be the only one "doing it right". Of course...that wouldn't fix anything and you'd be screwed. But do you see the problem? Everyone has the exact same argument you have for doing it, this the cultural thing I was talking about.
As another example, my friend's father passed away a few years ago. As everyone over there he had all of his saved money hidden at home. His own brother stole all the money just hours before his dad passed away.
As I said on my initial comment, this happens everywhere on every country, but the proportions and the impunity on which this shit happens over there is just unbelievable. This is an example of what I mean with "everyone would do it at their level". It's just that politicians have more opportunities to do it.
My wife and I vacationed in Buenos Aires a few years ago because we read it was the Paris of the south. We enjoyed our trip, but what we found was far from Paris!
We rented a nice apartment from an expat from Michigan who married a Argentinian. In an email he practically begged us to bring $100 bills, which he would exchange for pesos at a much better rate then was available from local banks, which he thankfully did. When I asked him what was the deal, he told me the currency is so volatile there, the only protection was the USD, especially the $100 bill.
Most of the locals were friendly, the food was great. Public transportation was dirty and hot. We were constantly being approached by people wanting to give us "tours" around city for a fee. (We read about this before going!) The infrastructure everywhere was pretty bad, you had to be very careful where you stepped on any sidewalk. Not sure if we would go back, but we did enjoy most of our time there.
> My wife and I vacationed in Buenos Aires a few years ago because we read it was the Paris of the south. We enjoyed our trip, but what we found was far from Paris!
When people describe Buenos Aires as "the Paris of the south", this is what they mean:
That we have a great deal of Parisian looking architecture, especially in our "historic" sections of the city, such as microcentro.
That we have a greater deal of European influence than our Latin American neighbors. (There's also a racist implication that we are "whitest". Argentinians care a lot about skin colors, and for us, calling someone a "negro" is a common insult. There's a confusing exception here -- "negrito", "negri" or "negro" is an endearing term you can call a friend, but it's always insulting if you refer to poor people, "esos negros", "qué negros", etc).
Historically, the upper classes of Buenos Aires looked up to Paris. This has been replaced for admiration of the US, a long time ago, and is no longer relevant.
As for scheming locals and dubious tours: I find these to be the norm in many European cities as well. I was marked for tricking/mugging in Paris, Barcelona and Rome, so... another European influence I guess?
Dirt and poorly maintained infrastructure: sadly, you're right. We porteños -- the people from Buenos Aires -- are a very dirty people and we like throwing garbage on the streets, breaking public stuff, urinating in whatever place, etc.
If you are an Argentinian developer working for a US company and want to do things the right way, you have to agree to a 55-70+% deduction from your gross income (adding taxes, fees from converting USD->ARS->USD which you can still do but who knows for how long, and so on)[0]. You could stay with ARS but with a projected annual inflation of 70% that doesn't sound too clever, plus you would automatically lose around 50% of the "real" value of your dollars.
Great! Now that your money is in the bank, pray for <deity> you don't fall into a bank run[1] and lose 65% of your savings[2]. The Central Bank still has reserves, but it doesn't look nice.
This applies to freelancing, but I can imagine most other areas work like this, with bureaucracy and pressure to SMBs working way right of the Laffer curve[3].
My point is, this is a negative feedback loop that (maybe?) started with the toxic vainglory of "outsmarting the system" but was fueled along the years with a general mistrust of banks/institutions, for good reasons. There are no incentives to do things correctly, and if some would appear it's likely set up for failure, because who says the next administration doesn't remove it and the show goes on?
Honestly, I don't know how (or if) it can be fixed at this point.
EDIT: Plus, it's really hard to see any of that tax revenue being put to good use. We're sitting at around 40-50% poverty.
I agree with everything you said. The system forbids doings things right. And I don't see any way out of it. The only realistic solution is to leave the country, which is what most that have the opportunity end up doing.
Taxes in Argentina are insane. If you have a 1000 USD monthly salary you will be taxed in the same way as a billionaire: you have to pay a third of your income and 3% of your total wealth (that is, everything you own) each year. And you can't even deduct most debts from the 3% tax. And you get nothing in exchange, because all the money goes to the politicians' pockets and a welfare state that literally hands out money to millions of people who refuse to work
Yes, but it is a feedback loop into destruction. People don't pay taxes because of this, so the government increases taxes to collect more, so people pay less, so they need more. There is no way out of it.
Doing Business* puts Argentina's tax on profit at 106%. That is, it is illegal to make a profit in Argentina. Legally every business must shrink until destruction.
Comments like this are always tough because on the one hand, (a) 20 years of experience is a lot and there are lots of interesting things to share out of that, and (b) denouncing entire cultures is internet flamebait for sure, and the kind of thing we routinely ask people not to do here. No doubt (b) is why users flagged your comment.
This comes up a lot in other cases too, e.g. "My spouse is from $country and I've learned that they $foo, $bar, and $baz as much as they can." Or: "I'm from $country so I get to say bad things about them."
In general, the "eschew flamebait" rule (see https://news.ycombinator.com/newsguidelines.html) has to take precedence because preserving the forum is more important than any specific discussion, and we're constantly trying to prevent this place from drowning in flames. It's really easy to understand how a comment like yours would land with someone else from $country (in this case Argentina), someone living there, someone having family from there, etc.
I don't have a great suggestion for how to rewrite a comment like this, except to say: reduce the generalization, be less judgmental, and instead emphasize your particular experience.
The current administration (as many others before, mostly of the same party, Justicialism, but also of the other main party, UCR, and de-facto governments) doesn't allow for a floating exchange rate [0]. Nowadays, the ARS follows a (very slow) crawling peg devaluation against the USD, buuuut if you want to buy dollars (or want to pay some product or service abroad, think Aliexpress but also App Store, Netflix, AWS, etc.) you have to pay a tax, and can't buy more than 200 per month per person. Then you have dollars that you can acquire via a broker, buying and selling bonds or shares; these are more expensive than the official+tax rate. And then yoy have the black-market, which tends to be the highest priced.
Argentina also has a chronic problem with inflation (in my opinion, due to printing more money than required by the economy, most times to solve the fiscal deficit you obtain when the national state spends too much), so everyone knows that you have to save money in a hard currency, USD being the most common one. So it has a real big demand for savings and capitalization, e.g. real estate is priced in dollars.
As why argentinians keep voting parties that keep the dollar artificially cheap, I believe it's a mix between a survivorship behaviour (if USD goes up, prices of goods and services will more or less go up) and wanting to consume more than what one can afford (holidays in Brazil, trips to Europe or USA every other year, cheap electricity and natural gas so you can leave your air conditioner on all day, etc).
Disclaimer: I am not an economist, and as everyone else, I have a biased point of view.
1. Low value of exports leads to a trade imbalance and long term decline in foreign currency reserves.
2. The government prints money to spend not on productive investments to solve 1. but on vanity projects or more-or-less bribes for their constituents to stay elected, leading to inflation.
3. Many historical periods of high ARS inflation leads to a lack of confidence in the local currency debt market.
4. 1+3 mean that Argentina needs to borrow in foreign currency, mostly USD.
5. Over time the debt accumulates and even more borrowing is necessary to pay interest.
6. Recently, rising US interest rates lead to a stronger USD, exacerbating the problem.
7. As debt rises so does the default risk and investors won't lend except at higher interest rates to compensate.
8. Eventually the country risks a default. Nobody wants that because the country wouldn't be able to import anything due to a lack of foreign currency (see Sri Lanka) and the creditors don't want that because they won't get paid back. So the IMF offers a bailout on the condition that the country will implement reforms to reduce spending so that it won't need to be bailed out again - austerity.
9. Austerity is unpopular and the government is replaced with one who promises to raise spending again and stick it to the IMF.
10. GOTO 1
This probably describes most countries in the world.
This is pretty accurate, but somewhere between step 8 and 9 or step 9 and 10 is "Argentinian government 'resets' the currency, causing even deeper loss of confidence"
11. Due to extremely taxes and an extremely unfavorable official exchange rate, citizens hoard dollars illegally and it exacerbates their currency reserve problems.
Note that 11 is really an issue of both government policy and the culture. Tax evasion is both a response to inflation and a result of a culture that doesn’t see an issue with putting private benefit over public good.
Yes, it’s a really a breakdown of civil society as a whole. Any individual person is going to through their hands up at the whole thing and go along with it because it appears there’s nothing to be done.
There is more nuance to some of these steps but roughly right.
It's very important to understand that this is a very important weakness of the monetary system in every country, and only countries with little political power are forced to austerity by larger powers (Greece, Argentina and the IMF, etc). Argentina is just a chronic abuser of foreign debt and money printing.
There is an additional ingredient which is very important in Latin America: the very rich see their countries as cash cows and are not particularly interested in changing things.
There is practically no industrial class in Argentina any more. Their main business is to export soy and meat.
Simply bad monetary policy. Argentina has a long history of resorting to money printing for its budget deficit and every generation thinks they will get away with it.
The country is incapable of taxing fairly and efficiently as there is rampant corruption and tax avoidance. This creates a very negative feedback loop, nobody wants to pay taxes as nobody else does so you would put yourself at a disadvantage and the tax money doesn't get put to good use anyway due to corruption, so why do it.
The above means that the government has to run permanent fiscal deficits and get indebted. At some point they are unable to pay the debt and the first temptation is to debase the currency. Rinse and repeat in an infinite loop of mistrust, tax avoidance and default.
It's a very hard problem to solve, unfortunately, as it's at this point deeply integrated into argentinian culture.
"As of 2022, the Japanese public debt is estimated to be approximately US$12.20 trillion US Dollars (1.4 quadrillion yen), or 266% of GDP, and is the highest of any developed nation."
Also unique in that the public debt is mostly held by citizens or local corporations (92%).
For reference, that figure is ~75% for the US, and between ~75 and 50% for most EU countries. Fun fact, the largest foreign debt holder of the US is...Japan.
* The Nikkei 225 stock market indicator reached a high of about 40k in 1989, but dropped to a quarter with the collapse of that asset bubble, and has not recovered that yet (it just recently hit 30k). This period was known as the "lost decade" [1]
* Japan has had very low (near zero) rates for nearly three decades, more than twice as long as the rest of the world.
* Demographics: the transition to low birth rates, shrinking and ageing population started earlier than most other countries
I believe Nikkei total return, i.e. with dividends reinvested, is higher than in 1989. So even money invested in 1989, if not touched, eventually outperformed cash. But it took a while.
Not much any more, but in the 90s and 2000s, having zero, or negative interest rates was a real peculiarity. People couldn't figure out how it could happen or why Japan couldn't fix it. Meanwhile 20 years later we've all been in the same boat.
Another example to my sibling comment's one of debt is the stock market. While most of the world that has advanced technology and industry etc. has seen huge gains over the past decades, Japan is still not quite back at the highs they saw in the late 80s - for various demographic and economic reasons that I'm not remotely knowledgable enough to explain.
But see for example the charts (click on "max" to see as far back as possible) on Yahoo Finance for famous indexes of top X companies in each country:
USA (S&P500): Up ~2000% since 1985, technically down ~12% since December but anyone who invested 15+ months ago is still up it's not like a crazy crash
https://finance.yahoo.com/quote/%5EGSPC/
Obviously these are limited to the few hundred biggest companies but offer a good snapshot, and it's a similar story if you look at other European countries etc., and a significant problem for Japan (as well as being a metric/indicator caused by significant problems) that their growth has been so far behind.
Sure, this random guy who works at a foundation who’s mission is “to explain to Argentinians that deficits are bad” [0] is the most qualified person to talk about global monetary policy.
Carlos Schilling, el ex presidente de FADA, señaló que “es común que hoy en día nos preguntemos ¿qué estamos haciendo para mejorar nuestropaís? Desde FADA hacemos, y hacemos mucho: trabajamos para que todos entendamos que producir más es bueno para todos, que si el país está en déficit es malo, que si exportamos más nos ayuda a todos.
You sound like you're being sarcastic, but certainly it sounds like the things he was trying to divulge are some of the most important and fundamental aspects of global economics, and they are aspects that are poorly understood by the Argentine public: producing more is good for everyone, it is bad if the country is in a [trade] deficit, and if we export more it helps us all. (That's my translation of the Spanish.)
> it is bad if the country is in a [trade] deficit
Argentina has been a net exporter since 2019, largely due to dramatically falling imports that are associated with a lower quality of life for its people.
Many of Argentina’s problems can be traced directly back to protectionism that is intended to “keep Argentina’s wealth in Argentina” (a great recent example re-nationalizing their oil company by force). This thinking has left the economy extremely dependent on volatile commodities and all but eliminated the vibrant start-up ecosystem that once existed there (Mercado Libre is still the largest public internet company in Latin America).
Suffice to say, inflation in Argentina has much more to do with destructive real economy policies than it does with “money printing,” especially when you consider their interest rate has been above 20% since 2016!
It's good if we no longer have a deficit, but I have no illusions that that situation will last; Argentina's perverse anti-protectionist foreign exchange policies that protect foreign companies from Argentine competition are still in place and show no sign of easing.
I don't understand why you would call the renationalization of YPF "protectionist". Did it somehow lower YPF's cost of oil drilling, subsidizing Argentina's oil exports, or at least reducing Argentina's oil imports (we are now a net importer)? I would think rather the contrary: by increasing the risk to investors and lenders, it will raise YPF's effective interest rate for the necessary capex, increasing the cost of Argentina's oil exports. What's your reasoning?
For reference, "protectionism" refers to government policies that have the effect of increasing the profits of domestic producers by "protecting" them from foreign competition, or political advocacy of such policies.
I don't understand what you're saying about "destructive real economy policies" vs. "money printing" and 20% interest rates. Can you elaborate? I would say the Argentine government's policy of printing lots of money is a destructive real-economy policy that has caused interest rates to be very high, because interest rates have to be higher than the rate of inflation in order for lending to be profitable.
I do! I think inflation is usually a real economy problem that has a bad quote about being a monetary phenomenon associated with it (which has confused a generation of lay people).
The implication of the economist doesn’t even really make sense - both Argentinas trade and budget deficits aren’t that big vs. the rest of the world, but their inflation and level of government intervention into the real economy sure is.
In general, my philosophy on economics is to notice what’s different about a country than just accepting the “easy” answer; a <10% of GDP deficit doesn’t phase me (Major trading partner Brazil is similar in both ways), but a government willing to renationalize a company it sold on the open market sure does!
Related, I kind of wish that Congress would _not_ separate the budget from fiscal policy. Right now they vote on debt limit increases completely separate from the budget, which is bizarre to me because _they_ approved the budget! The side not in power just uses it as political leverage saying "we can't keep spending money we don't have". Well, I dunno, maybe you shouldn't have approved a budget you can't afford then? The budget and the _financing of the budget_ need to be a single bill.
Look, nobody disputes that extremely bad policy can lead to hyperinflation - there are obvious cases of that.
But that doesn't mean that it is impossible to manage fiat money sensibly, or do QE responsibly without subsequent inflation. It is not fine to print money at will, but it is fine to run expansive monetary policy when warranted.
It's not that it's impossible to manage fiat money sensibly. It's that the incentives are perverse such that politicians have every incentive to keep the gravy train going and little to no incentive to be disciplined about spending. The end result is a system that necessarily has a greater likelihood to evolve into an inability to manage fiat money sensibly.
So it's not about impossibilities, so much as it is about incentives and probabilities.
Note, there are definitely cases where deficit spending is warranted (e.g. recessions) and even a good investment during boom times. But when deficit-spending during good times goes towards not infrastructure but ephemeral program spending, which much of the world is currently doing, then it's easy to see why it is so difficult to manage fiat money responsibly.
The US was on the gold standard from 1882 to 1933. Recessions from that time:
* 1882-1885 recession (not totally fair; gold standard policies hadn’t had time to cause this)
* 1887-1888 recession
* 1890-1891 recession
* Panic of 1893
* Panic of 1896
* 1899-1900 recession
* 1902-1904 recession
* Panic of 1907
* Panic of 1910-1911
* 1913-1914 recession
* Post-WW1 recession (1918-1919)
* Depression of 1920-1921
* 1923-1924 recession
* 1926-1927 recession
* The Great Depression
We were on a mixed system from 1933 until the end of Bretton Woods. We’ve had seven recessions since then (vs 15 over a similar time span), and one of the big ones (1973-1975) was clearly driven by decisions made while operating on a gold standard.
(It’s a different story if inflation is the only metric you about at all - while it was more volatile it was also lower on average)
Just to clarify, the dollar was gold-backed from 01944 until the end of Bretton Woods in 01971; it wasn't a fiat currency.
Also I think saying that inflation was "lower on average" is really a dramatic understatement. From independence up to the advent of the "mixed system" in 01933 (really a switch to fiat currency until 01944) inflation was probably zero on average. The same was observed over the 1300 years of the commodity-backed pound sterling (usually gold, sometimes silver or bimetallic).
I think there are plausible arguments that fiat currencies are less prone to such crises, and even that they stimulate economic growth, but I don't think it's an open-and-shut case.
Average inflation rates over multiple lifetimes largely irrelevant. 24+% inflation for 2 years in 1863 was a huge issue. Short term deflation is often much worse than inflation. Averaging both to zero is wildly misleading.
The vast devaluation of silver after the discovery of the new world was a massive issue in Europe even if it averages out to nothing over time.
These kind of fluctuations that average out make the money useful on an immediate or long-term timeline, with the cost of medium-term fluctuations (think hold under a few months or over 5 years). Fiat as currently found in places like the US makes the money useful in the immediate or medium term timeline (think under 5 years).
I think which you prefer depends on your station in life and your spending choices. Personally when fiat hits my bank account I want to shit-can it as soon as possible, eithre for equities or commodities. If I were paid in the kind of unstable but averaging out dollar of the 1800s I would very much prefer that, rather than losing money to middle men converting to some commodity like that (such as a commodities index, silver, whatever) and then converting back whenever I need to spend.
Being able to store value as currency for long periods is a bug not a feature as it does bad things to the economy.
Lets’s say you want to store gold in your basement for bad times like a famine. Great you and everyone else has 1+ oz of gold when a famine hits, but society didn’t actually get any more food so everyone having gold is not just pointless but wasteful both to mine the stuff and to keep it protected from thieves.
Alternatively, society can try and store value as productive assets like stocks. On a day to day basis it looks similar but rather than building ever larger vaults and digging ever deeper it’s a quest to create even the smallest income stream. You still hit diminishing returns but it’s stuck with diminishing positive returns.
PS: > losing money to middle men converting to some commodity
You end up losing even more money when the government is trying to get and store enough gold to keep a gold backed currency, it’s just less obvious. Great Britten sent many ships to Canada during WWII to keep it’s gold safe. They had much much useful things to do with those ships and men.
This is a specious (ha!) argument because the total amount of effort required to safeguard precious metals is so small, because the metals themselves are so small. Gold currently costs US$55.92 per gram. Gross world product is US$80 trillion per year over 7.9 billion people; this works out to US$10.1k per person per year, or US$770k per person per 76-year lifetime. The lifetime earnings of an average person are thus 14 kg of gold, less than a liter.
It does not require a significant fraction of your lifetime to dig enough of a vault to protect a liter of gold from thieves, nor to mine it. The impact on overall economic productivity is probably similar to that of spelling "through" as "through" rather than "thru".
You can easily wear a year's wages as jewelry, or a lifetime's wages with more difficulty, which has historically often been useful when you're fleeing famine-stricken areas. Stocks have usually been less useful; protecting a stock portfolio from disaster requires active investment management and is generally infeasible during wars and famines.
It is true that collectively we need to store food, not gold, to prepare for famines. It is a mistake to leap from this fact to the conclusion that everyday people should not be allowed to save money. You might or might not be aware that until roughly the transition to fiat currency in 01971 saving money was a canonical example of responsible adult behavior in the US, much like doing your tax returns, separating your recycling, or investing in an index fund today.
I've presented a better argument for why being able to store value as currency is harmful in https://news.ycombinator.com/item?id=32258546. I'm not completely convinced by it but it's at least not completely specious.
First you can most of the benefits of gold as a currency by just buying gold and then selling it in 40 years. At a personal level a gold backed currency doesn’t change much. Anyway, if gold was actually the words medium of exchange it’s value would be vastly higher.
A reasonable estimate is the value of the worlds gold would equal the value of the words current money. As it’s a nice round number the US’s 20 Trillion M1 money supply and ~20% share of the world GDP suggests something like 100 Trillion for a reasonable estimate for the words supply of gold in that hypothetical situation.
The actual supply of gold is around 400,000,000 lb. So in that hypothetical world 1 lb of gold would in theory be worth ~100,000,000,000,000 / 400,000,000 = 250,000$/lb. Let’s again simplify to ~10x as much.
But wait if it’s worth 10x as much two things happen first it’s used less often in electronics etc which directly hurts the economy, but next it’s vastly more profitable to mine and thus the world spends more effort mining stuff that just sit’s in a vault. Except, governments can’t safely issue currency without being able to back it up with gold so they need to buy up most of this mined gold and then securely transport, store, inspect it etc.
As to keeping it in your own vault, you can secure it all you want that just makes home invasion vastly more profitable. As long as you have access to your gold at home, so does anyone with a gun to your head.
I suppose that, if you're right that a hypothetical return to the gold standard would greatly increase the value of gold, that would greatly diminish the amount of gold you need to safeguard.
There's nothing in the use of commodity money rather than fiat money that prevents fractional-reserve banking, though you seem to be suggesting that there is, since you're doing the computation based on M1 (though I think you may be using the number for M2). The St. Louis Fed estimates the velocity of M1 and M2 at 1.122, which I guess is transactions per year: https://fred.stlouisfed.org/series/M2V so I think you're probably right that gold would be about 5 or 10 times as expensive without fractional-reserve banking.
So instead of 700 grams of gold your lifetime earnings would be 70 grams.
If 5% instead of 0.5% of the cost of electronics was gold, I don't think you'd be able to tell the difference. Maybe that boosts the economic impact of this return to the gold standard to the same as spelling both "through" as "thru" and "thorough" as "thoro".
Your implied prohibition on fractional-reserve banking would, by contrast, have an enormous economic impact.
The most destructive bit was the pointless push to mine more gold. The physical volume of gold has very little to do with how expensive it is to keep safe.
Anyway, I thought M1 excluded fractional reserve money which is why it ignores money in bank vaults. Aka as you pay down a loan the M1 money supply is unchanged. Do you have a source for that?
PS:
Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
>The physical volume of gold has very little to do with how expensive it is to keep safe.
I'm having my doubts about that. If I can fit all my life's savings in my pocket, I would very much prefer to do that with savings in one pocket and gat in the other (yes I know gold doesn't fit that for everyone, but lets imagine the physical volume is smaller since you said it doesn't matter). Fight to the death against violent intrusion upon your person. That doesn't incur me any material cost. If I die I won't be needing it anyway. would 100000% prefer that to sitting in the bank where some bonehead at a three letter agency can freeze or seize it at will, maybe the help of a rubber stamping judge. Or worse yet some unelected governors at the fed just choose to inflate it away.
I guess there is some argument to be made it's cheaper to keep something safe if it is either very small or very large. Small enough and you can more effectively hide it or keep it on your person. Large enough and someone will need a semi, a few men, and a big forklift or crane to steal it. Houses come to mind as something worth a lot but unpractical to steal in the conventional sense of just taking off with it.
I can't imagine the amount of costs lost in places like Argentina by people trying to find a way to keep their fiat held in a safe way.
Houses are worth a lot, but they are not worth a lot per kilogram. Consider a house consisting of four 4m×4m rooms and a floor, with 200-mm-thick floor and 3-m-tall walls made of 2.4g/cc concrete, plus a cheap sheet-metal roof. This house might cost US$100k, but its 144 m² of walls and 64 m² of floor contain 41.6 m³ of concrete. (We can disregard the weight of the roof as insignificant.) So it weighs 99.8 tonnes and only costs US$1.002/kg, 4.7 orders of magnitude less than gold. Different construction techniques can modify this somewhat but by less than an order of magnitude.
I think the lesson you should draw here is not "a large thing such as a house is impractical to steal in the conventional sense of just taking off with it" but rather "a thing worth only US$1/kg is impractical to steal in the conventional sense of just taking off with it, unless it floats". It's also unusual for people to steal pieces of a junk car chassis, for example, even though all the equipment you need is an angle grinder or a portable oxy rig.
If a thing is impractical for a thief to carry away, it is also impractical for the owner to carry it away themself, or to conceal their possession of it from thieves.
You're right about the amount of M1; it's US$20T in the US. Thank you.
In fractional reserve banking demand deposits are lent out. So if you print $1000 cash (whether fiat or commodity-backed), you deposit it in a bank, the bank lends out $800, someone deposits that in their bank, that bank lends out $640, and someone else deposits that in their bank, then M1 is not $1000 but $2440. If that last person withdraws the $640 from their bank and repays the loan then M1 contracts to $1800. (And that's still true if they held the $640 as currency in their mattress rather than putting it in a bank.)
So, paying down a loan does not leave M1 unchanged. You're thinking of MB or maybe M0.
Gold mining is, due to its scale, not especially destructive; the amount of gold in circulation is about 60–100 years' worth of mining at current rates. There are many environmental and human-rights problems associated with gold mines, but their total magnitude is small just because there's not that much gold out there to mine.
The physical volume of gold has a great deal to do with how expensive it is to keep safe. So does its mass. In your earlier comment, you were talking about the effort required to dig vaults, for example; this effort scales directly with the volume of the gold.
I was going to write a rebuttal, but instead I focus on an amusing byproduct of your points and points above:
1) low inflation good because long-period storage bad
2) Government mishandling of fiat policies also bad
3) 3rd party custody is expensive
The solution: radioactive commodity money of high enough density for self-custody. Maybe one with a half-life of like 20 years. Tritium is a close candidate. Keep your life's wealth in tritium in one pocket and your gat in the other.
Both short-term and long-term inflation are relevant for different purposes.
It matters a lot whether the expected average inflation rate in the future is ±½%, 4%, or 25% when you get a 30-year mortgage on a house, sign a 99-year lease, save money for retirement 45 years in the future, buy a life insurance policy that probably won't pay off for 50 years, or rent an apartment to someone under rent-control laws that can hold the rent fixed until they die (perhaps 60 years from now).
±½% compounded over 30, 45, 50, 60, or 99 years is -14%–+16%, -21%–+25%, -23%–+29%, -16%–+35%, or -39–+64%.
4% compounded over 30, 45, 50, 60, or 99 years is -71%, -84%, -87%, -91%, and -98%. So in an environment where inflation averages 4% per year, like the current US environment, such contracts are unviable even if the inflation is fairly predictable. Rent control becomes politically impossible because renting an apartment amounts to selling it. Saving for retirement requires gambling on the stock market and subsidizing the Fortune 500 with your savings.
25% annual inflation is the average we've experienced during the time I've lived in Argentina, most of my adult life. At 25% annual inflation even renting an apartment to live in becomes a major problem. The US had 24+% inflation with commodity money for two years during the Civil War; Argentina has been averaging 25% for decades now, thanks to fiat money.
The vast devaluation of silver was a quite manageable problem by comparison, except perhaps for Spain.
But it's true that volatility is a real problem for a currency.
The bigger problem often ascribed to commodity money in a growing economy is the incentive to hoard: if the economy grows 3% per year, but gold or silver (or Bitcoin) is mined at a much smaller rate, maybe the price of gold will rise in tandem with the economy. And then you can earn a 3% return just by buying gold jewelry, so maybe you won't be tempted to take the risk of investing in productive ventures (or lending to them) by buying stock and hoping for a 5% return.
My review of the Warren–Pearson index data in https://news.ycombinator.com/item?id=32258172 makes me wonder if this problem in fact exists, because it seems like gold did not appreciate significantly over the period 01776–01932, compared to their changing basket of goods. But maybe it existed in other places (maybe the US is atypical) or maybe its apparent nonexistence is an artifact of Warren and Pearson's methodology?
It's hard to assess economic stability because big crises are low-probability events, but it doesn't seem obvious to me that Bretton Woods US (01944–01971) was systematically less stable than the US after the switch to fiat money in 01971.
Certainly it was far more economically prosperous; the change to a fiat currency coincides with a widely-remarked drop in the GDP growth rate and an even more dramatic growth of inequality, to the point that the lowest quintile in the US has famously seen no real income growth since the switch to fiat money.
But that could easily be a coincidence, because many other things also changed. For example, the Bretton Woods period was a historically anomalous period during which the US was by far the world's dominant economic power; all the other advanced economies had been bombed to smithereens, the PRC and Russia were additionally crippled by communism, and the former colonies in India, Africa, and Latin America were only beginning to recover from colonialism. The dollar itself enjoyed the exorbitant privilege of being the backing for all other currencies. Plausibly the US's dominance during this period allowed it to strip resources from weaker powers in a way that dramatically enhanced its own economic growth, a way that is no longer possible.
Also, you could reasonably quibble that, rather than being a natural division between systems, comparing to Bretton Woods amounts to historical cherry-picking: it's been 51 years since the US transitioned to a fiat currency, and the preceding 51 years include the crash of 01929 and the Great Depression! Any period of world history is economically stable compared to a period embracing the Great Depression.
I am suggesting you compare 1776-1971 vs 1971+ which is the opposite of cherry-picking. Ignoring all US history prior to 1944 is going to give you a very distorted view of what’s normal. Especially as Brenton Woods was a mixed system.
The degree to which these differences are a function of various monetary systems is debatable, but it’s very hard to argue that fiat is worse on those timescales.
I don't think it's very hard to argue that fiat is worse on those timescales; few if any fiat money systems have ever survived for a period of 195 years, like 01776–01971, without succumbing to at least one episode of hyperinflation. These are localized but generally worse than the Great Depression. We have numerous examples going back to the Yuan Dynasty, including four already this century: North Korea, Turkey, Venezuela, and most notoriously, Zimbabwe.
You could of course argue that Turkey isn't the US: there are important differences between the countries. And that's true, and surely the differences are relevant to the risk of hyperinflation. But the US today isn't the US of 50 years ago, either — economically speaking, it has a lot less in common with the US of 01972 than with today's Turkey (PPP GDP US$37000 per capita).
The US monetary system didn’t survive for 195 years. We tried several different approaches because it kept failing spectacularly.
The Copper Panic of 1789 for example went spectacularly bad. New Jersey in 1787 declared currency from other states was no longer valid and New York banned copper coins entirely. “At the height of the debasement, there was a 430% inflation rate for copper and commerce ceased, forcing several businesses and manufacturers to close down.[1][2]”
While there were certainly crises, people's dollars from before the Copper Panic were still worth the same amount after it. The exception was paper money during the Civil War (not just Confederate, as I said!), which became valueless after it. And of course banknotes issued by banks that failed.
There are lots of historical cases of debasement of coinage, yes.
Inflation over half a lifetime is not really relevant. For investors, large savings should be in productive assets (debt or equity), and real rates (on bonds) or real returns (on shares) have been positive. For non-investors, real wages are much more important.
But even including the high inflation in the 1970s and early 1980s (which Paul Volcker famously vanquished), that period from 1970 to 2020 averages less than 4% inflation a year. The four decades from 1982 to now have been pretty good on the inflation front.
Which is much preferable to +20% one year, and deflation another year, as in decades prior.
See https://news.ycombinator.com/item?id=32258546 for why 4% inflation over decades is relevant to average people. Dollar inflation over the past year has been I think 9%, higher than at any time since Volcker supposedly vanquished it. It's anybody's guess whether the vanquished inflation will be 0% or 15% over the next year.
Next year will be closer to 0% than 15%, I wager. Let's see.
You say inflation is important when:
* you get a 30-year mortgage on a house. - true, but more inflation is better for you then.
* sign a 99-year lease. - true, but more inflation is better for you then.
* save money for retirement 45 years in the future. - that should not be in money, so the level of inflation is not relevant, real returns are (the difference between nominal returns and inflation).
* buy a life insurance policy that probably won't pay off for 50 years. - yes indeed. Some of them offer inflation protection.
* rent an apartment to someone under rent-control laws that can hold the rent fixed until they die. - yes indeed, good point. Also if you write a mortgage. That does not affect most average consumers, though.
As Retric points out in https://news.ycombinator.com/item?id=32258306, every transaction needs both a buyer and a seller to happen, so all of these things do affect most average consumers.
Averaging inflation over 50 years is dressing for the average annual temperature rather than how hot it actually is today.
The best measurement of stability is to take the absolute magnitude (1) value of inflation or deflation and average that. 20% deflation does horrific things to the economy and alternating randomly between 25% inflation or 20% deflation would insanely destructive.
(1) 20% increase and 20% decrease don’t cancel each other out you want the inverse for negatives.
Surely we can all agree that fiat currencies are often less volatile than commodity currencies but have higher average (signed!) inflation, but looking at the development of the US economy during the 01776–01932 period we're talking about, I wonder what you are thinking of when you say "does horrific things to the economy ... would [be] insanely destructive".
You may or may not be aware that during that time period the US went from being a set of mostly agrarian colonies under the thumb of Great Britain to being the world's most prosperous economy, the world leader in industrialization, and the most popular destination for economic migrants, where supposedly "the streets were paved with gold" (a phrase originally used to ironically condemn London).
It’s hard to compare economies over such timescales, but in terms of PPP per capita the US was shockingly flat from 1776 to 1900.
The overall GDP exploded due to a larger population and industrialization was in full swing, but people where also forced to farm more marginal land in the mid west largely using the same techniques from 130 years prior. The US started with extreme abundance of old growth forests, wild animal and fish populations, and farming some of the most productive land on the planet. The US was considered a land of opportunity for so long largely because there was so much to exploit, but people didn’t move to the west and then Alaska because the economy was booming.
From 1900 to 1970 things far more consistently expanded with multiple boom times, but the Great Depression also shouldn’t be ignored. If anything it shows that a steady and growing economy is largely preferable to one with moderately faster growth but significantly more wild swings.
The thing that may be hard to understand if you've grown up in a fiat-currency world is that prices moved in both directions, not just one. The periods of high inflation you name are real, but they were generally compensated by subsequent periods of deflation, except for the case of 01947.
Fiat currencies are often stabler than commodity money, but they very rarely deflate. Bitcoin so far seems to be acting a lot like commodity money in this sense; in the sense of prices rather than the money supply, it has currently inflated about 230% from its peak in value earlier this year.
The Warren–Pearson wholesale price index is the one usually used for measurements of pre-WWI inflation in the US, at least by people who don't simply use the price of gold; it is plotted on https://newworldeconomics.com/the-warren-pearson-index/ and appears to be about 80 in 01776 and about 80 in 01891, where they've suspiciously cut off the price data.
Warren and Pearson's book is apparently in the public domain in India and is available at https://dspace.gipe.ac.in/xmlui/handle/10973/22256. They did a plot from 01797 to 01932 on p.6 which looks pretty similar: it's about 100 in 01797 and also 100 in 01932. It is indeed 79–85 in 01891. At the end of 01776 in their data table (p. 7) it was 86; at the end of the data table in 01932 (p. 10) it was 95.
So we could say that the average inflation rate from 01776 to 01932 was 0.06% yearly ((95/86)*(1/(1932-1776))). But this is probably overstating the secular inflation rate and is better understood as random noise; at the end of 01920 it was 226 (13% higher than the 202 at the end of 01919, close enough to the 15.6% you quote) and in 01894 it was 70. The same calculation thus gives us an average inflation rate of -0.17% yearly from 01776 to 01894 (that is, 0.17% deflation) or +0.7% from 01776 to 01920.
Warren and Pearson also include H. M. Stoker's data for the colonial period, even though the title is "Wholesale Prices in the United States, 1797 to 1932". It starts at 58 in January 01720 and rises somewhat steadily until 01776, at the beginning of which it is 75 before reaching 86 at the end of the year. Stoker's suggestion is that prices were lower worldwide during this period "due to the changes in the value of precious metal," presumably due to the Spanish flooding the world with cheap American gold and silver from Potosí and their other colonies.
Deflation is just as bad as inflation so the average inflation rate is meaningless.
It’s less obvious, but the point of currency isn’t simply to have more value stored as currency which changes nothing. It’s to facilitate the exchange of goods over time. During inflation sellers are reluctant and during deflation buyers are reluctant, both of which are problems.
And while it’s easy to think of yourself as a buyer or a seller every transition requires both in exactly equal amounts.
You are right, those are the bad incentives. And that is why there are legal and institutional and customary mechanisms in place to insulate central banks from political pressure, and by and large they seem to work well (maybe not in Argentina...)
Powell raised rates 4 times in 2018. Then, in 2019, the Fed became more dovish, but that was arguably justified by economics (inverted yield curve in spring of 2019).
More details than you ever wanted, from Bernanke's 21st Century Monetary Policy:
> At his swearing-in ceremony on February 5, 2018, Powell noted the importance of Fed independence—its “long-standing, nonpartisan tradition to make decisions objectively, based only on the best available evidence."
> On monetary policy, Powell soon made clear that, the president’s preferences notwithstanding, he planned to continue gradually moving toward a more neutral, or “normal,” policy stance. At his first meeting as chair, in March 2018, the FOMC voted unanimously to increase the target range for the federal funds rate by another quarter percentage point, to 1½–1¾ percent.
> In June [2018], the Committee raised the target range for the funds rate by another quarter percentage point [...]
> President Trump had praised Powell at the announcement of his nomination: “He’s strong. He’s committed. He’s smart.” And he remained silent on monetary policy through Powell’s first five and a half months. The honeymoon ended on July 19, 2018, when Trump, in a CNBC interview, said “I’m not thrilled” about the Fed’s interest-rate increases.
> [Trump's] public criticism of the Fed’s policy decisions would continue—a sharp break from the norm that, with few exceptions, had governed presidents after Nixon. Trump’s complaints also reversed his campaign-trail rhetoric that easy-money policies had created a “false” stock market.
> Powell’s strategy for dealing with Trump was multipronged. As he had at his swearing-in ceremony and, earlier, at the announcement of his nomination, he regularly and publicly emphasized that independence allows the Fed to make decisions in the public interest based on objective data and analysis and free of short-term political considerations.
> Consequently, the best policy, [Powell] concluded, was to continue Yellen’s policy of gradual rate increases, with close attention to economic developments and a willingness to adjust nimbly. As foreshadowed in Powell’s speech, the FOMC raised the target range for the funds rate again in September [2018], bringing it to 2–2¼ percent.
> On December 19, 2018, near the end of Powell’s first year as chair, the FOMC increased the federal funds rate target to 2¼–2½ percent. It was the ninth quarter-point increase since the tightening of policy had begun three years earlier under Yellen, and the fourth under Powell’s chairmanship.
> Four rate hikes in 2018, the promise of more in 2019, and the ongoing reduction in the balance sheet—which traders had dubbed “quantitative tightening”—added up to a significant prospective tightening, which seemed hard to justify when set against the agnostic stance that Powell had taken in Jackson Hole or the economic crosscurrents he cited at the press conference.
> In 2019, Powell and the rest of the FOMC navigated continued pressure from the president. They had to avoid “caving” to Trump’s demands but also not allow a desire to demonstrate independence to distort their decisions.
> On April 5 [2019], the president told reporters that the Fed should cut rates, and on April 30 he tweeted that the economy would “soar like a rocket” if the Fed lowered its benchmark rate by a full percentage point. “They [Fed officials] don’t have a clue,” he tweeted on June 11.
> It is hard to overstate how jarring Trump’s tactics were, particularly compared with his predecessors’ assiduous respect for Fed independence. Understanding the importance of not taking the bait, Fed officials responded to the inevitable press questions about the president’s tweets and comments through gritted teeth. For decades, presidential jawboning has not been an effective way to influence Fed policy, and it was not this time.
The alternative would be for us to all buy the book, so yes, I would say FabHK's comment was extremely valuable. Generally I find that comment length has a strong positive correlation with comment quality and a strong negative correlation with comment score.
I quoted a small selection of relevant paragraphs from chapter 9 of the book, which covers precisely this topic, as can be deduced from its title Powell and Trump.
The functions don't matter much when you're talking about the few dominating currencies, but shitcoins are doubly suspicious when their contracts include a centralized_mint().
At present (or at the time of my last conversation about the situation with my mother-in-law), you can legally acquire 200 USD/month at the official rate. This is part of what's driving the black market rate higher. The "ideal" would be to go to a bank, get a large sum of dollars, and immediately arbitrage it at a changer in some market to double your money. At $200/month, that won't get you a lot right now.
Not everyone is allowed to acquire 200 USD per month; only people with legally declared jobs, which I think is less than half the population now. The government policy is that dollars are only for the rich.
There's an official exchange rate. If you are a tourist and you want to buy pesos, you have to buy at the official exchange rate.
Of course, there will be other places that will give you rates that are closer to that the actual market value is. They may be disguised as place selling collectable coins or whatever.
At some stores, they may give you a much higher rate if you buy their stuff with foreign cash. USD and BRL are generally accepted.
Then there are the 'arbolitos'. They will be the guys shouting 'cambio!' at tourist locations. YMMV with them. Some are legitimate, some may insert some counterfeit currency in the mix. Personally, I never felt comfortable following someone to an unknown location when they know I have cash in my person.
About 30% of the stores in "arbolito" areas are willing to buy dollars at the black-market rate, and maybe 0.1% of them will report you to the police for asking.
Let me supplement the other replies to your question.
The unofficial rate that outworlder mentioned is the dólar azul (blue dollar). As FabHK and jtsummers said, Argentina imposes capital controls, so you can't buy too many US dollars at the (artificially strong) official rate.
The capital controls mean that an Argentinean that buys something from or while abroad must purchase US dollars at the blue dollar rate. Blue dollar is unofficial but so widespread that websites track it.
Russia is an interesting contrast to Argentina. The gap between the official and unofficial exchange rates between ruble and US dollar is much smaller than between the Argentinean peso and US dollar. This is because right now it is almost impossible for a Russian to travel or purchase things from abroad, which depresses the demand for dollars. Argentineans are free to travel and purchase things from abroad, so the demand for US dollars is much stronger.
It's not the dólar azul, it's the dólar blue. Also, people who travel abroad are allowed to purchase some more dollars at the official rate. Otherwise your comment is correct.
Looks like I was wrong: the "dólar turista" is 75% higher than the "dólar oficial" that you get paid if you export something, AR$226/US$ rather than AR$130/US$ (but still much lower than the AR$321 of the black market). I haven't been able to figure out what the limit is or who is allowed to buy it. Maybe you can: https://www.cronista.com/finanzas-mercados/dolar-turista-asi...
Confusing the issue is that the same "dólar turista" term is also being used to describe a new exemption from the foreign exchange restrictions that allows banks to purchase dollars from non-Argentine tourists visiting Argentina at the "dólar MEP" rate, which is actually currently higher than the black-market rate, at AR$323. Up to US$5000 per tourist per month.
Doesn't the dólar MEP being higher than the dólar blue imply that Argentina has a severe US dollar shortage, severe enough to authorize Argentinean banks to pay pretty much whatever tourists bringing them to the country demand in exchange?
Also, as a non-Argentinean, I have to confess that I hadn't considered the impact of an artificially strong dólar oficial on the country's exports. Surely beef and other Argentinean exports aren't priced at the official exchange rate on world markets? But I don't see how they couldn't be, either.
Yes, but also it means they don't want the tourists to feed the "blue" markets.
Yes, Argentine exports (mostly direct farm products like soy and corn now rather than beef) are made artificially more expensive by the perverse dollar policy. Also, on top of the 59% haircut from the fraudulent exchange rate, there's a 33% "retención" applied to agricultural products, so the farmers only get 21% of the international price of the exported grain. The fraudulent exchange rate also subsidizes (legal) imports, making it impossible for most Argentine industry to compete even in the domestic market with overseas imports.
> Although Argentines are used to high inflation, during the first semester of 2022, inflation hit over 36,2%, and in the last 12 months it registered a 64% increase.
Wikipedia notes:
> In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, the book often regarded as the first serious study of hyperinflation and its effects ... . In his book, Cagan defined a hyperinflationary episode as starting in the month that the monthly inflation rate exceeds 50%, and as ending when the monthly inflation rate drops below 50% and stays that way for at least a year. Economists usually follow Cagan's description that hyperinflation occurs when the monthly inflation rate exceeds 50% (this is equivalent to a yearly rate of 12874.63%).
So the current rate is far away from hyperinflation. On the other hand, it appears to be accelerating. And then there's this from a different article:
> Official CPI inflation figures released monthly by INDEC have been a subject of political controversy since 2007 through 2015. Official inflation data are disregarded by leading union leaders, even in the people sector, when negotiating pay rises. Some private-sector estimates put inflation for 2010 at around 25%, much higher than the official 10.9% rate for 2010. Inflation estimates from Argentina's provinces are also higher than the government's figures. The government backed up the validity of its data, but has called in the International Monetary Fund to help it design a new nationwide index to replace the current one.
24% every two weeks would be 59.6% inflation per month, but I don't think we're there yet; I think it's been about 35% so far over the last month. But I don't see why you'd say it's "far away from hyperinflation". We might go over the hyperinflation line next month.
The INDEC inflation figures are, yes, 100% fake, and the controversy didn't end in 02015 (my guess is that somebody wrote that paragraph of that article in 02015). In 02001 AR$1 was worth US$1 (US$1.67 in 02022, deflating according to US BLS CPI figures according to https://www.usinflationcalculator.com/) and today it's AR$321 per US$1 according to https://preciodolarblue.com.ar/, thus AR$536 today is worth AR$1 in 02001. That's an average of 34.9% inflation per year. Some years it's been higher than that — 02001 is when the government dropped the dollar peg that had been strangling our economy but holding back inflation, at which point the peso immediately lost about 75% of its value before bouncing back — but the INDEC figures don't come anywhere close to the truth. A friend of mine was one of the numerous people who resigned from INDEC over this.
Argentina's economy is a self-similar process: when you look at snapshots taken days apart, nothing's really changed. When you look at snapshots taken a few years apart, nothing's changed, either. On occasion, there's (ephemeral) change at intermediate timescales.
Borges, one of their most excellent writers, once said: Argentina "has all its past ahead of it".
As a Chilean, I'm dreading the day their country finally collapse. We will have an unprecedented migration event from our neighbor, we are definitely not ready for that.
You are a professional working overseas. A company pay to you in dollars, 1000/5000/whatever.you gets an exchange at Ar$ 137 per dollar today , you moves to the next box in the bank to exchange that to dollars again. The cashier tells to you that you can only buy usd 200 with pesos, at ar$ 137 per dollar, with 65% tax over that, so near ar$ 226 per dollar. You wants more, ok, you are not allowed to buy those 200 dollars at official price, you goes to the free market, legal, to change your pesos for dollars at 336 each one.
You ends asking please to pay you in an foreign bank to not loose the dollars.
And why we want to save in dollars, because the inflation, that maybe this year is 80% with luck.
And I'm lucky, because if I'm exporting soy beans they are paying me 33% less in the first step.
And I'm not starting to talk about taxes.
Forget, we are the bug in the system.
Edit: and you are ok, because you works on IT, but around you, your friends.., they will never buy a house, they are surviving. it is sad as hell.
195 comments
[ 3.6 ms ] story [ 258 ms ] thread(From the article). Chronic lack of competent governance seems to be the culprit.
Complicating things, of course, is the fact the US saw our military junta as a bulwark against communism, and so provided some support to them [2] (and, it is argued, our military dictators thought they saw indications the US would support us in our war against the UK, which is just as deranged as it sounds. Then again, our dictatorship was as incompetent as it was bloodthirsty).
---
[1] https://en.wikipedia.org/wiki/National_Reorganization_Proces...
> "However, relations soured after the U.S. supported the United Kingdom in the Falkland Wars."
[2] https://en.wikipedia.org/wiki/National_Reorganization_Proces...
> "The United States provided military assistance to the junta and, at the start of the Dirty War, Secretary of State Henry Kissinger gave them a "green light" to engage in political repression of real or perceived opponents."
> "The US Congress approved a request by the Ford Administration, to grant $50,000,000 in security assistance to the junta. In 1977 and 1978 the United States sold more than $120,000,000 in spare military parts to Argentina, and in 1977 the US Department of Defense granted $700,000 to train 217 Argentine military officers."
[1] https://en.m.wikipedia.org/wiki/Operation_Condor
Using US examples because those are the ones I'm most familiar with, just look at how long there's been a "housing crisis" due to insufficient housing in some US cities. There's been plenty of time to fix it, but policy changes just nibble at the edges. Why? Because some people don't want to fix it, or don't care, or there are some downsides to fixing it properly.
Similarly, the US has a high rate of traffic fatalities among developed nations. The fixes for this are well understood, but they involve tradeoffs or design changes that many people do not want. (The US is getting better at safe road/street design, but very slowly)
Also: the black market of dollars is relatively small and also easily manipulated, but generates panic in people's minds.
The current ruling party (the one that likes to blame the agricultural sector) just signed up for some new unpayable loans from the IMF last month.
I've no particular respect for the current government, and I did mention "it's not just the government", meaning I believe part of the blame is theirs.
Do you deny the agricultural sector is one of the most powerful in Argentina, and one that speculates on the dollar and has a vested interest in it going higher?
Do you deny the illegal dollar market is relatively small but has a high impact in people's minds?
Do you deny the real estate sector trades in dollars?
> As this comment illustrates, partisan propaganda
Your comment is autological!
The illegal dollar market is not small, and its prices change similarly to the legal dolar market (mep, ccl).
> It's not that the dollar goes higher: the peso goes down.
Well, yes. If you are from Argentina, you know what I meant. If the agricultural sector only "thinks in dollars", then why do they regularly push for a peso devaluation, talk about "competitivity" of the peso vs the dollar, and must be forced to liquidate their dollars in a reasonable time? They obviously care about the relative value of the peso vs the dollar.
So the answer is the same as if a mugger asks why you must be forced to give me all the money in your wallet, receiving nothing in return. The implied necessity is an invention of the speaker.
I don't believe you have reliable information about the size of the illegal dollar market.
Certainly it is true that the agricultural sector is one of the most powerful in Argentina and that the real estate sector trades in dollars, but most of the rest of your comment is not even wrong, reflecting fundamental misunderstandings of a flat-earth level.
The assertion that the agricultural sector in Argentina is "speculating on the dollar" is incoherent. Speculating on the dollar is an activity dominated by big international investment banks and hedge funds, which make enormous leveraged bets on whether the dollar, the yen, the euro, or other real currencies will go up or down by 0.05%. The agricultural sector in Argentina is not able to do this because of legal prohibitions, and at any rate does not have nearly enough money to engage in the activity profitably.
When people in Argentina talk about the dollar "going higher" what they mean is that the fake Monopoly money we call the Argentine peso is losing value relative to the dollar, whose own changes in value are usually a rounding error by comparison, though not this year. Argentine pesos are an irresponsible speculative investment that are guaranteed to lose value; no prudent investor would hold them.
Anybody who owes debts denominated in Argentine pesos—most notably, the government—has a vested interest in inflation, the devaluation of the peso ("the dollar going higher"). Conversely, anyone who is owed debts denominated in Argentine pesos has a vested interest in the peso appreciating, or, since that's not going to happen, in the peso losing value more slowly. However, overall, the rampant inflation of the peso is one of the factors that makes the Argentine economy unstable and unproductive, which is the bigger factor in play here.
I suspect your reasoning is something along the lines of "the agricultural sector is a big exporter, so they get paid in dollars, so if those dollars are worth AR$600 instead of AR$300 then they make more money." But that is nonsense; if a dollar is "worth" AR$600 instead of AR$300, that's because the peso has lost half its value, so that AR$600 only buys you roughly the same amount of fertilizer, Monsanto seeds, farmhand labor, silage bags, etc., that you could have bought with the AR$300 without the additional inflation. Moreover when inflation is fast enough it becomes difficult to carry out any transactions at all.
It's relevant to point out to other readers that the official dollar, the fake value the exporters of agricultural as well as other goods get paid, is AR$129.25 × AR$137.25 today. That means that for every dollar of soybeans you export legally, you get paid AR$129.25, which is "worth" US$0.41. That is, the central bank confiscates 59% of your revenues (not your profits!) in order to subsidize imports and rich people going abroad for vacations. Unfortunately, soybeans are too bulky to smuggle out of the country.
Government confiscation of 59% of export revenues in order to subsidize Chinese imports goes a long way to explaining how we have ended up in such a terrible economic situation. Argentine makers trying to compete with Chinese imports have the central bank subsidizing 57% of the price of their foreign competition; Argentine consumers only pay 43% (137.25/316). So a hypothetical Argentine product of the same quality must be 57% cheaper than the Chinese product in order to compete. Government mandates of "Industria Argentina" result in companies importing fully manufactured products in kit form from China or Korea and paying unskilled workers a minimal amount to assemble the kits.
Export-led industrialization was the key policy that replaced poverty with prosperity in Taiwan, Japan, PRC, Kore...
For starters, if the dollar goes up, the inflation doesn't necessarily follow. Otherwise that means that the salaries (among other things) follow the dollar, and that's not true at all.
Second, this whole week there were talks about a special exchange rate for the sector to tempt them to export more, because the government needs more dollars for energy imports. So by just waiting they get a better deal, that's clearly speculation.
You can argue if this is right or wrong, if it's good or bad for the economy or the people, but speculation it is.
Holding pesos is speculative. It's not just speculation — it's speculation done badly and irresponsibly, like buying a lottery ticket, because the peso's prospects for increasing in value are quite poor indeed. Holding dollars is, by comparison, not speculative at all.
We are facing a piece of absurd doublespeak in which "speculation" is being used to mean "refusing to foolishly invest in an unstable commodity", namely, the peso.
Speculation in dollars is not impossible. You need servers in London, New York, or Tokyo that respond to second-by-second price changes, and you need access to forex markets with very, very tight spreads — otherwise the spread will give all of your potential speculative profits to market makers, because forex price movements in real currencies are fractions of a tenth of a percent most days.
This is not what the agriculture sector in Argentina is doing.
(Let's leave aside for the moment that this is also a transaction in which the central bank confiscates 59% of the value of the currency being traded in order to subsidize vacations abroad for the rich, and to subsidize imports so that they are impossible for Argentine domestic industry to compete with.)
— ⁂ —
Salaries and other prices do follow the dollar relatively closely, though there is both volatility and a secular decline in Argentina's productivity over time. The current salario mínimo is $45540 per month, which was US$210 earlier this month, though now it's US$150. (Presumably that will change in the next month or two.) When I moved to Argentina in 02006 it was $800, equal to about US$260. See https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A....
The minimum wage did not track the dollar perfectly; US$210 differs from US$260 by 24% (or 19% calculated the other way round — a 1.3% decline per year), but $800 would now be worth US$2.61, or US$3.70 earlier this month, and US$210 differs from US$3.70 by 5600%. 24% is a significant tracking error but it's insignificant compared to 5600%.
This calculation understates the decline of the salario mínimo in real terms, because the dollar has experienced a total of 47% inflation since 02006, according to the US BLS CPI. US$1 in 02006 is US$1.47 today; 1.47 · US$260 · AR$216/US$ gives AR$82600 as the equivalent salario mínimo at the blue dollar rate earlier this month, and using today's mid-market blue dollar rate of AR$306/US$ it would be AR$117000. Over 16 years that's a 5.7% decline per year in the buying power of the salario mínimo, though obviously that's a very noisy estimate.
I would welcome other salary data. For example, how has the median Argentine salary changed over this time? How about the mean salary, which is essentially the per capita GDP?
And about salaries, that was my point, they are 24% lower than in 2006. Considering the dollar's 47% inflation since that year, those USD 260 would be ~USD 380 now, so 68% lower.
And it's not limited to the current government, their previous one was woefully incompetent at fixing deficit spending. But it can't also be denied that the party in power is the one that refuses under any circumstance to address the underlying cause.
Everything else you mentioned: Loans, bank runs, rampant inflation impacting land value, and business trying to protect their investments from the governments' byzantine rules and outright thievery through price controls that expects them to produce at a loss, is just a byproduct of government policy that is rotten to the core and a population that keeps electing the same incompetent buffoons that do not dare or desire to make the necessary changes.
I really don't think it is just the government, nor is it the lack of cutting down deficit spending, nor the tax system. I try to take a more historically grounded view. I don't think there are easy answers though.
I believe the view that "there's the government, and there's this bunch of innocent businessmen at the mercy of big bad government" is not very compelling, for various reasons. One is that democratic governments in Argentina are pretty weak, all things considered; they aren't all-powerful, they usually have an opposition running interference at every step, US-style. Another is that when some businessmen had their chance to run their own government (you mentioned one recent occasion, the dictatorship was another) they still screwed up.
Yes. The actual men in green uniforms were just the visible face of the dictatorship. There were actual businessmen behind their economic policies. Not for nothing the dictatorship is called the civic-military dictatorship, as you well know if you are from Argentina.
> And Macri's business become big thanks to its links to government
I'm well aware of Macri's corruption and its links to the government. It's ironic, really -- those who benefited the most from government ties are so quick to decry "government corruption". Such is the history of corruption, too: one foot in the government, one foot outside of it. Both parts are important. I think, historically, the government is the weaker part in Argentina, at the beck and call of those actually calling the shots.
If you want to choose to believe that this is an "us vs greedy capitalists/the opposition/whatever" problem, that Argentina's problem is highly complex, multi-layered, too hard to deal with, and that the devil is in the details like the government tells people to believe on the TV, don't be surprised or angry by the results.
I've also never implied the solution is to let "some businessmen" run the country, and in fact implied that clearly not to be the case with my statement on Macri's government. Argentina is in such a dire state of emergency that it matters none if it's a right-wing, left-wing or whatever kind of government that's running the show because given basic competent human beings willing to fix the country that kind of "detail" only matters once you have surplus money to expend and you have to decide what to do with it. There's only one way out of this and it's to fix the budget by cutting spending to reasonable levels in one go, do away with inflationary practices, and make it possible for productive people to produce without having to worry about arcane tax rules. And again, tax-wise it's not so much the tax rate that matters (although in the short term it does, because Argentina has fucked over investors time and again and needs to do a lot to seduce money back in) as it is the amount and complexity of the tax system that leads people to evade them.
There are many political situations where information is scarce and there's room for honest discussion. In this one, there is none. I just hope that the only person stating basic truths over there looking and acting like a clown doesn't ruin your chances of not becoming another Venezuela.
I obviously disagree with this. Whatever else our differences are, I don't think anyone thinks "the answers are surprisingly easy".
> There are many political situations where information is scarce and there's room for honest discussion. In this one, there is none.
I... well, I'm glad you have this level of certainty that you think there's no room for honest discussion.
> I just hope that the only person stating basic truths over there looking and acting like a clown doesn't ruin your chances of not becoming another Venezuela.
I'm afraid I know who you are talking about. "Basic truths" :facepalm:
The most important thing is that major operations are not done in this market, obviously.
Also, bizarrely enough the location of all "cuevas" (which is what we call the physical places where the illegal market operates) are well known by the authorities and could be shut down if they so wished. So there is definitely that in favor of the "the government is corrupt" argument.
As for the size: again, major operations -- the kinds that actually "move the needle" -- are done in the legal market. I seriously doubt crypto has any impact in Argentina.
Another way to look at it is that crypto is strengthening the dollar’s foothold in Argentina and weakening the state’s ability to manage their own currency, to extremely detrimental effects.
However, a number of presidents and finance ministers have had to resign in disgrace when their policies (or those of their predecessors) provoked immediate crises. Printing money is a common way to postpone an immediate crisis.
The government there is very competent at stealing their people's wealth through inflation.
I bet there are people like this in every country. They just couldn't find a way to do it unchecked. Yet...
People usually complain about the government being corrupt and stealing to the people. But most people are the same, at their own level. They will try to steal as much as they can at their level or what is close to their hands. From bit paying taxes to actually pocketing others money, etc.
I know it is not everyone, but it is the majority of the people that are like this, politician or not.
I still have a friend there, always complaining public services don't work (healthcare, police, etc) but then in the same conversation he says with a straight face that he prefers not to pay with credit cards or bank accounts because then he'd have to pay taxes and declare the money.
There are people like this all over the world, but the proportion in Argentina is huge, a big majority I'd say. It's part of the culture.
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
You're correct about what the policy says, but enforcement doesn't seem to back it up in many cases.
Personally I don't see an issue with critiquing the dominant culture in any nation. GP made plenty of caveats about "not everyone" and the like.
I find such caveats to be nauseating, but they tend to be quite effective at preemptively disarming the type of insinuations of national or racial chauvinism that are exemplified by your comment.
I think because YC is based in the US and most of the users here are based in the US then harsh criticism of the US (and its people) is acceptable.
Would you feel better or worse if I elucidated my criticisms of Argentina en Español on an Argentinian website?
My intuition is that would be seen as aggressive or chauvanistic.
I was born and raised in Uruguay, a smaller neighboring country that shares a lot of traits with Argentina. I'd bet a lot of people from either country will not only agree with OP's characterization, but embrace it. This kind of behavior even has a name that carries positive connotations: "viveza criolla", loosely translated as "local wit". Behaving this way is considered the smart thing to do. Not behaving this way makes you an idiot.
I hated this mentality growing up. I never felt like I fit. I've now lived in Europe for the last 12 years and it feels a lot more like home.
Note I mostly disagree on politics with 99% of all other Argies posting here (let's say the kind of Argies who post on HN are self-selecting for the kind of politics I disagree with), but this bit is true: we are, at least in Buenos Aires, a selfish, cheating people. Nobody ever in Argentina thinks the rules and laws apply to us, we want to take every advantage we want, pull whatever lever from friends in useful positions, but we always, ALWAYS, complain when somebody else bends or breaks the rules.
"The politicians are all corrupt!" -- but never me.
"That guy drives terribly and jumped a red light!" -- but never me.
"He's cheating me on the price of this!" -- but I never do this myself.
"My employer is exploiting me!" -- but I, of course, always legally employ cleaning ladies for my own house.
This defines our national identity and it needs to be said.
Either way. I hail from a particular (different) country and I will make fairly confidently proclamations about cultural every-day ingrained corruption there. I have explicitly, consciously and purposely changed my culture as I vehemently disagreed with common negative traits of my previous and original culture.
People just got by with stealing and hustling.
Inevitably I will simply have to withdraw from the market there...
This sounds like an issue with capitalism and the rest of your comment aligns with that too. You also pointed out the dissonance between the complaints people have about the govt and the similar actions they take - I think a lot of that has the same cause. We have bad incentives at multiple levels because it's the water we're all swimming in
Argentina has a poor economy because it is a half-capitalist half-socialist country.
They have a very different monetary system, though, and some of them are successful because the Euro lets them export their economic problems to their poorer neighbours.
It is also way more capitalist than the US by having a large part of the population paying less than 5% income taxes.
The country is hard enough to explain without the constraints of a browser textbox.
Bad monetary policy makes bad acting individuals: https://mises.org/library/ethics-money-production
It is a "positive reinforcement" loop with negative consequences for everyone and there is no easy way out of it.
I agree that you cannot be the only one "doing it right". Of course...that wouldn't fix anything and you'd be screwed. But do you see the problem? Everyone has the exact same argument you have for doing it, this the cultural thing I was talking about.
As another example, my friend's father passed away a few years ago. As everyone over there he had all of his saved money hidden at home. His own brother stole all the money just hours before his dad passed away.
As I said on my initial comment, this happens everywhere on every country, but the proportions and the impunity on which this shit happens over there is just unbelievable. This is an example of what I mean with "everyone would do it at their level". It's just that politicians have more opportunities to do it.
We rented a nice apartment from an expat from Michigan who married a Argentinian. In an email he practically begged us to bring $100 bills, which he would exchange for pesos at a much better rate then was available from local banks, which he thankfully did. When I asked him what was the deal, he told me the currency is so volatile there, the only protection was the USD, especially the $100 bill.
Most of the locals were friendly, the food was great. Public transportation was dirty and hot. We were constantly being approached by people wanting to give us "tours" around city for a fee. (We read about this before going!) The infrastructure everywhere was pretty bad, you had to be very careful where you stepped on any sidewalk. Not sure if we would go back, but we did enjoy most of our time there.
When people describe Buenos Aires as "the Paris of the south", this is what they mean:
That we have a great deal of Parisian looking architecture, especially in our "historic" sections of the city, such as microcentro.
That we have a greater deal of European influence than our Latin American neighbors. (There's also a racist implication that we are "whitest". Argentinians care a lot about skin colors, and for us, calling someone a "negro" is a common insult. There's a confusing exception here -- "negrito", "negri" or "negro" is an endearing term you can call a friend, but it's always insulting if you refer to poor people, "esos negros", "qué negros", etc).
Historically, the upper classes of Buenos Aires looked up to Paris. This has been replaced for admiration of the US, a long time ago, and is no longer relevant.
As for scheming locals and dubious tours: I find these to be the norm in many European cities as well. I was marked for tricking/mugging in Paris, Barcelona and Rome, so... another European influence I guess?
Dirt and poorly maintained infrastructure: sadly, you're right. We porteños -- the people from Buenos Aires -- are a very dirty people and we like throwing garbage on the streets, breaking public stuff, urinating in whatever place, etc.
All of us are selfish, not only people in Argentina
Great! Now that your money is in the bank, pray for <deity> you don't fall into a bank run[1] and lose 65% of your savings[2]. The Central Bank still has reserves, but it doesn't look nice.
This applies to freelancing, but I can imagine most other areas work like this, with bureaucracy and pressure to SMBs working way right of the Laffer curve[3].
My point is, this is a negative feedback loop that (maybe?) started with the toxic vainglory of "outsmarting the system" but was fueled along the years with a general mistrust of banks/institutions, for good reasons. There are no incentives to do things correctly, and if some would appear it's likely set up for failure, because who says the next administration doesn't remove it and the show goes on?
Honestly, I don't know how (or if) it can be fixed at this point.
EDIT: Plus, it's really hard to see any of that tax revenue being put to good use. We're sitting at around 40-50% poverty.
[0] https://maxifirtman.medium.com/gu%C3%ADa-definitiva-para-cob... - second graph [1] https://en.wikipedia.org/wiki/Corralito [2] https://en.wikipedia.org/wiki/Corral%C3%B3n [3] https://en.wikipedia.org/wiki/Laffer_curve
https://www.doingbusiness.org/content/dam/doingBusiness/coun...
This comes up a lot in other cases too, e.g. "My spouse is from $country and I've learned that they $foo, $bar, and $baz as much as they can." Or: "I'm from $country so I get to say bad things about them."
In general, the "eschew flamebait" rule (see https://news.ycombinator.com/newsguidelines.html) has to take precedence because preserving the forum is more important than any specific discussion, and we're constantly trying to prevent this place from drowning in flames. It's really easy to understand how a comment like yours would land with someone else from $country (in this case Argentina), someone living there, someone having family from there, etc.
I don't have a great suggestion for how to rewrite a comment like this, except to say: reduce the generalization, be less judgmental, and instead emphasize your particular experience.
Argentina also has a chronic problem with inflation (in my opinion, due to printing more money than required by the economy, most times to solve the fiscal deficit you obtain when the national state spends too much), so everyone knows that you have to save money in a hard currency, USD being the most common one. So it has a real big demand for savings and capitalization, e.g. real estate is priced in dollars.
As why argentinians keep voting parties that keep the dollar artificially cheap, I believe it's a mix between a survivorship behaviour (if USD goes up, prices of goods and services will more or less go up) and wanting to consume more than what one can afford (holidays in Brazil, trips to Europe or USA every other year, cheap electricity and natural gas so you can leave your air conditioner on all day, etc).
Disclaimer: I am not an economist, and as everyone else, I have a biased point of view.
[0] This newspaper article has a (badly cropped) chart of the difference between black-market and official dollar exchange rate through the years. https://www.infobae.com/economia/2020/08/22/la-historia-de-l...
1. Low value of exports leads to a trade imbalance and long term decline in foreign currency reserves.
2. The government prints money to spend not on productive investments to solve 1. but on vanity projects or more-or-less bribes for their constituents to stay elected, leading to inflation.
3. Many historical periods of high ARS inflation leads to a lack of confidence in the local currency debt market.
4. 1+3 mean that Argentina needs to borrow in foreign currency, mostly USD.
5. Over time the debt accumulates and even more borrowing is necessary to pay interest.
6. Recently, rising US interest rates lead to a stronger USD, exacerbating the problem.
7. As debt rises so does the default risk and investors won't lend except at higher interest rates to compensate.
8. Eventually the country risks a default. Nobody wants that because the country wouldn't be able to import anything due to a lack of foreign currency (see Sri Lanka) and the creditors don't want that because they won't get paid back. So the IMF offers a bailout on the condition that the country will implement reforms to reduce spending so that it won't need to be bailed out again - austerity.
9. Austerity is unpopular and the government is replaced with one who promises to raise spending again and stick it to the IMF.
10. GOTO 1
This probably describes most countries in the world.
Note that 11 is really an issue of both government policy and the culture. Tax evasion is both a response to inflation and a result of a culture that doesn’t see an issue with putting private benefit over public good.
It's very important to understand that this is a very important weakness of the monetary system in every country, and only countries with little political power are forced to austerity by larger powers (Greece, Argentina and the IMF, etc). Argentina is just a chronic abuser of foreign debt and money printing.
There is practically no industrial class in Argentina any more. Their main business is to export soy and meat.
The above means that the government has to run permanent fiscal deficits and get indebted. At some point they are unable to pay the debt and the first temptation is to debase the currency. Rinse and repeat in an infinite loop of mistrust, tax avoidance and default.
It's a very hard problem to solve, unfortunately, as it's at this point deeply integrated into argentinian culture.
1. Developed
2. Underdeveloped
3. Japan
4. Argentina
https://en.wikipedia.org/wiki/National_debt_of_Japan
For reference, that figure is ~75% for the US, and between ~75 and 50% for most EU countries. Fun fact, the largest foreign debt holder of the US is...Japan.
* Huge asset bubble in the 1980's.
* The Nikkei 225 stock market indicator reached a high of about 40k in 1989, but dropped to a quarter with the collapse of that asset bubble, and has not recovered that yet (it just recently hit 30k). This period was known as the "lost decade" [1]
* Japan has had very low (near zero) rates for nearly three decades, more than twice as long as the rest of the world.
* Demographics: the transition to low birth rates, shrinking and ageing population started earlier than most other countries
[1] https://en.wikipedia.org/wiki/Lost_Decades
But see for example the charts (click on "max" to see as far back as possible) on Yahoo Finance for famous indexes of top X companies in each country:
Japan (Nikkei 225): Up 118% today since 1985, but down 29% from 1989's peak https://finance.yahoo.com/quote/%5EN225/
USA (S&P500): Up ~2000% since 1985, technically down ~12% since December but anyone who invested 15+ months ago is still up it's not like a crazy crash https://finance.yahoo.com/quote/%5EGSPC/
UK (FTSE250): Up ~1000% since 1986 https://uk.finance.yahoo.com/quote/%5EFTMC/
Obviously these are limited to the few hundred biggest companies but offer a good snapshot, and it's a similar story if you look at other European countries etc., and a significant problem for Japan (as well as being a metric/indicator caused by significant problems) that their growth has been so far behind.
It's hard to keep a good standard of living for 45 million people with that.
> “everything starts with a large fiscal imbalance, which becomes a monetary imbalance due to printing [money] to finance the deficit.”
Says the chief economist of the Agricultural Foundation for the Development of Argentina.
A.k.a. someone in one of the best places in the world today to really know this stuff.
[0] https://www.google.com/amp/s/www.infocampo.com.ar/gustavo-vi...
Carlos Schilling, el ex presidente de FADA, señaló que “es común que hoy en día nos preguntemos ¿qué estamos haciendo para mejorar nuestropaís? Desde FADA hacemos, y hacemos mucho: trabajamos para que todos entendamos que producir más es bueno para todos, que si el país está en déficit es malo, que si exportamos más nos ayuda a todos.
I don't know anything about his qualifications.
Argentina has been a net exporter since 2019, largely due to dramatically falling imports that are associated with a lower quality of life for its people.
Many of Argentina’s problems can be traced directly back to protectionism that is intended to “keep Argentina’s wealth in Argentina” (a great recent example re-nationalizing their oil company by force). This thinking has left the economy extremely dependent on volatile commodities and all but eliminated the vibrant start-up ecosystem that once existed there (Mercado Libre is still the largest public internet company in Latin America).
Suffice to say, inflation in Argentina has much more to do with destructive real economy policies than it does with “money printing,” especially when you consider their interest rate has been above 20% since 2016!
I don't understand why you would call the renationalization of YPF "protectionist". Did it somehow lower YPF's cost of oil drilling, subsidizing Argentina's oil exports, or at least reducing Argentina's oil imports (we are now a net importer)? I would think rather the contrary: by increasing the risk to investors and lenders, it will raise YPF's effective interest rate for the necessary capex, increasing the cost of Argentina's oil exports. What's your reasoning?
For reference, "protectionism" refers to government policies that have the effect of increasing the profits of domestic producers by "protecting" them from foreign competition, or political advocacy of such policies.
I don't understand what you're saying about "destructive real economy policies" vs. "money printing" and 20% interest rates. Can you elaborate? I would say the Argentine government's policy of printing lots of money is a destructive real-economy policy that has caused interest rates to be very high, because interest rates have to be higher than the rate of inflation in order for lending to be profitable.
I don't see how the quote diminishes his qualifications to talk about macroeconomics.
The implication of the economist doesn’t even really make sense - both Argentinas trade and budget deficits aren’t that big vs. the rest of the world, but their inflation and level of government intervention into the real economy sure is.
In general, my philosophy on economics is to notice what’s different about a country than just accepting the “easy” answer; a <10% of GDP deficit doesn’t phase me (Major trading partner Brazil is similar in both ways), but a government willing to renationalize a company it sold on the open market sure does!
But that doesn't mean that it is impossible to manage fiat money sensibly, or do QE responsibly without subsequent inflation. It is not fine to print money at will, but it is fine to run expansive monetary policy when warranted.
So it's not about impossibilities, so much as it is about incentives and probabilities.
Note, there are definitely cases where deficit spending is warranted (e.g. recessions) and even a good investment during boom times. But when deficit-spending during good times goes towards not infrastructure but ephemeral program spending, which much of the world is currently doing, then it's easy to see why it is so difficult to manage fiat money responsibly.
US has had a much more stable economy post fiat money than before fiat money. https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
Any evidence for that?
* 1882-1885 recession (not totally fair; gold standard policies hadn’t had time to cause this)
* 1887-1888 recession
* 1890-1891 recession
* Panic of 1893
* Panic of 1896
* 1899-1900 recession
* 1902-1904 recession
* Panic of 1907
* Panic of 1910-1911
* 1913-1914 recession
* Post-WW1 recession (1918-1919)
* Depression of 1920-1921
* 1923-1924 recession
* 1926-1927 recession
* The Great Depression
We were on a mixed system from 1933 until the end of Bretton Woods. We’ve had seven recessions since then (vs 15 over a similar time span), and one of the big ones (1973-1975) was clearly driven by decisions made while operating on a gold standard.
(It’s a different story if inflation is the only metric you about at all - while it was more volatile it was also lower on average)
Also I think saying that inflation was "lower on average" is really a dramatic understatement. From independence up to the advent of the "mixed system" in 01933 (really a switch to fiat currency until 01944) inflation was probably zero on average. The same was observed over the 1300 years of the commodity-backed pound sterling (usually gold, sometimes silver or bimetallic).
I think there are plausible arguments that fiat currencies are less prone to such crises, and even that they stimulate economic growth, but I don't think it's an open-and-shut case.
The vast devaluation of silver after the discovery of the new world was a massive issue in Europe even if it averages out to nothing over time.
I think which you prefer depends on your station in life and your spending choices. Personally when fiat hits my bank account I want to shit-can it as soon as possible, eithre for equities or commodities. If I were paid in the kind of unstable but averaging out dollar of the 1800s I would very much prefer that, rather than losing money to middle men converting to some commodity like that (such as a commodities index, silver, whatever) and then converting back whenever I need to spend.
Lets’s say you want to store gold in your basement for bad times like a famine. Great you and everyone else has 1+ oz of gold when a famine hits, but society didn’t actually get any more food so everyone having gold is not just pointless but wasteful both to mine the stuff and to keep it protected from thieves.
Alternatively, society can try and store value as productive assets like stocks. On a day to day basis it looks similar but rather than building ever larger vaults and digging ever deeper it’s a quest to create even the smallest income stream. You still hit diminishing returns but it’s stuck with diminishing positive returns.
PS: > losing money to middle men converting to some commodity
You end up losing even more money when the government is trying to get and store enough gold to keep a gold backed currency, it’s just less obvious. Great Britten sent many ships to Canada during WWII to keep it’s gold safe. They had much much useful things to do with those ships and men.
It does not require a significant fraction of your lifetime to dig enough of a vault to protect a liter of gold from thieves, nor to mine it. The impact on overall economic productivity is probably similar to that of spelling "through" as "through" rather than "thru".
You can easily wear a year's wages as jewelry, or a lifetime's wages with more difficulty, which has historically often been useful when you're fleeing famine-stricken areas. Stocks have usually been less useful; protecting a stock portfolio from disaster requires active investment management and is generally infeasible during wars and famines.
It is true that collectively we need to store food, not gold, to prepare for famines. It is a mistake to leap from this fact to the conclusion that everyday people should not be allowed to save money. You might or might not be aware that until roughly the transition to fiat currency in 01971 saving money was a canonical example of responsible adult behavior in the US, much like doing your tax returns, separating your recycling, or investing in an index fund today.
I've presented a better argument for why being able to store value as currency is harmful in https://news.ycombinator.com/item?id=32258546. I'm not completely convinced by it but it's at least not completely specious.
A reasonable estimate is the value of the worlds gold would equal the value of the words current money. As it’s a nice round number the US’s 20 Trillion M1 money supply and ~20% share of the world GDP suggests something like 100 Trillion for a reasonable estimate for the words supply of gold in that hypothetical situation.
The actual supply of gold is around 400,000,000 lb. So in that hypothetical world 1 lb of gold would in theory be worth ~100,000,000,000,000 / 400,000,000 = 250,000$/lb. Let’s again simplify to ~10x as much.
But wait if it’s worth 10x as much two things happen first it’s used less often in electronics etc which directly hurts the economy, but next it’s vastly more profitable to mine and thus the world spends more effort mining stuff that just sit’s in a vault. Except, governments can’t safely issue currency without being able to back it up with gold so they need to buy up most of this mined gold and then securely transport, store, inspect it etc.
As to keeping it in your own vault, you can secure it all you want that just makes home invasion vastly more profitable. As long as you have access to your gold at home, so does anyone with a gun to your head.
There's nothing in the use of commodity money rather than fiat money that prevents fractional-reserve banking, though you seem to be suggesting that there is, since you're doing the computation based on M1 (though I think you may be using the number for M2). The St. Louis Fed estimates the velocity of M1 and M2 at 1.122, which I guess is transactions per year: https://fred.stlouisfed.org/series/M2V so I think you're probably right that gold would be about 5 or 10 times as expensive without fractional-reserve banking.
So instead of 700 grams of gold your lifetime earnings would be 70 grams.
If 5% instead of 0.5% of the cost of electronics was gold, I don't think you'd be able to tell the difference. Maybe that boosts the economic impact of this return to the gold standard to the same as spelling both "through" as "thru" and "thorough" as "thoro".
Your implied prohibition on fractional-reserve banking would, by contrast, have an enormous economic impact.
Anyway, I thought M1 excluded fractional reserve money which is why it ignores money in bank vaults. Aka as you pay down a loan the M1 money supply is unchanged. Do you have a source for that?
M1 is listed at 20T here: https://fred.stlouisfed.org/series/M1SL
PS: Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
I'm having my doubts about that. If I can fit all my life's savings in my pocket, I would very much prefer to do that with savings in one pocket and gat in the other (yes I know gold doesn't fit that for everyone, but lets imagine the physical volume is smaller since you said it doesn't matter). Fight to the death against violent intrusion upon your person. That doesn't incur me any material cost. If I die I won't be needing it anyway. would 100000% prefer that to sitting in the bank where some bonehead at a three letter agency can freeze or seize it at will, maybe the help of a rubber stamping judge. Or worse yet some unelected governors at the fed just choose to inflate it away.
I guess there is some argument to be made it's cheaper to keep something safe if it is either very small or very large. Small enough and you can more effectively hide it or keep it on your person. Large enough and someone will need a semi, a few men, and a big forklift or crane to steal it. Houses come to mind as something worth a lot but unpractical to steal in the conventional sense of just taking off with it.
I can't imagine the amount of costs lost in places like Argentina by people trying to find a way to keep their fiat held in a safe way.
Houses are worth a lot, but they are not worth a lot per kilogram. Consider a house consisting of four 4m×4m rooms and a floor, with 200-mm-thick floor and 3-m-tall walls made of 2.4g/cc concrete, plus a cheap sheet-metal roof. This house might cost US$100k, but its 144 m² of walls and 64 m² of floor contain 41.6 m³ of concrete. (We can disregard the weight of the roof as insignificant.) So it weighs 99.8 tonnes and only costs US$1.002/kg, 4.7 orders of magnitude less than gold. Different construction techniques can modify this somewhat but by less than an order of magnitude.
I think the lesson you should draw here is not "a large thing such as a house is impractical to steal in the conventional sense of just taking off with it" but rather "a thing worth only US$1/kg is impractical to steal in the conventional sense of just taking off with it, unless it floats". It's also unusual for people to steal pieces of a junk car chassis, for example, even though all the equipment you need is an angle grinder or a portable oxy rig.
If a thing is impractical for a thief to carry away, it is also impractical for the owner to carry it away themself, or to conceal their possession of it from thieves.
Great read, thank you.
In fractional reserve banking demand deposits are lent out. So if you print $1000 cash (whether fiat or commodity-backed), you deposit it in a bank, the bank lends out $800, someone deposits that in their bank, that bank lends out $640, and someone else deposits that in their bank, then M1 is not $1000 but $2440. If that last person withdraws the $640 from their bank and repays the loan then M1 contracts to $1800. (And that's still true if they held the $640 as currency in their mattress rather than putting it in a bank.)
So, paying down a loan does not leave M1 unchanged. You're thinking of MB or maybe M0.
Gold mining is, due to its scale, not especially destructive; the amount of gold in circulation is about 60–100 years' worth of mining at current rates. There are many environmental and human-rights problems associated with gold mines, but their total magnitude is small just because there's not that much gold out there to mine.
The physical volume of gold has a great deal to do with how expensive it is to keep safe. So does its mass. In your earlier comment, you were talking about the effort required to dig vaults, for example; this effort scales directly with the volume of the gold.
1) low inflation good because long-period storage bad
2) Government mishandling of fiat policies also bad
3) 3rd party custody is expensive
The solution: radioactive commodity money of high enough density for self-custody. Maybe one with a half-life of like 20 years. Tritium is a close candidate. Keep your life's wealth in tritium in one pocket and your gat in the other.
It matters a lot whether the expected average inflation rate in the future is ±½%, 4%, or 25% when you get a 30-year mortgage on a house, sign a 99-year lease, save money for retirement 45 years in the future, buy a life insurance policy that probably won't pay off for 50 years, or rent an apartment to someone under rent-control laws that can hold the rent fixed until they die (perhaps 60 years from now).
±½% compounded over 30, 45, 50, 60, or 99 years is -14%–+16%, -21%–+25%, -23%–+29%, -16%–+35%, or -39–+64%.
4% compounded over 30, 45, 50, 60, or 99 years is -71%, -84%, -87%, -91%, and -98%. So in an environment where inflation averages 4% per year, like the current US environment, such contracts are unviable even if the inflation is fairly predictable. Rent control becomes politically impossible because renting an apartment amounts to selling it. Saving for retirement requires gambling on the stock market and subsidizing the Fortune 500 with your savings.
25% annual inflation is the average we've experienced during the time I've lived in Argentina, most of my adult life. At 25% annual inflation even renting an apartment to live in becomes a major problem. The US had 24+% inflation with commodity money for two years during the Civil War; Argentina has been averaging 25% for decades now, thanks to fiat money.
The vast devaluation of silver was a quite manageable problem by comparison, except perhaps for Spain.
But it's true that volatility is a real problem for a currency.
The bigger problem often ascribed to commodity money in a growing economy is the incentive to hoard: if the economy grows 3% per year, but gold or silver (or Bitcoin) is mined at a much smaller rate, maybe the price of gold will rise in tandem with the economy. And then you can earn a 3% return just by buying gold jewelry, so maybe you won't be tempted to take the risk of investing in productive ventures (or lending to them) by buying stock and hoping for a 5% return.
My review of the Warren–Pearson index data in https://news.ycombinator.com/item?id=32258172 makes me wonder if this problem in fact exists, because it seems like gold did not appreciate significantly over the period 01776–01932, compared to their changing basket of goods. But maybe it existed in other places (maybe the US is atypical) or maybe its apparent nonexistence is an artifact of Warren and Pearson's methodology?
Certainly it was far more economically prosperous; the change to a fiat currency coincides with a widely-remarked drop in the GDP growth rate and an even more dramatic growth of inequality, to the point that the lowest quintile in the US has famously seen no real income growth since the switch to fiat money.
But that could easily be a coincidence, because many other things also changed. For example, the Bretton Woods period was a historically anomalous period during which the US was by far the world's dominant economic power; all the other advanced economies had been bombed to smithereens, the PRC and Russia were additionally crippled by communism, and the former colonies in India, Africa, and Latin America were only beginning to recover from colonialism. The dollar itself enjoyed the exorbitant privilege of being the backing for all other currencies. Plausibly the US's dominance during this period allowed it to strip resources from weaker powers in a way that dramatically enhanced its own economic growth, a way that is no longer possible.
Also, you could reasonably quibble that, rather than being a natural division between systems, comparing to Bretton Woods amounts to historical cherry-picking: it's been 51 years since the US transitioned to a fiat currency, and the preceding 51 years include the crash of 01929 and the Great Depression! Any period of world history is economically stable compared to a period embracing the Great Depression.
The degree to which these differences are a function of various monetary systems is debatable, but it’s very hard to argue that fiat is worse on those timescales.
You could of course argue that Turkey isn't the US: there are important differences between the countries. And that's true, and surely the differences are relevant to the risk of hyperinflation. But the US today isn't the US of 50 years ago, either — economically speaking, it has a lot less in common with the US of 01972 than with today's Turkey (PPP GDP US$37000 per capita).
The Copper Panic of 1789 for example went spectacularly bad. New Jersey in 1787 declared currency from other states was no longer valid and New York banned copper coins entirely. “At the height of the debasement, there was a 430% inflation rate for copper and commerce ceased, forcing several businesses and manufacturers to close down.[1][2]”
There are lots of historical cases of debasement of coinage, yes.
Also, the top 10 highest US annual inflation rates all occurred before fiat.
1813: 20.3% 1862: 14.8% 1863: 24.7% 1864: 24.6% 1917: 17.4% 1918: 18% 1919: 14.6% 1920: 15.6% 1947: 14.4%
1970-2020 : ~560%
1920-1970 : ~ 94%
1870-1920 : ~ 53%
1820-1870 : ~ 12%
If memory serves, we went completely fiat in ~1974, or roughly the beginning of the 1970-2020 period.
But even including the high inflation in the 1970s and early 1980s (which Paul Volcker famously vanquished), that period from 1970 to 2020 averages less than 4% inflation a year. The four decades from 1982 to now have been pretty good on the inflation front.
Which is much preferable to +20% one year, and deflation another year, as in decades prior.
You say inflation is important when:
* you get a 30-year mortgage on a house. - true, but more inflation is better for you then.
* sign a 99-year lease. - true, but more inflation is better for you then.
* save money for retirement 45 years in the future. - that should not be in money, so the level of inflation is not relevant, real returns are (the difference between nominal returns and inflation).
* buy a life insurance policy that probably won't pay off for 50 years. - yes indeed. Some of them offer inflation protection.
* rent an apartment to someone under rent-control laws that can hold the rent fixed until they die. - yes indeed, good point. Also if you write a mortgage. That does not affect most average consumers, though.
The best measurement of stability is to take the absolute magnitude (1) value of inflation or deflation and average that. 20% deflation does horrific things to the economy and alternating randomly between 25% inflation or 20% deflation would insanely destructive.
(1) 20% increase and 20% decrease don’t cancel each other out you want the inverse for negatives.
You may or may not be aware that during that time period the US went from being a set of mostly agrarian colonies under the thumb of Great Britain to being the world's most prosperous economy, the world leader in industrialization, and the most popular destination for economic migrants, where supposedly "the streets were paved with gold" (a phrase originally used to ironically condemn London).
The overall GDP exploded due to a larger population and industrialization was in full swing, but people where also forced to farm more marginal land in the mid west largely using the same techniques from 130 years prior. The US started with extreme abundance of old growth forests, wild animal and fish populations, and farming some of the most productive land on the planet. The US was considered a land of opportunity for so long largely because there was so much to exploit, but people didn’t move to the west and then Alaska because the economy was booming.
From 1900 to 1970 things far more consistently expanded with multiple boom times, but the Great Depression also shouldn’t be ignored. If anything it shows that a steady and growing economy is largely preferable to one with moderately faster growth but significantly more wild swings.
What leaves you to believe that? And why do you want to move the dividing line to 01900 instead of 01933, when the US went off the gold standard?
Fiat currencies are often stabler than commodity money, but they very rarely deflate. Bitcoin so far seems to be acting a lot like commodity money in this sense; in the sense of prices rather than the money supply, it has currently inflated about 230% from its peak in value earlier this year.
The Warren–Pearson wholesale price index is the one usually used for measurements of pre-WWI inflation in the US, at least by people who don't simply use the price of gold; it is plotted on https://newworldeconomics.com/the-warren-pearson-index/ and appears to be about 80 in 01776 and about 80 in 01891, where they've suspiciously cut off the price data.
Warren and Pearson's book is apparently in the public domain in India and is available at https://dspace.gipe.ac.in/xmlui/handle/10973/22256. They did a plot from 01797 to 01932 on p.6 which looks pretty similar: it's about 100 in 01797 and also 100 in 01932. It is indeed 79–85 in 01891. At the end of 01776 in their data table (p. 7) it was 86; at the end of the data table in 01932 (p. 10) it was 95.
So we could say that the average inflation rate from 01776 to 01932 was 0.06% yearly ((95/86)*(1/(1932-1776))). But this is probably overstating the secular inflation rate and is better understood as random noise; at the end of 01920 it was 226 (13% higher than the 202 at the end of 01919, close enough to the 15.6% you quote) and in 01894 it was 70. The same calculation thus gives us an average inflation rate of -0.17% yearly from 01776 to 01894 (that is, 0.17% deflation) or +0.7% from 01776 to 01920.
Warren and Pearson also include H. M. Stoker's data for the colonial period, even though the title is "Wholesale Prices in the United States, 1797 to 1932". It starts at 58 in January 01720 and rises somewhat steadily until 01776, at the beginning of which it is 75 before reaching 86 at the end of the year. Stoker's suggestion is that prices were lower worldwide during this period "due to the changes in the value of precious metal," presumably due to the Spanish flooding the world with cheap American gold and silver from Potosí and their other colonies.
It’s less obvious, but the point of currency isn’t simply to have more value stored as currency which changes nothing. It’s to facilitate the exchange of goods over time. During inflation sellers are reluctant and during deflation buyers are reluctant, both of which are problems.
And while it’s easy to think of yourself as a buyer or a seller every transition requires both in exactly equal amounts.
Even Trump didn't manage to sway Powell.
More details than you ever wanted, from Bernanke's 21st Century Monetary Policy:
> At his swearing-in ceremony on February 5, 2018, Powell noted the importance of Fed independence—its “long-standing, nonpartisan tradition to make decisions objectively, based only on the best available evidence."
> On monetary policy, Powell soon made clear that, the president’s preferences notwithstanding, he planned to continue gradually moving toward a more neutral, or “normal,” policy stance. At his first meeting as chair, in March 2018, the FOMC voted unanimously to increase the target range for the federal funds rate by another quarter percentage point, to 1½–1¾ percent.
> In June [2018], the Committee raised the target range for the funds rate by another quarter percentage point [...]
> President Trump had praised Powell at the announcement of his nomination: “He’s strong. He’s committed. He’s smart.” And he remained silent on monetary policy through Powell’s first five and a half months. The honeymoon ended on July 19, 2018, when Trump, in a CNBC interview, said “I’m not thrilled” about the Fed’s interest-rate increases.
> [Trump's] public criticism of the Fed’s policy decisions would continue—a sharp break from the norm that, with few exceptions, had governed presidents after Nixon. Trump’s complaints also reversed his campaign-trail rhetoric that easy-money policies had created a “false” stock market.
> Powell’s strategy for dealing with Trump was multipronged. As he had at his swearing-in ceremony and, earlier, at the announcement of his nomination, he regularly and publicly emphasized that independence allows the Fed to make decisions in the public interest based on objective data and analysis and free of short-term political considerations.
> Consequently, the best policy, [Powell] concluded, was to continue Yellen’s policy of gradual rate increases, with close attention to economic developments and a willingness to adjust nimbly. As foreshadowed in Powell’s speech, the FOMC raised the target range for the funds rate again in September [2018], bringing it to 2–2¼ percent.
> On December 19, 2018, near the end of Powell’s first year as chair, the FOMC increased the federal funds rate target to 2¼–2½ percent. It was the ninth quarter-point increase since the tightening of policy had begun three years earlier under Yellen, and the fourth under Powell’s chairmanship.
> Four rate hikes in 2018, the promise of more in 2019, and the ongoing reduction in the balance sheet—which traders had dubbed “quantitative tightening”—added up to a significant prospective tightening, which seemed hard to justify when set against the agnostic stance that Powell had taken in Jackson Hole or the economic crosscurrents he cited at the press conference.
> In 2019, Powell and the rest of the FOMC navigated continued pressure from the president. They had to avoid “caving” to Trump’s demands but also not allow a desire to demonstrate independence to distort their decisions.
> On April 5 [2019], the president told reporters that the Fed should cut rates, and on April 30 he tweeted that the economy would “soar like a rocket” if the Fed lowered its benchmark rate by a full percentage point. “They [Fed officials] don’t have a clue,” he tweeted on June 11.
> It is hard to overstate how jarring Trump’s tactics were, particularly compared with his predecessors’ assiduous respect for Fed independence. Understanding the importance of not taking the bait, Fed officials responded to the inevitable press questions about the president’s tweets and comments through gritted teeth. For decades, presidential jawboning has not been an effective way to influence Fed policy, and it was not this time.
> At the press conference, Heat...
Oil sales are in USD.
US Taxes are in USD.
US debt is in USD.
The USD is backed by the most powerful military in the world.
The US is in a much different place than Argentina or Greece.
There are many countries with stable economies and currencies despite not using the US dollar natively.
Literally, he bought that.
The gov says the peso is worth way more than it really is, so can't you exploit that to get really cheap dollars?
Do they only allow "one way" official exchanges, from dollars to pesos?
1. fixed (or managed) exchange rates
2. independent monetary policy
3. free flow of capital
Most countries pick 2, 3, not 1, and thus have floating exchange rates.
Countries within the Euro area, Hong Kong pick 1, 3, not 2, and thus have limited influence on monetary policy.
China, Argentina pick 1, 2, not 3, and thus impose capital controls.
Of course, there will be other places that will give you rates that are closer to that the actual market value is. They may be disguised as place selling collectable coins or whatever.
At some stores, they may give you a much higher rate if you buy their stuff with foreign cash. USD and BRL are generally accepted.
Then there are the 'arbolitos'. They will be the guys shouting 'cambio!' at tourist locations. YMMV with them. Some are legitimate, some may insert some counterfeit currency in the mix. Personally, I never felt comfortable following someone to an unknown location when they know I have cash in my person.
The unofficial rate that outworlder mentioned is the dólar azul (blue dollar). As FabHK and jtsummers said, Argentina imposes capital controls, so you can't buy too many US dollars at the (artificially strong) official rate.
The capital controls mean that an Argentinean that buys something from or while abroad must purchase US dollars at the blue dollar rate. Blue dollar is unofficial but so widespread that websites track it.
Russia is an interesting contrast to Argentina. The gap between the official and unofficial exchange rates between ruble and US dollar is much smaller than between the Argentinean peso and US dollar. This is because right now it is almost impossible for a Russian to travel or purchase things from abroad, which depresses the demand for dollars. Argentineans are free to travel and purchase things from abroad, so the demand for US dollars is much stronger.
Confusing the issue is that the same "dólar turista" term is also being used to describe a new exemption from the foreign exchange restrictions that allows banks to purchase dollars from non-Argentine tourists visiting Argentina at the "dólar MEP" rate, which is actually currently higher than the black-market rate, at AR$323. Up to US$5000 per tourist per month.
Also, as a non-Argentinean, I have to confess that I hadn't considered the impact of an artificially strong dólar oficial on the country's exports. Surely beef and other Argentinean exports aren't priced at the official exchange rate on world markets? But I don't see how they couldn't be, either.
Yes, Argentine exports (mostly direct farm products like soy and corn now rather than beef) are made artificially more expensive by the perverse dollar policy. Also, on top of the 59% haircut from the fraudulent exchange rate, there's a 33% "retención" applied to agricultural products, so the farmers only get 21% of the international price of the exported grain. The fraudulent exchange rate also subsidizes (legal) imports, making it impossible for most Argentine industry to compete even in the domestic market with overseas imports.
Wikipedia notes:
> In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, the book often regarded as the first serious study of hyperinflation and its effects ... . In his book, Cagan defined a hyperinflationary episode as starting in the month that the monthly inflation rate exceeds 50%, and as ending when the monthly inflation rate drops below 50% and stays that way for at least a year. Economists usually follow Cagan's description that hyperinflation occurs when the monthly inflation rate exceeds 50% (this is equivalent to a yearly rate of 12874.63%).
https://en.wikipedia.org/wiki/Hyperinflation
So the current rate is far away from hyperinflation. On the other hand, it appears to be accelerating. And then there's this from a different article:
> Official CPI inflation figures released monthly by INDEC have been a subject of political controversy since 2007 through 2015. Official inflation data are disregarded by leading union leaders, even in the people sector, when negotiating pay rises. Some private-sector estimates put inflation for 2010 at around 25%, much higher than the official 10.9% rate for 2010. Inflation estimates from Argentina's provinces are also higher than the government's figures. The government backed up the validity of its data, but has called in the International Monetary Fund to help it design a new nationwide index to replace the current one.
https://en.wikipedia.org/wiki/Economy_of_Argentina
The INDEC inflation figures are, yes, 100% fake, and the controversy didn't end in 02015 (my guess is that somebody wrote that paragraph of that article in 02015). In 02001 AR$1 was worth US$1 (US$1.67 in 02022, deflating according to US BLS CPI figures according to https://www.usinflationcalculator.com/) and today it's AR$321 per US$1 according to https://preciodolarblue.com.ar/, thus AR$536 today is worth AR$1 in 02001. That's an average of 34.9% inflation per year. Some years it's been higher than that — 02001 is when the government dropped the dollar peg that had been strangling our economy but holding back inflation, at which point the peso immediately lost about 75% of its value before bouncing back — but the INDEC figures don't come anywhere close to the truth. A friend of mine was one of the numerous people who resigned from INDEC over this.
Borges, one of their most excellent writers, once said: Argentina "has all its past ahead of it".
You are a professional working overseas. A company pay to you in dollars, 1000/5000/whatever.you gets an exchange at Ar$ 137 per dollar today , you moves to the next box in the bank to exchange that to dollars again. The cashier tells to you that you can only buy usd 200 with pesos, at ar$ 137 per dollar, with 65% tax over that, so near ar$ 226 per dollar. You wants more, ok, you are not allowed to buy those 200 dollars at official price, you goes to the free market, legal, to change your pesos for dollars at 336 each one.
You ends asking please to pay you in an foreign bank to not loose the dollars. And why we want to save in dollars, because the inflation, that maybe this year is 80% with luck.
And I'm lucky, because if I'm exporting soy beans they are paying me 33% less in the first step.
And I'm not starting to talk about taxes.
Forget, we are the bug in the system.
Edit: and you are ok, because you works on IT, but around you, your friends.., they will never buy a house, they are surviving. it is sad as hell.