Journey into Argentina: Bitcoin, Hyperinflation, and the Milei Effect
The 2nd Bitcoin president has just been elected in Argentina, and one question in particular looms large: Can Javier Milei save Argentina from the grips of hyperinflation?
To uncover the reality on the ground, Luke from CoinBeast embarked on a journey to Argentina during what many considered its most crucial election. His investigative journey included:
Exploring the challenges of living through a staggering 250% inflation;
Uncovering the demise of Buenos Aires, which used to be the wealthiest city in South America;
A visit to the Central Bank;
Delving into what local Argentinians know about Bitcoin, inflation, and the political figure Javier Milei.
The financial landscape in Argentina sets the stage for unique challenges, and the scarcity of cash is a primary concern.
Luke’s exploration into the local Bitcoin and crypto market revealed the intriguing dynamics of exchanging Bitcoin for Argentinian Pesos. On the first day, he engaged in a transaction, swapping $400 worth of Bitcoin for a large stack of 400,000 Pesos.
For this transaction, Luke locked in an approximate rate of 1 USD: 1000 Pesos. But, the existence of two exchange rates in Argentina adds an element of complexity.
The government claims an official rate of 1 USD: 370 Pesos, but the free market reveals a starkly different reality, with the actual rate surpassing 1 USD: 1000 Pesos.
This dual exchange rate — categorized by the government’s official rate and the free-market “blue dollar” rate — contributes to the intricate financial landscape in the country.
The “blue dollar” market, born in 2002, emerged as a response to governmental regulations and currency controls.
Luke’s investigation uncovers how the government’s misleading exchange rate attempts to sway public perception and trust in the banking system.
We can see why the government employs such drastic measures when looking at the rate of the Peso’s devaluation:
In the year 2000, 1 Peso = $1 US Dollar, however, the Peso is HYPERINFLATING;
In 2010, 4 Pesos gets you $1 USD;
In 2020, you needed 150 Pesos to obtain $1 USD;
In 2023, a whopping 1000 Pesos are needed to get $1 USD.
The staggering devaluation of the Peso over the years, coupled with chronic inflation reaching an all-time high of 143%, raises serious economic concerns that might be even worse than what the Central Bank is willing to admit.
Steve Hanke is infamous in the Bitcoin space for all the wrong reasons, but he does some great work on exposing the REAL inflation figures around the world.
In his analysis, he contends that the actual inflation figures in Argentina hover around 239% annually, contrasting with the government’s claim of 138%.
As horrifying as this sounds, chronic inflation is not a new problem for Argentina. The country has had inflation rates above 20% in 15 out of the last 21 years.
This raises questions surrounding whether their inflation rates relate to the booming expansion of their money supply.
Unsurprisingly, Argentinians have consistently increased their M1 money supply by an average of over 20% annually since 2002.
The growth rate is visible, exceeding 20% every month in the country in 2023. Taking a broader perspective, the trajectory of this growth appears to be parabolic.
This prompts the question:
Why would Argentina persist in devaluing its currency?
Argentina has repeatedly found itself compelled to resort to inflation as a strategy to mitigate numerous debt bubbles that have emerged over the years. The country has faced debt defaults on eight occasions since 1800, ranking seventh in the number of defaults among all nations.
Due to the rapid occurrence of this latest devaluation, the country’s economic system is struggling to keep pace.
The highest denomination currency bill in the country is a 2000 Peso note, and it’s worth approximately $2 US Dollars.
This makes simple tasks like paying for a cheap dinner outrageously difficult! Look at how much cash Luke needed to pay for a 2-person lunch worth $35 US Dollars.
However, despite the drawbacks of hyperinflation, the remarkably low cost of living is genuinely beneficial for those able to leverage it. Regrettably, these advantages are exclusive to foreigners and locals who store their savings in Dollars or Bitcoin.
Hyperinflation has severely impacted the daily lives of ordinary Argentinians. Consequently, poverty rates in Argentina have surged beyond 40% in 2023, indicating that over 20 million people in the country are surviving on less than $2.15 a day.
Nevertheless, there is hope on the horizon for Argentina. Some locals are beginning to embrace Bitcoin, and Luke even managed to make several purchases using the cryptocurrency! To witness these experiences, check out our latest YouTube video.
Before delving into this, let’s address a burning question tied to the recent election. Can Javier Milei rescue the country, or will his drastic measures lead to more short-term economic volatility?
Javier Milei, a staunch advocate of sound money, pledges to eliminate the central bank. Pre and post his recent triumph in the election primaries, he has put forward bold proposals for Argentina:
SLASHING government spending;
Allowing currencies to freely trade against each other
Moreover, he has openly endorsed Bitcoin on several occasions. While the specific policies he’ll implement remain uncertain, one thing is clear: Bitcoin is a lifeboat for Argentina.
With Bitcoin, there’s no need to speculate on a politician’s decisions or anticipate their policies. Simply Dollar-Cost Average (DCA) into sound money, and you emerge victorious.
This underscores a crucial point: Bitcoin is reaching an All-Time High (ATH) in countries experiencing the highest inflation levels globally, including Venezuela, Lebanon, and Argentina.
Turning our attention to Javier Milei:
Will the new president eliminate hyperinflation?
He emerged victorious, but can we place trust in him?
Will Argentina embrace Bitcoin?
To uncover the answers to these burning questions, join us in our recent video, where we provide an insightful glimpse into life on the ground in a country teetering on the edge of hyperinflation.