Argentina Viva La Bitcoin Revolution – Bitcoin Magazine
This is an opinion editorial by Samantha Messing, a Brown graduate who is making the world a better place with Bitcoin.
Investment legend and limousine liberal Warren Buffett has never been a fan of Bitcoin. He recently commented:
Of course, Buffett doesn’t understand “it.” He’s a Nebraska billionaire. The US dollar is the strongest currency in the world. He cannot fathom the possibility of the government hyperinflating the currency, defaulting on debts or confiscating assets.
For the people of Argentina, economic collapses are their Groundhog Day. Thankfully, Bitcoin offers a reliable alternative to their failing national currency and corrupt monetary system. Let’s get into it.
Argentina is facing one of the highest inflation rates in the world…again! The nation has no access to international capital and owes over 40 billion dollars to the IMF. Prices are skyrocketing, and almost half the population lives in poverty. Economic conditions are as bad as they’ve ever been… and that’s saying something for Argentina.
Successive governments, beginning with the Peronists in the 1940s, have saddled the nation with unmanageable debt. Argentina has gone bankrupt nine times, with more than a dozen cycles of hyperinflation and reform over the past century. No country has worse results.
The playbook looks like this:
- Print money to provide social services and retain power.
- Act shocked when inflation skyrockets.
- Act even more shocked when political unrest occurs.
- Institute for Monetary “Reform” (Ha!).
Argentine inflation is a special type of inflation. It comes with a lot of zeros. We’re talking millions. What good is a $1 million salary when bread costs $2 million? In the face of political pressure, politicians embrace monetary “reform” that includes a mix of raising key interest rates, controlling exchange rates, or introducing a new currency.
Pretend it’s 1970 and you have a million pesos in the bank. Feels good, right? Here comes monetary “reform”.
- The peso replaces the previous peso at a rate of 1:100. You now have 10,000 pesos.
- Then in 1983, the Argentino peso replaced the peso ley at 1:10K. You now have 1 peso.
- Just two years later, 1:1K – 0.001 peso.
- Ten years later, 1:10K — 0.0000001 peso.
Economist Marcos Buscaglia recently described the peso as ice cream:
On paper, Argentina’s political system is similar to that of the United States: three branches and elected presidents with four-year terms. In practice, checks and balances have been in decline for several decades. Known as “hyper-presidentialism”, Argentine presidents wield far too much power, and Argentina has been poorly governed by both liberals and conservatives.
The seeds of Argentina’s current economic crisis were sown over the past decade. It begins with former President Cristina Kirschner (now Vice President) pursuing a populist-socialist agenda for her working class base. She spent massively on subsidies and social programs, all financed by foreign loans. Public debt skyrocketed, and then inflation and interest rates skyrocketed.
Then center-right President Mauricio Macri took office with promises to revive the economy. However, the peso continued to fall against the US dollar. With capital controls imposed on the population, Argentines hoarded black market US dollars under mattresses.
At this point the government should have really stopped spending and ruled in deficit. But, as we know, austerity dampens one’s re-election prospects. Then in 2018, Marci secured a $57 billion line of credit from the IMF, the largest in IMF history. Phew.
The billions came with a caveat: Macri must implement anti-inflationary policies. Marci looked for shortcuts. He sold tons of high-interest short-term bills, called Leliq notes, to sponsor the liquidity. But it wasn’t enough. Poverty increased and the inhabitants became restless. Macri’s popularity rating plummeted … just as the 2019 presidential election looms. His populist rivals, Alberto Fernandez and former president Cristina Kirchner, were swept into office.
We know what happened next. The pandemic, Russia’s war in Ukraine, shrinking food supplies and tighter energy markets hit economies around the world. Few countries were less prepared than Argentina. Immediately after the shutdown, the nation defaulted on its national debt and inflation reached 70 percent.
This is not the first currency collapse rodeo for the Argentines. Citizens began to accumulate durable goods such as homes, gold, technological devices, and non-perishable food. They all have one goal: Get out of the peso… now!
On payday, Argentines rush to illegal “cuevas” (black market exchanges) to trade pesos for other currencies. These exchanges primarily distribute cash, and this is a dangerous enterprise. Criminals know the game, and abuse is common. Nevertheless, the black market offers a safer bet than the national currency and banking system. Really?
Yes! In 2001, the Argentine government enacted “el corralito,” which denied people access to their bank accounts for nearly a year. When the banks reopened, residents discovered that all US dollars had been exchanged for pesos and the peso lost 60 percent of its value. Could this happen again? You bet your ass it can.
No wonder Argentina bred Silicon Valley’s Bitcoin “patient zero,” Wences Casares, who helped convert Elon Musk, Peter Thiel, Reed Hoffman, and Chamath Palihapitiya to the cause. Growing up in the Patagonia region, Casares saw his family lose their savings – three times – due to currency collapse. Casares also founded Xapo, the first Bitcoin institutional custodian, which he sold to Coinbase in 2019.
Argentines are increasingly using bitcoin as an alternative to their national shitcoin currency. 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 debasement-resistant and seizure-resistant. Bitcoin can be stored safely on a USB stick or in your head (if you can remember your seed phrase). In any case, it is much easier and safer than transporting money from a cueva to an attic.
Public officials, journalists and limousine liberals like Warren Buffett and Elizabeth Warren cluelessly deride bitcoin as dangerous and risky. They engage in Western luxury beliefs without regard for the needs of billions of people living in countries with unstable financial systems.
To be clear – Bitcoin is not perfect. But even though Bitcoin’s price has fallen (hard) in recent months, Bitcoin remains a superior alternative to the Argentine peso. In fact, according to this New York Times article, “nearly 60 percent of Argentines believed that Bitcoin, one of the most popular cryptocurrencies, would retain the value of their savings over the same period…”
Bitcoin adoption in Argentina surpasses Europe and the US (duh!). The same New York Times article states: “About a third of Argentines said they bought or sold cryptocurrencies at least once a month, double the percentage of people in the United States, according to a separate survey by Morning Consult.” The nation is a top country for receiving paychecks in crypto, and cuevas now offer exchange rates between the peso and Bitcoin.
Of course, Bitcoin will not cure Argentina’s economic problems and political failure. But it’s a super valuable resource for the people… because it’s the only money that Argentine politicians can’t destroy.
Viva la bitcoin revolution!
These views are my own and are not 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 Bitcoin Magazine.
