This is an opinion piece by Samantha Messing, a Brown alumnus on making the world a better place with Bitcoin.
Legendary investor and limousine liberal Warren Buffett was never a fan of Bitcoin. He recently commented:
Of course, Buffett doesn’t understand “it.” He’s a Nebraska millionaire. The US dollar is the strongest currency in the world. He cannot understand the possibility of a country hyperinflating its currency, defaulting on its debts, or confiscating its assets.
For Argentineans, the financial collapse is Groundhog Day. Thankfully, Bitcoin offers a credible alternative to failed national currencies and corrupt monetary systems.
Argentina is facing one of the highest inflation rates in the world…again! The country has no access to international capital and owes the IMF over $40 billion. Prices are soaring and nearly half of the population lives in poverty. The economic situation has never been worse…and that says something for Argentina.
Beginning with the Peronist regime of the 1940s, successive governments have left the country heavily indebted. Argentina has gone through hyperinflation and reform more than a dozen times over the past 100 years and has gone bankrupt nine times. No country has a worse track record than this.
The playbook looks like this:
- Print money to provide social services and stay in power.
- You will be shocked when inflation spikes.
- If the political instability continues, it will be even more shocking.
- Implement financial “reform” (Ha!).
Inflation in Argentina is a special kind of inflation. It has lots of zeros. We are talking millions. If bread is $2 million, what good is a $1 million salary? Politicians facing political pressure are embracing financial “reforms” that combine policy rate hikes, exchange rate controls, or the introduction of new currencies.
Suppose it’s 1970 and you have 1 million pesos in the bank. Sounds good, right? Here comes the financial “reform”.
- The Peso Leu replaces the previous Peso at a rate of 1:100. Now it’s 10,000 pesos.
- Then in 1983 the Peso Argentinian replaced the Peso Lei at 1:10K. It’s now 1 peso.
- After just two years, 1:1K — 0.001 pesos.
- After 10 years, 1:10K — 0.0000001 pesos.
Economist Marcos Buscaglia recently described the peso as ice cream.
On paper, Argentina’s political system resembles the United States. Three branches and a popularly elected president for a four-year term. In fact, checks and balances have been in decline for decades. Known as “hyperpresidential,” the president of Argentina wields too much power and Argentina is poorly governed by both liberals and conservatives.
The seeds of Argentina’s current economic crisis were sown in the last decade. It begins with former President Christina Kirschner (now Vice President) pursuing a populist socialist agenda for her working-class base. She spent a lot of money on grants and social programs, all of which was financed by foreign borrowings. Public debt soared, inflation and interest rates skyrocketed.
Then, center-right President Mauricio Macri took office and promised to revive the economy. However, the peso continued to depreciate against the US dollar. Due to capital controls imposed on the masses, Argentines hoarded black market US dollars under their mattresses.
At this point the government For real We stopped spending and reigned in the red. But, as we all know, austerity dims re-election prospects. So in 2018 Marsi secured his $57 billion line of credit from the IMF. This is he is the largest in IMF history. Phew.
Be careful with billions of dollars. Macri must implement an anti-inflationary policy. Marci looked for a shortcut. He sold large amounts of high-interest short-term notes, called Relic bonds, to liquidity sponges. But that wasn’t enough. Poverty increased and citizens resisted. Macri’s popularity ratings plummeted as the 2019 presidential election began. His populist rival Alberto Fernandez and former president Christina Kirchner took office.
We know what happened next. The pandemic, Russia’s war in Ukraine, shrinking food supplies and tight energy markets have hit economies around the world. Few countries were less prepared than Argentina. Shortly after the shutdown, the country defaulted on its government debt and inflation hit 70%.
This is not Argentina’s first currency collapse rodeo. Citizens began accumulating durable goods such as housing, gold, technological equipment, and non-perishable food. They all have one goal. It’s time to get out of the peso… NOW!
On payday, Argentines flock to illegal “cuevas” (black market exchanges) to exchange their pesos for other currencies. These exchanges primarily distribute cash, which is a risky business. Criminals know the game and robberies are routine. Still, the black market offers safer bets than national currencies and banking systems.
Yes! In 2001, the Argentinean government enacted “el corralito”, denying people access to bank accounts for almost a year.When banks reopened, citizens found all US dollars exchanged for pesos When The peso has lost 60% of its value. Could this happen again? you must be able to do it.
No wonder Argentina raised Wences Casares, Silicon Valley’s Bitcoin “Patient Zero” who helped convert Elon Musk, Peter Thiel, Reid Hoffman and Chamas Palihapitiya. Casares grew up in the Patagonian region, where he has seen his family lose their savings to currency crashes three times. Casares also founded Xapo, the first Bitcoin institutional investor he sold to Coinbase in 2019.
Argentina is increasingly using bitcoin instead of its national currency, shitcoin. As a peer-to-peer decentralized network, Bitcoin allows Argentines to freely send and receive value to each other and across borders. Importantly, Bitcoin is both decay resistant and seizure resistant. Bitcoin can be safely stored on a USB stick or in your head (if you remember the seed phrase). Either way, it’s much easier and safer than hauling cash from Cueva to the attic.
Government officials, journalists, and limousine liberals like Warren Buffett and Elizabeth Warren ignorantly mock Bitcoin as dangerous and unsafe. They tout Western luxury beliefs with little regard for the needs of billions of people living in countries with unstable financial systems.
Let me be clear: Bitcoin is not perfect. But even with the (significant) price drop in Bitcoin in recent months, Bitcoin is still a good alternative to the Argentine peso. Nearly believed that Bitcoin, one of the most popular cryptocurrencies, would maintain its savings value over the same period…”
Bitcoin adoption in Argentina has surpassed Europe and America (duh!). The same New York Times article noted, “According to another Morning Consult survey, about a third of Argentineans said they buy or sell cryptocurrencies at least once a month, which is more than the average for people in the United States. Twice as much.” The country is the top country to receive salaries in cryptocurrencies, and cuevas now offers an exchange rate between pesos and bitcoin.
Of course, Bitcoin will not heal Argentina’s economic woes and political failures. But because it’s the only money Argentinian politicians can’t destroy.
Long live the Bitcoin revolution!
These views are my own and do not constitute financial advice.
This is a guest post by Samantha Messing. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or BTC. Bitcoin magazine.
Argentina Viva La Bitcoin Revolution – Bitcoin Magazine
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