Argentina Printed too much Money. America may have done the same. Europe may take that Route
How money printing destroyed Argentina and can destroy others...
If you’re an American citizen currently on the edge of your seat just waiting for the incoming recession, this rings true for you just as much as it does for Argentina. For many, we realize that the most dangerous phrase in monetary policy, economics, and general politics is “this time it’ll be different.”
For the Argentinian politicians, they felt as if inflation is a measly ordeal and that everything will be solved by increasing the amount of money being printed. In April 2022, the CPI in Argentina witnessed a rise of 58% year to ear. This means that the country registered a 2.9% growth in variation last march.
For those that don’t follow, this is bad. Inflation in the country is more than six figures higher than in neighboring countries such as Uruguay, it is five times higher than in Chile, and four times higher than the inflation in Brazil and Paraguay.
Inflation is not something that occurs due to many things. It typically has one cause and that is an extractive and confiscatory monetary policy. The printing of money without control and without the demand for the money will balloon any monetary base. The monetary base in Argentina this year has increased by 43.83%. Price inflation is at 58.2%. In just three years, the monetary base is up 179.73%, and in ten years up to more than 1,543.8%. Within those same ten years, the Argentine peso has also lost 99% of its value against the dollar.
The monetary base of the United States grows at a rate of 9.9%, which is six times less than that of Argentina but the United States is also suffering inflation of 8.5%. When the United States reached peak financial gluttony, the monetary base grew by 26.9% and Argentina's monetary base grew threefold that.
Many believe that Argentina has already been dollarized before. There was no dollarization, however. There was in fact a deception in which it was declared that one peso was equal to one dollar. Just like crypto stablecoins crashing on the market today, the so-called dollarization was simply a fallacy, and when the bubble burst, policymakers went on to further destroy the currency’s purchasing power.
The decision made by the Argentina government is the same exact path the politicians in the United States and Europe are following. However, these people are saying “It will not happen to us” and “This time is different.” People seem to neglect the realization that countries and their economic infrastructure typically fall due to the destruction of purchasing power and because their position in the world would collapse as well.
J.P. Morgan used to say gold is money and everything else is credit. Credit is confidence. Once confidence is lost, the currency dissolves.