A Dubious Honor
Move over Venezuela...inflation in Argentina reaches continent-crushing new highs...
Joel Bowman, with today’s Note From the End of the World...
“There is no freedom for man where his security, his life and his property are at the mercy of a leader.” ~ Juan Batista Alberdi
Buenos Aires is empty. Like European capitals in August, denizens of the “Paris of the South” make for the coast in January to avoid the high summer heat.
The pretty and the popular head to Punta del Este, in neighboring Uruguay... or further north, to sip caipirinhas and gaze upon the girls from Ipanema in Rio de Janeiro, Brazil. The well-healed likewise decamp to their country estancias or to “undisclosed locations” amidst the cooler, Patagonian climes.
As for your editor, we rather enjoy the sweltering quietude in the city... the empty cafes, the lonesome boulevards, the deserted parks and plazas. No need to make dinner reservations... no last minute “elevensies” or “drinky-poohs” or “Christmas cheers”... no hectic social schedule of any kind.
Just peace, quiet and... freedom.
We’ll leave too, of course... but not until everyone else returns. (Did you ever meet a holiday horde you wanted to join?)
Meanwhile, life down at the End of the World goes on... even as inflation surges to crushing new highs.
Money, Money, Money…
Each and every day, we receive a text message from the kindly ladies at our local cueva. (A cueva – or “cave”– is a money exchange, also known as a “casa de cambio,” or exchange house.)
Until recently, these establishments were illegal... which is to say, they operated in the full light of day, often guarded by off duty policemen looking to supplement paltry state wages... but they could be shuttered any time the government needed a scapegoat to blame for its own egregious monetary mismanagement.
Anyway, here was last Friday’s message...
And here was yesterday’s (with an adjustment to reflect some intraday volatility in the market)...
And here, this afternoon’s message/real time lesson in Gresham’s Law...
¡En Fuego!
Yes, dear reader, Argentina’s Great Currency Conflagration continues apace. Official data out this morning (Thursday) revealed annual inflation on the Pampas surged to 211% in December, handing Argentina the dubious honor of highest inflation rate on the continent. (Venezuela dropped to second place, with a “mere” 193% annual rate.)
Prices now change so rapidly – and so unevenly – that many businesses no longer bother listing elastic numbers on the shelves or on menus. By the time you’ve finished your coffee, the price is already out of date!
But let us return to the cause of inflationary disaster: the government. “Inflation is everywhere and always a monetary phenomenon,” Milton Friedman famously remarked. It is also, said he, “taxation without legislation.”
Unlike rains from the heavens, however, inflation does not fall on the just and the unjust alike. Those who get their grubby mitts on the newly-inked bills first (government insiders and their bankster cronies) are free to divest their holdings, to unload their plummeting pesos for superior stores of value – gold, crypto, real estate, cases of malbec, polo ponies, construction materials, etc.
Those further down the political totem pole, who rely on fixed income or government handouts, are not so lucky. By the time the red hot pesos hit their trembling, outstretched palms, they have been devalued, debased and otherwise debauched, such that one in ten Argentines now live in what’s considered “absolute poverty,” unable even to feed themselves.
A Peso Prison
The previous government enforced strict capital controls to prevent the politically unconnected from escaping their peso-prison. Citizens were prevented from exchanging more than US$200 per month in foreign currency. Foreign credit card payments were subjected to onerous taxes, levied at point of purchase. Financial transactions were closely invigilated, rendering one’s “security, life and property at the mercy of a leader”... the state.
Worse still, the situation is likely to deteriorate from here, a hangover from the Titanic captaincy of the ousted Perónist government. At least for the next few months, perhaps even years. But there is hope...
Next week, we’ll examine the proposed plans for revitalizing this basket case economy and for liberating the generative powers of the free market. We’ll also take a look at the man who inspired Javier Milei’s massive Omnibus Law, a blueprint for the nation’s once and future prosperity.
Stay tuned for more Notes From the End of the World...
Cheers,
Joel Bowman
Of course I read this. I can’t “like” it, though. What’s likable about this condition? How does one feed family, friends, oneself in this enclosure? Head for Rio I guess.
Joel, thank you for these updates. We’ve begun looking for options outside the US, and your “boots on the ground” reporting from BA is invaluable in our ongoing research.