Javier Milei (Buenos Aires, 1970) has a quote that could not be more meaningful, and which he repeated many times during his campaign and in his last television duel. “It is impossible to change reality by doing the same things, and a different Argentina with the same old people is impossible.” And lo and behold, the magical realism of Argentine politics wanted the new president to start doing the exact opposite, having won with great breadth and the freedom he aspired to achieve, without theoretically having to make a deal with anyone.
One of the economists who was the chief architect of the plan initiated during his government. Mauricio Macri (2015-2019), first as Minister of Finance, then as Minister of Finance and then as Governor of the Central Bank, i.e. Luis Caputo (Buenos Aires, 1965), one of the most publicly vilified high-ranking officials Milei, He is the new czar of the Argentine economy. Milei accused him of inheritance: “He drank 15 billion dollars and left us alone with this treason” [desaguisado] lelik’s [Letras de liquidez con las cuales el Banco Central regula la cantidad de dinero circulante]. hood “He is one of those responsible for the disasters they caused at the Central Bank,” Milei said three weeks ago, on November 24.
Yes, it’s the same hood who chose Milei -after one procedure Mauricio Macri and other power tycoons – to create the disaster that he began to weave and created by the Peronist Government Alberto Fernandez. If the inflation rate left by Macri was around 70 percent, Fernandez It reached 140%.
The important thing is Milei Not only does he not want to do something different, but he also decides to do something that has been tried before without success. And even worse, with the same things as always.
Argentina evokes a certain parallel with the economic crisis experienced by the Weimar Republic, especially Germany, in 21-23, during the years of the Great Hyperinflation. In those years, the movie ‘The Cabinet of Doctor Caligari’ (film Robert is Coming In Berlin, 1920) mentioned by the filmmaker Vincent LoBrutto It was described in 2005 as “a metaphor for a country in chaos, the moral and physical collapse of Germany at the time, with one man on the loose wreaking havoc on a warped and unbalanced society.”
Until Milei In his speech about the inheritance, he announced that inflation could reach 15,000 percent; this figure was undoubtedly artificially invented in dollar terms. hood He added an example of a household where milk might cost 60,000 pesos.
As the radio commentator said Victor Hugo Morales His speech on the ‘La Mañana’ program on Radio AM750 Milei “It was done to impress Gilada” [tontos, según el diccionario de americanismos de la RAE].
If you read the report on the Argentinian economy published by the International Monetary Fund (IMF) team, which visited Buenos Aires last August, Dr. You’ll notice where Caputari’s cabinet plan comes from. As usual, the emphasis in the fund is on the need to solve the financial crisis of the Central Bank in the face of the fiscal deficit and the negative situation in international reserves. To put it simply: There are no more dollars left in the issuing bank.
The IMF does not include figures in the framework of the plan it had previously created together with the government’s ambassadors. Alberto Fernandez. These are Dr. It was placed by Caputari’s office. This is a scheme designed to pay foreign creditors and domestic creditors, a debt contracted by Caputo-Macri’s policy and increased by his successor Alberto Fernández.
Far from anarcho-capitalism, appealing to North American economists Murray Rothbard (United States 1926-1995) declared: Milei His campaign is for a program so intrusive that the state is even tasked with determining pensioners’ incomes by government decree (among other measures against importers and exporters).
The Central Bank of Argentina has to find dollars and aims to pay approximately 25 billion dollars a year in interest on the debt. For this, he designed an income policy in which wage earners (new payroll tax) and retirees were pagan.
Exchange rate with dollar
The starting point was this: Although starting out timidly Alberto Fernandez– a major adjustment in the exchange rate. The official dollar appreciated 100% from 400 pesos to 800 pesos per unit; This represents 50% in terms of devaluation or depreciation of the peso (increasing towards 70% in real terms) because 400 pesos currently buys $0.50.
The adjustment meant liberalizing prices, starting with fuel and utility rates, but maintaining what was called the exchange rate, or restrictions on access to foreign currency, to control the outflow of money from the country and avoid speculation with the dollar. .
Since 2018, Argentines have withdrawn $78 billion in cash from the country through the second quarter of 2023, and Argentine bondholders have sold $23 billion worth of Argentine bonds, according to the IMF’s selected external sector indicators.
The money needed to cover these amounts came from a loan from the IMF, the Federal Reserve’s negative international reserves, and a clearing operation facilitated by the People’s Bank of China (this line was canceled by the People’s Bank of China). government Xi Jinping after insults Milei campaign against China and is currently trying to renegotiate).
The Federal Reserve’s fiscal crisis (massive purchases of government bonds last year) has outpaced any deficit monetization schemes to compensate for capital flight. This financial crisis, along with debt, is a tumor that may now metastasize more widely.
In the short term, the worsening of the financial crisis (in which the Central Bank will have to increase monetary emissions rather than reduce them) and the threat of hyperinflation are also added to the recession, which will paralyze all public works. Milei knows what will happen. That’s why he warned Argentines that there would be stagflation. That is, stagnation in inflation. In reality, it fell short: we are talking about hyperinflation with sharp declines in economic activity. Milei He suggests that everything changes so that everything remains the same (“Il Gattopardo”). Instead of making it worse. This is ‘shock’.