Argentina's New President - Madman or Antidote?

Argentina’s President-elect Javier Milei has been described by Leftist media in colorful terms ‘madman’, ‘far-right’, 'Argentina's Trump', and the like. I don’t have a view on his politics, but I can understand why Argentinians voted for an outsider who wants to shut down the Central Bank and use the US dollar as currency. Argentina currently faces a crisis – inflation of over 100% and a fraudulent exchange rate – sure signs of failure of economic policies.

However, these problems are not new. As a collector of old banknotes, I have seen this movie play repeatedly in Argentina (and the rest of South America) in the past half-century. The attached image shows three different high denomination notes of three different currencies – all from Argentina – all within the span of a single decade (1980s)!

This can be a bit hard to understand for someone who hasn’t witnessed this firsthand. Therefore, some context is needed. I started my career in a business newspaper – where personal finance was an important section. Q&A columns routinely advised people on how much they needed to save for retirement, which could be 10-20 years from now and could easily stretch on for 30 years, as our life expectancy improves. Now imagine for a moment a horrible scenario – everything you have worked for/saved during your career suddenly becomes worthless due to hyperinflation. Now imagine this happening repeatedly.

This unthinkable scenario has been depressingly common – Venezuela over the past two decades, Zimbabwe in 2008, Russia, and most of Eastern Europe after 1992 have all witnessed hyperinflation. Mostly, it is a government that spends more than what it gets from taxes, and resorts to printing money to pay its bills. Left uncontrolled, this causes hyperinflation – where prices of goods and services can move up daily.

During the 1980s, Latin America – Argentina, Brazil, and the other smaller economies in South America all witnessed repeated rounds of hyperinflation – where monthly inflation exceeded 50%. The government would print ever higher denomination notes to meet its expenses, the old currency would become worthless in a matter of months, then three zeroes (sometimes six zeroes!) would be lopped off and new currency would be brought in. From 1980 to 1991, Argentina went through four different currencies (view attached image). Brazil also ran through multiple currencies in the same period. Many countries which have witnessed hyperinflation tend to be repeat offenders. Venezuela, Zimbabwe, and Turkey have all come out with new currencies since 2000, and looks like they will need another one soon. I can understand why Argentina may want to try a new approach.

#Argentina #Hyperinflation #USDollar #JavierMilei