Morning in Argentina

Milei delivers a centennial surplus, the law of causality and David Hume's skepticism...

(Friday Billiards at Hume’s man cave)

“They sow the wind and reap the whirlwind.”

~ Hosea 8:7

Joel Bowman with today’s Note From the End of the World: Buenos Aires, Argentina...

Argentina ends deficit for the first time in 123 years... inflation on the Pampas falls to a 4-year low... oh, and actions still have consequences.

All that and more below, but first...

In Tuesday’s Note (on The Revolution So Far) we took the liberty on behalf of Dear Readers of assuming that effects have causes. If you’re comfortable with this bold, philosophical gambit, do feel free to skip over the next several paragraphs...

If there is a constant conjunction observable to man, it is surely that day follows night... just as night, in turn, follows day.

And yet, even given the reliable repeatability of such an occurrence, who among us is prepared to posit that the one causes the other?

“Ah ha!” you gasp, recalling with youthful vigor your first year logic class... and that dreamy gal/guy in the front row, who caused your heart to flutter. “While it is certainly true that every effect has a cause – the ‘law of causality’ – it also holds that correlation does not equal causation.”

Right you are, keen logician! Good memory!

Whirlwind Billiards

And still, as eminent a philosopher as David Hume remained famously skeptical that a purely rational mind could establish causality at all. From his 1776 work, The Enquiry Concerning Human Understanding.

“When I see, for instance, a billiard-ball moving in a straight line towards another; even suppose motion in the second ball should by accident be suggested to me, as the result of their contact or impulse; may I not conceive, that a hundred different events might as well follow from the cause?”

To be sure, Hume means not to suggest that anything else might happen to the second ball other than the (sensorily) perceived effect... only that it is possible to conceive of such an eventuality, indeed a hundred of them and more, however unlikely they may be. Hume’s contention:

“That there is nothing in any object, consider’d in itself, which can afford us a reason for drawing a conclusion beyond it; […] even after the observation of the frequent or constant conjunction of objects, we have no reason to draw any inference concerning any object beyond those of which we have had experience.”

Subsequent metaphysicians have been fussing, fuming and fulminating over the technicalities of the proposition ever since. (Hume’s Enquiry famously gave rise to Immanuel Kant’s controversial tome, Critique of Pure Reason, and the ocean of secondary literature that it inspired, or – dare we say? – caused).

Even so, after all these years... apples still fall to earth, drunkards still get hangovers, and money printing still ruins nations.

“Sow the wind and reap the whirlwind.”

A Chaotic Universe

Indeed, it behooves us, as Ludwig von Mises writes, to recognize that we live in a world governed by the law of causality in that (from Human Action):

Man is in a position to act because he has the ability to discover causal relations which determine change and becoming in the universe. Acting requires and presupposes the category of causality. Only a man who sees the world in the light of causality is fitted to act. In this sense we may say that causality is a category of action. The category means and ends presupposes the category cause and effect. In a world without causality and regularity of phenomena there would be no field for human reasoning and human action. Such a world would be a chaos in which man would be at a loss to find any orientation and guidance. Man is not even capable of imagining the conditions of such a chaotic universe.

To wit: Ideas... converted into human actions... have consequences.

And that brings us back to the revolution down here at the End of the World, which celebrated its first anniversary on Tuesday. (They grow up so fast!)

For three-quarters of a century, the Argentine State remained unable and/or unwilling to recognize the consequences of their policy actions, dire as they became. Without recourse to causal feedback, they bumbled from one bone-headed theory to the next, miring themselves deeper and deeper in the proverbial muck.

Then, in December of last year, a new set of ideas gained prominence...first on the lips of whacky anarcho-capitalists, then in the hearts and minds of everyday voters.

Today, and for the next several Notes, we take a look at some of those “ideas in action” – and their consequences so far – to discover what we might learn.

The Augean Stables

Consider the idea that running budget deficits (and printing money to cover the difference between promises and reality) results in inflation. Rather than rising prices causing inflation, as many cart-before-hose thinkers insist, inflation is in fact the cause of rising consumer prices.

Of the many Herculean tasks undertaken by the incoming president, Javier Milei, during the past year, getting the federal budget “back in black” surely ranks up there with cleaning the Augean stables. After decades of reckless profligacy, built upon the foolish idea that the government could fund each and every welfare scheme, make-work scam and preposterous boondoggle imaginable, it was simply accepted that it therefore should.

The results, for anyone interested in causes and their effects, were nothing short of disaster. Inflation... recession... hyperinflation... depression... currency collapse... and nine separate debt defaults... including, in 2001, the world’s largest (at the time) sovereign debt default of $91 billion in external debt.

Understanding that actions have consequences, Milei has long defended a “zero tolerance” approach to budget deficits, as we reported back in September (after he delivered seven consecutive monthly surpluses):

“The deficit has always been a consequence of thinking first about how much to spend and then how to finance it,” said Milei at the time.

“We are going to do it the other way around: thinking first about how much we have to save, and then see how much we can spend,” he added.

A Centennial Surplus

Fast forward to yesterday, December 11, and Milei announced the rare feat of having finally balanced the federal budget... for the first time in well over a century. From Milei’s announcement (translated):

The deficit was the root of all our evils—without it, there’s no debt, no emission, no inflation.

Today, we have a sustained fiscal surplus, free of default, for the first time in 123 years.

This historic achievement came from the greatest adjustment in history and reducing monetary emission to zero.

A year ago, a degenerate printed 13% of GDP to win an election, fueling inflation.

Today, monetary emission is a thing of the past.

And lo! What do we see here? On the very same day that the president declared monetary emissions to be a “thing of the past,” the National Institute of Statistics (INDEC) released their latest inflation figures. The newswires were on the case:

BUENOS AIRES, Dec 11 (Reuters) - Argentina's monthly inflation rate slowed to 2.4% in November, the lowest in over four years, the official INDEC statistics agency said on Wednesday, as locals began to warily hope the worst of a biting economic crisis might be over.

It’s morning in Argentina, Dear Reader, and if prosperity still follows liberty, as we reckon it does, it promises to be a glorious day ahead.

Stay tuned for more Notes From the End of the World...

Cheers,

Joel Bowman

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