Last November, many in the crypto community welcomed the election of Javier Miley in Argentina. He had spoken positively about Bitcoin, and many believed that his far-right populist tactics could help tame Argentina’s notoriously high inflation.
Miley has described himself as an anarcho-capitalist. He made several campaign promises, such as ending the central bank, firing most government workers, and his most important promise, reduction of inflation.
For context, inflation is the most obvious symptom of Argentina’s financial problems. The country owes $43 billion to the International Monetary Fund and is heavily indebted elsewhere, owing creditors a total of $400 billion.
Double- and triple-digit inflation in the Argentine peso has paralyzed the country for years. Ten years ago, 20 pesos bought one US dollar. Today the dollar is worth 1440 pesos..
Within 24 hours of taking office, Miley had broken his promise to end inflation. After devaluing the official peso exchange rate from 366.5 to 800 per US dollar on his first day in office, he claimed he was simply bringing the official rate in line with the real exchange rate at regular cuevas (illegal currency exchange booths).
But he continues to break his promise. He has been president for six months, and this month the peso once again hit an all-time low against the US dollar. Worse, its official exchange rate of 946 is completely out of touch with reality, and not even close to the real rate of 1,440 Blue Dollars available in cuevas.
Neither Miley nor Bitcoin stopped inflation in Argentina
High inflation rates make the economy unproductive and chaotic.
- Cash holders want to spend it as quickly as possible – before prices rise – and cannot afford to waste time shopping.
- Business owners are having difficulty pricing long-term contracts.
- What may seem like unnoticeable delays in work or invoicing can quickly become catastrophic due to currency devaluation.
- In an attempt to reduce the country’s inflation rate, investors are looking for high-risk and offshore investments.
In summary, avoiding inflation itself becomes a priority, which is not an economically productive activity. Indeed, this focus on avoiding inflation distracts all workers from producing valuable services and goods for society.
Read more: Javier Miley is a big proponent of decentralization, but does he care about Bitcoin?
Moreover, a currency inflates when creditors fear that the sovereign will print or devalue the currency to pay off its debts. For this reason, inflation itself is not a problem; rather, inflation is a symptom of sovereign indebtedness.
In recent weeks, Miley has made belated attempts to slow the peso’s inflation rate. He vows the central bank slow down typing speed and promised to use the country’s modest foreign exchange reserves to trade for the peso.
Skeptics argue that his strategies are recklessly aimed at treating a symptom of the problem rather than the problem itself, namely debt.
