Hyperinflation in Argentina

Today I want to talk about the hyperinflation in Argentina right now, what caused it and why we really need to pay attention here in the United States.

In Argentina last year, the annual inflation rate crossed 100% for the first time since 1991. This year its well over 200%. The election of new president Javier Milei seems positive, but regardless he’s got a very difficult task. He wants to cut spending dramatically and time will tell if he’s able to stabilize or at least improve the Argentinian economy. But at this point the country has only bad options to choose from.

So how did all these economic issues come about? And I think this is what here in the US we need to think about. Inflation has been bad in Argentina for a long, long time. And this really began in the late 70s early 80s with the military dictatorship that ran the country. This really came about with poor leadership, and corrupt leaders, doing things like suddenly and quickly de-regulating the financial markets and corrupt politics. For example, the government decided to loan out 46 billion dollars, which half went directly to big businesses. Later a decision was made to not require repayment for some reason. This is eerily reminiscent of what we have been seeing in the United States with Student loan debt. Student loan forgiveness is making the country take on more unneeded debt. In Argentina, interest on the debt compounded the problem more and more. We’re beginning to see that in our country as interest on national debt is growing more and more every year. We’ve actually been seeing this for quite some time though.

In Argentina, we’ve seen politician after politician come in there and try and fix the economy and fail. They’ve tried a number of things, like pegging their currency to our dollar, and always they end up printing more money to try and solve the problem. What’s troubling too that happened there, that we haven’t seen here and it’s tough to imagine really is capital flight. In Argentina, banks and financial institutions and big investors invested abroad, so there was no capital investment in the country. In the US, if we start seeing big investors putting big money overseas, it will really compound our debt problem

One thing you might find surprising about Argentina is they are rich in natural resources. Similar with Venezuela having tons of oil and mismanaging the whole situation. 

Here in the United States, we have all the ingredients to see something like this. We have out of control debt, most of our largest corporations are banking and technological, not manufacturing based. We’re a service-based economy these days. and of course, we have poor leadership within both the Federal Gov’t and the Fed as well as big businesses. 

This worst part of what could happen in the United States is that our kids will pick up the tab. It’s easy for me to imagine a future with hyperinflation here. Maybe it doesn’t come the next 5 or 10 years, but we need to start focusing on Innovation and productivity. That begins with having a business-friendly environment for smaller businesses. We don’t see this though; we see them plugging hole after hole in a sinking ship. Let’s have some pain now, rather than pass this mess onto our kids and future generations.