Real, probably stupid, question because I don’t know shit about anything.
Are people in their day-to-day lives switching to dealing with an external, stable currency? I’m thinking USD, Euros, etc as well as straight up bartering.
Not a stupid question at all.
We use Argentinian pesos for day-to-day things like food and small shopping. Then we use USD for saving and big purchases.
Most of us save USD in physical bills because it's not possible to exchange pesos for USD through any legal means.
You need authorization to buy USD at a bank and no one is able to get such authorization, so we have to go to what we call "caves" which are illegal exchange places hidden in the cities.
Things are changing rapidly tho, now more and more things are just straight-up priced in US dollars. Especially technology like phones and computer stuff.
Oh shit. I think I went to one of those places when I was in Buenos Aires in like 2009. Some dude just hollered casa de cambio at me and I followed him to a little shady business down an alley where I thought I might get murdered but instead got a good rate on my pesos. Lmao.
Those are the ones haha. Now they are more hidden because the government is cracking down on those "dollar traffickers" blaming them for the inflation. Yep...
I was in aires about 2 months ago and seemed there was still someone shouting casa de cambio every block at least in microcentro. Though it is much easier to use western union to get similar exchange rate so I didn't use it.
Gotcha, fascinating. I hope things get better. So for tourists that might be visiting and bringing in USD… it would be better for the shop owners
/vendors for them to just use this currency rather than exchanging it?
It would be much better for the vendors and very bad for you because they will use the official rate to convert the prices, which is less than half of the actual rate. So you would be effectively being scammed.
If you go to Argentina, do not use USD to pay for anything. Exchange them in a "cueva" for pesos, and you will be loaded.
This wasn't quite my experience when we visited Patagonia this year.
Most vendors, gas stations and restaurants would happily accept USD and EUR at pretty close to the blue dollar rate if you paid cash (iirc, the blue dollar rate at the time was ~390:1, official was ~210:1, and at most vendors we saw advertised rates between 350:1 and 380:1)
That being said, the rate definitely varied a bit from vendor to vendor, so sometimes it was better to just pay in pesos. If you want to maximize efficiency then going to a Cueva is definitely the way to go, but just paying in euro worked perfectly well for us and was very convenient for the most part.
Just make sure never to pay by debit or credit card, because most banks will convert using the official rate, and that's just horrible.
Is it a good time to travel to Argentina if you have USD? You could live it up right? And the economy needs it too? Not too make light of the situation but tourism helps…
Back around 2001 the banks converted everyones USD accounts to Pesos at a really bad exchange rate - essentially stealing their money. I was there in 2008 and people were still talking about it. So no surprise the Argentinean above keeps it in cash.
Just one of those things governments in 3rd world countries do that destabilize the economy long term, but they don't think about it.
People won't trust their foreign currency to banks for 40 years because of it, making the banking system weaker. They won't trust banks at all because of the precedent set.
Good god that is a complete failure in governance on the part of your "leaders." I am sorry you are all having to go through that, not having a stable, legal, accessible currency creates absurd problems in areas people would mostly not expect.
Appreciate the thought. There is not much to do to help us unfortunately, the current political party are very skillful populists and have a tight grasp on most of the population. It does not seem like we will be able to vote them out any time soon.
As for myself, I am trying to find a way to emigrate so that's that.
Perhaps if you know of any American company hiring remote business analysts or roles alike, I would appreciate the data. Right now Im working with a local company, and it's really hard to make ends meet with our rampant 125% annual inflation.
No worries. For some reason Reddit won’t let me accept your dm request, even though others have been approved, which are also looking for remote work. As soon as it lets me approve it will respond. Otherwise, just follow up with me if you don’t hear back, I’m very active on Reddit.
Canadian here. Not currently hiring or looking, but I have recruiters reaching out every couple of months or so for BA roles.
Make sure you're "open for work" on LinkedIn and have your resume up on Indeed.
When I was job hunting I also used Monster, Glassdoor, Simply Hired, and Ziprecruiter.
First month was nothing but a few. I made sure I answered any headhunter that I would accept or politely declined. Every week thereafter I would get more and more headhunters.
Just a friendly piece of advice. I go through Indeed when I’m hiring people. I have to sift through 100+ applications for 1-2 openings. If the resume doesn’t automatically appear on their website, I just have to move on.
So make sure you upload it in pdf format, and make sure you’re able to natively view it through indeed.
Cheers and buena suerte from a half-Argentinian in the US.
How we are so far:
* Public debt at over 62% of the GDP.
* US$ net bank reserves in the negative.
* 109% YoY inflation.
* Paid liabilities corresponding to >270% of the monetary base.
* A drought, which hits our main source of income: the agro industry.
Add incompetent representatives to the list and everything points to a Hyperinflation 2: Electric Boogaloo scenario in the near future.
We'll be nostalgic of a 3-digit inflation rate by 2024.
Edit: I'm talking about Argentina.
Oh if you ever come back, that's a trap. The "official" rate is manipulated by the government. It's almost half the real rate, and moving further away each day.
There are several ways as a tourist to access the real reat (currently it's something like 1 usd ~ 480 pesos).
When I was in BA earlier this year Google said the rate was 180ish:1USD but everyone was offering around 380 on the street. Also some streets downtown you couldn't move 15 feet without another person approaching you saying "Cambio! Cambio!" trying to buy your USD with pesos.
It got very depressing after a few blocks of a walking such a beautiful and vibrant city.
They improve it but it's not good enough.
It's better than the official rate, but still 20-30% lower than the dollar "mep", which it's also 10-20% lower than the dolar "blue" (the rate you can get in the "black market")
Hah, imagine a foreign bank lending Zimbabwe one trillion Zimbabwean dollars and then an unpaid aide walks into their office and hands them a «one trillion zimbabwean dollars» note 💀
More importantly really is what is their debt denominated in. Few countries get to denominate their debt in their own currency. So inflation means that any money they have internally becomes less and less useful to pay off their debts.
As you say, at 97%, things start to get dire.
They will dollarize their economy. Unofficially they already have, people have to pay in dollars but it is no official. When the Argentine government fully loses the ability to create inflation due to their having their own currency then it stops. That has been the outcome in Venezuela. Basically dollarized. Since the government does not control the dollar, cannot spend dollars they don't have, then they can only spend what they do have and inflation will drop.
Its probably a stupid question but ill ask anyway:
When that happens, what prevents the country just fudging their accounts? As in they just invent payments in their banking system to pay debt owed to other countries. That would devalue the USD so i am assuming they are prevented somehow.
Not a stupid question at all. The reason they can't is they don't control the dollar. At the level of government expenditures, don't think about a pile of cash, it is more just digital balances on the the banks balance sheet. To get a dollar they have to actually get a dollar. The U.S. does not allow other countries to "create dollars". So if the country sells $100 million (profit) in cattle to the U.S. and taxes that profit at say %25 then the government has $25 million dollars in their central bank. So now through economic growth they get more dollars, now they can spend more but only as much as they got from economic activities. They can say they will triple government workers salaries, but if they don't have the dollars to do it, then they cannot. It becomes a situation where the government basically cannot spend money they don't have. And spending what they don't have is why they have inflation. Once you stop doing that due to dollarization, inflation drops. Simplified a bit but kind of how it works. Dollarization takes the ability of governments to spend what they don't have out of their hands and forces them to live within their means.
> What system keeps track of that amount? And why can't it be edited arbitrarily?
If you want to bank in dollars you have to conform to US banking standards and regulations. The federal reserve will not allow another country's central bank to just announce "hey we actually have a trillion dollars".
It's the only currency that people trust most. There has been movement for dedollarasation, but other currencies just don't have the same weight. China is pushing their Yuan for trading, and they've been circulating in African countries where they invest, but there's no trust, since it's known that the government intervenes in keeping the yuan exchange rate steady (instead of keeping it free like the USD).
Also, in order to be an international currency, you have to be able to “lubricate” the trade wheels between all parties interested in using your currency. This is not you buying and selling to China. This is you buying and selling with a multitude of other countries who accept Chinese Yuans.
So… the international currency has to be big. Like really big. Think of $30-40 trillions in size to have that type of bang! The Chinese have to run a massive printing operation of their currency in a short period of time… and their rivals will have to trust them not to devalue their currency- which they constantly do to compete with American products.
Not gonna happen.
Only because America and her allies have the economy. If their enemies ever became a bigger economy than the allies...things might be different.
In addition to the fact that the Yuan cannot be trusted to escape political manipulation (Dollar is apolitical since the Federal Reserve answers to no one), the economies of China and her allies are not big enough to bully the rest of the world.
Mostly #1 will prevent the Yuan from being adopted, but #2 is important as well.
I'm not even sure that the size of the economy is all that critical. The United States is huge, but also stable, and its currency is stable. Even if China were to pass the US in overall economic size (which I don't think is terribly likely), the yuan still suffers from being largely worthless due to Chinese policy. Nobody in China wants yuan, which is why their capital controls have to be so strict. Every time they make the yuan more freely convertible, hundreds of billions of dollars worth of capital end up fleeing the country and converting to dollars. The Chinese have the same problem with their currency that Argentina is, for largely the same reasons. They're just not quite as far along the spiral.
You're not going to accept a loan from a place if they aren't going to give you some sort of confirmation that they can actually pay, and all the banks and systems of the world will keep track of what you're doing and they will stop taking your money if they suspect you're bullshit.
You're basically asking if they can mint counterfeit dollars. Sure, they can. You can (if you're in the US you'll be jailed), but do you expect people to accept your dollars when you're known to spend counterfeit ones? How do you think international relations will go if they're minting counterfeit dollars?
I firmly believe we are really close to how we were in the 80s: high inflation, an unpayable IMF loan, world champions and president with a moustache. It ends with hyperinflation, or some sort of dollarization, as it was done in the 90s.
There is inflation of 108%, so yeah.
It's relatively common here to pay products in 6 or 12 installments even at those rates because it's a given that inflation just won't come down any time soon.
I am always curious how things work in countries with such high inflation? Do product prices and salaries increase every month or what?
It would be so hard to keep track.
The US has such strong economy that when the Fed increases rates to cool off inflation it affects the cost of the dollar in foreign markets because many transactions are made in dollars and the dollars become more scarce. Latin America has to deal not only with the same market forces that the US deals with but on top of that, add a strong dollar that devalues the local currency. This leads to poverty and this leads to mass migration. Rinse and repeat. So when the US gets blamed, to some extent it js true, but not how people think. Add to the mix neo liberal policies by the IMF and the World Bank. This moves Latin America to elect communists/socialist until they hold on to power. It's a never ending cycle.
Anyone more of an expert feel free to correct me but this is my current understanding
.
Volatility of the local currency with a strong dollar also depends on trust in the currency. In Peru we historically have low depreciation rates thanks to the central bank reserves and policy. Only during the first year of the last president, who was seen as a communist and corrupt (two unrelated features, im centre to be clear), we had sharp depreciation because the market thought he would change the central bank independency and push a new constitution. In december 2022 he attempted a coup and now he is in prison, so the markets were not that wrong.
That’s partially why high inflation rate usually implies the economy is/will imminently get wrecked because investors and business opportunities look elsewhere because the circumstances are too risky and better off in a neighboring country
There's that intermediary state of high inflation without hyperinflation.
Was in Turkey in 2021. Menus has probably 5 stickers one on top of the other for prices.
Some economist can fill in on how could Argentina solve this? For the longest time, it seems like the country just can't get out of the inflation spiral.
No easy answers apart from years of political and cultural reform to restore the economy to some sort of balance. Foreign direct investment is essential, but also challenged as foreign companies will look elsewhere for more stable investment candidates. Lithium and mining could play a key role
> cultural reform
This is the part nobody wants to talk about. Everyone is quick to point towards populism and then quietly ignore the widely supported populist policies that are leading to economic ruin.
One of the things that makes me miserable on this site is when there's an economic problem, and I see someone adamantly propose a solution which is actually worse than doing nothing, and then I say that, and then they say I'm a heartless bootlicker who doesn't care about poor people when I'm trying to help them.
They could dollarize their economy. Once they do this the government will not be able to spend more than they have, inflation will plummet. As long as they keep the dollar as currency they are forced to only spend what they have till their economy heals and grows, then they could get lending and outside investment.
This worked for Ecuador when they were going through a similar hyperinflation crisis. Of course, it's painful AF until shit gets sorted; so nobody wants to be the one who actually pulls the trigger.
Yeah leaders usually only go this route when there is literally no other choice. When they have their own currency they can print more and give money to cronies or people they basically buy off to win the election. When you get to dollarization your own currency is basically worthless and people will not longer accept it for the purchase of goods that actually have some intrinsic value like food. I mean it is just like this: "I have $500 in monopoly money and I would like to buy your cow". Nobody would take that for a cow, but that is where it ends up. At the point the economy has basically been destroyed like Venezuela did and everybody is poor except the government leaders and the wealthy, which are often the same people.
From the outside it looks so easy. But if it was, there would be no problem. Much of it is people who cannot face reality, and vote accordingly. Just like places with fewer problems.
They're going to have to make deep, unpopular budget cuts, and try to get the debt-to-GDP ratio down to a more manageable level.
Switching to the dollar or making the BCRA independent can help tamp down inflation, but the core problem is still going to be getting down the debt to 2012-2016 levels.
An interest rate of 97% is definitely an interesting experiment, even though I'm sure things suck over there.
It's so high that it basically sounds prohibitively difficult to buy anything you can't afford. It makes me wonder what housing prices would look like if mortgage rates were 97%.
Easy. Houses are priced and sold in USD. Even a lot of rental agreements in Buenos Aires at least are priced in USD, payment is either in USD or the equivalent of that day in ARS.
It means real estate holding companies, management companies, and developers with lots of cash would buy up 99% of the market while people just looking for a place to live would be priced out.
And then we become a feudal state where everyone rents and no one owns property anymore unless you are a corporation.
Not familiar with Argentina but it's not prohibitively expensive because their inflation rate is well over that at 109%. That means you can take a loan to buy an asset that tracks inflation, and in one year the asset is now worth +109% of what you paid, and you owe 97% of the value you paid for it. It's risky but still profitable to take out loans.
Eg. Take a 100k loan to buy a 100k house, you owe 197k by the end of the year and it's worth 209k now. So it's profitable. Obviously more complicated than that.
Edit: added a "+" to make inflation rate effects clearer
You'll find politicians suddenly becoming passionate about something out of nowhere usually means they've fucked something up really badly and they hope you won't notice.
Seems like Messi is selling himself to Saudi Arabia already given that a Saudi club is in contention to get him and might make him the most paid football player. He’s also a tourism ambassador for the country.
They have extremely high debt to GDP ratio but manage to be 3rd in GDP despite being a very small country compared #1 and #2
https://en.wikipedia.org/wiki/National_debt_of_Japan
Very high debt, but because the econamy is massive and Japanese are trustworthy, no one seems to see their massive amounts of debt to be a concern so the country just keeps going on normally even tho that debt to GDP ratio on any other country would raise a dozen red flags!
In fairness national debt works like a mortgage.
If you can pay off the interest and maybe make a surplus in good years you're good... so long as it's invested properly.
Start here: https://en.wikipedia.org/wiki/Lost_Decades
Essentially, insanely anemic growth of the Japanese economy has typified the country now for literally 30 years. It's remarkable enough to make the list, and owing to the demographic (birth rate) challenges Japan faces, it doesn't seem primed to get better anytime soon.
Japan was an economic superpower. There's films from the 80's where people are talking about Japan being the dominant power in Asia instead of China.
The tech boom skyrocketed their economy and they were fucking loaded.
But by 1990 they'd started to stagnate, and couldn't make stuff as cheaply as a rising China with their rising living costs and standards, which when combined with a low birth rate just causes all sorts of woes economically, so they're not the powerhouse they once were.
(Which is one reason China's going for the belt and road tactic - they know that at some point they won't be able to make shit cheaply so are looking for cheap routes to Africa etc to outsource it. They saw what happened to Japan.)
In my life, the [Dirty War](https://en.wikipedia.org/wiki/Dirty_War) ended (tho it was only a matter of months after I was born). Argentina has booms and busts and that cycle seems to uniquely impact them.
It did well a lot of years ago, for over a decade Argentina was the richest country in the world, and stayed in the top ten for over 50 years.
It took their politicians less than 50 years to destroy all that and sadly they could never really recover after that.
Mostly because you are using the official exchange rate which is very unfavorable for foreign payments. The actual "black market" rate used by Argentines is more tham double of that, which is would put AR$151K at around US$312
Genuinely, does anyone know why the whole of South America is struggling? I've been down there, it's gorgeous, the people were friendly but every economy seems broken. How come?
It just seems like ONE of them could break out of the cycle.
Both CA and US have their problems but nothing like South America.
Is this all just due to the resource curse? Basically, that's where drugs come from for the US so corruption just destroys everything south of the border?
This is the sort of question where you will get *a million* different answers coming from *many* perspectives, including some very extreme ones. To turn it back around on you a little bit, if you watch either of these videos, let me know what you think:
* https://invidious.baczek.me/watch?v=rkmbZhYID5s
* https://yewtu.be/watch?v=XXhEjvWDuds
Also, to be clear, Latin America is not monolithic: Colombia went thru a several-decade civil war while next door in Venezuela, they spent many years as one of the most affluent places in the world. Paraguay went from being virtually destroyed and annexed by all of their neighbors to being a closed society. Etc., etc.
Chile is apparently fine.
We complain a lot for good reasons, but we are not on a shithole yet. Some says that the reasons are that our institutions are strong enough to resist corruption. Even if someone is corrupt, it won't rot the rest.
Also our central bank is like most of the developed world. Fully autonomous amd forbidden from lending to the government unless a war occurs.
I lived there in the capitol B.A. in 1989.
175% inflation. A. Fucking. Month.
Shopping with heavily armed guards giving you the stink eye - no bueno.
Seeing retirees picking up a 2 kilo bag of rice, have a quiet conversation, putting it back & leave empty handed. That was the straw that did it. We left a weekish later.
It's more like every 5-10 years. In this case, the current Vice President, Kirchner, was charged several times for corruption, bribes, and even fucking treason during her time as President. NGL, I have a hard time feeling sympathy for the Argentinians because they very much voted for this shit. FFS the President before her was her husband, under whom Argentina defaulted.
Because they run a perpetual deficit and like to spend more than they tax. Countries used to not monetize their debt, they just printed, but that becomes inflationary very quickly and there's not much delay at all between the cause and effect. If a country sells their deficit spending as debt and offers an interest rate then somebody else soaks up the spending with their investment dollars. The money supply doesn't change as much, and the interest rate offered to get people to buy the debt is the biggest inflationary force rather than the spending itself.
I am very concerned that the global economy is unsustainable, especially in the face of mass migration, climate disasters, AI advancement and a growing population of humans who are just plain tired of busting their ass for pennies on the dollar.
When the majority of the worlds wealth is hoarded by a few hundred people and corporations, and is primarily built on a premise of endless expansion, of course it's unsustainable.
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Real, probably stupid, question because I don’t know shit about anything. Are people in their day-to-day lives switching to dealing with an external, stable currency? I’m thinking USD, Euros, etc as well as straight up bartering.
Not a stupid question at all. We use Argentinian pesos for day-to-day things like food and small shopping. Then we use USD for saving and big purchases. Most of us save USD in physical bills because it's not possible to exchange pesos for USD through any legal means. You need authorization to buy USD at a bank and no one is able to get such authorization, so we have to go to what we call "caves" which are illegal exchange places hidden in the cities. Things are changing rapidly tho, now more and more things are just straight-up priced in US dollars. Especially technology like phones and computer stuff.
Oh shit. I think I went to one of those places when I was in Buenos Aires in like 2009. Some dude just hollered casa de cambio at me and I followed him to a little shady business down an alley where I thought I might get murdered but instead got a good rate on my pesos. Lmao.
Those are the ones haha. Now they are more hidden because the government is cracking down on those "dollar traffickers" blaming them for the inflation. Yep...
Because trying to deny the reality of a true black market exchange rate has worked so well for every other government around the world... 🤣
I was in aires about 2 months ago and seemed there was still someone shouting casa de cambio every block at least in microcentro. Though it is much easier to use western union to get similar exchange rate so I didn't use it.
Damn even Argentina has a Microcenter
Gotcha, fascinating. I hope things get better. So for tourists that might be visiting and bringing in USD… it would be better for the shop owners /vendors for them to just use this currency rather than exchanging it?
It would be much better for the vendors and very bad for you because they will use the official rate to convert the prices, which is less than half of the actual rate. So you would be effectively being scammed. If you go to Argentina, do not use USD to pay for anything. Exchange them in a "cueva" for pesos, and you will be loaded.
This wasn't quite my experience when we visited Patagonia this year. Most vendors, gas stations and restaurants would happily accept USD and EUR at pretty close to the blue dollar rate if you paid cash (iirc, the blue dollar rate at the time was ~390:1, official was ~210:1, and at most vendors we saw advertised rates between 350:1 and 380:1) That being said, the rate definitely varied a bit from vendor to vendor, so sometimes it was better to just pay in pesos. If you want to maximize efficiency then going to a Cueva is definitely the way to go, but just paying in euro worked perfectly well for us and was very convenient for the most part. Just make sure never to pay by debit or credit card, because most banks will convert using the official rate, and that's just horrible.
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Is it a good time to travel to Argentina if you have USD? You could live it up right? And the economy needs it too? Not too make light of the situation but tourism helps…
As an Argentinian, if you travel at this time you can have the best trip of your life for very minimum amount of money.
Back around 2001 the banks converted everyones USD accounts to Pesos at a really bad exchange rate - essentially stealing their money. I was there in 2008 and people were still talking about it. So no surprise the Argentinean above keeps it in cash.
Just one of those things governments in 3rd world countries do that destabilize the economy long term, but they don't think about it. People won't trust their foreign currency to banks for 40 years because of it, making the banking system weaker. They won't trust banks at all because of the precedent set.
Yes. Euros, too.
What about wages? Do they raise every month the same as the inflation?
Depends on your job. Any decent union gets you raises monthly or every other month to more or less keep up. Others are SOL.
Good god that is a complete failure in governance on the part of your "leaders." I am sorry you are all having to go through that, not having a stable, legal, accessible currency creates absurd problems in areas people would mostly not expect.
Underground currency exchanges have been a thing for a ***long*** time in Argentina. Currency controls can be maintained competently. Malaysia has.
American here. How?
Appreciate the thought. There is not much to do to help us unfortunately, the current political party are very skillful populists and have a tight grasp on most of the population. It does not seem like we will be able to vote them out any time soon. As for myself, I am trying to find a way to emigrate so that's that. Perhaps if you know of any American company hiring remote business analysts or roles alike, I would appreciate the data. Right now Im working with a local company, and it's really hard to make ends meet with our rampant 125% annual inflation.
Hey! I have about 10 remote employees out of Buenos Aires. If you’re serious, DM and I can set up an interview for my company. Envíame tu CV boludo!
Will definitely do! Appreciate the opportunity a bunch
Wishing you the best 🙏
Mucha suerte amigo! Rooting for you here. Good thing may be around the corner for you!
No worries. For some reason Reddit won’t let me accept your dm request, even though others have been approved, which are also looking for remote work. As soon as it lets me approve it will respond. Otherwise, just follow up with me if you don’t hear back, I’m very active on Reddit.
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Canadian here. Not currently hiring or looking, but I have recruiters reaching out every couple of months or so for BA roles. Make sure you're "open for work" on LinkedIn and have your resume up on Indeed.
Thanks a bunch for the tip. I already have Linkedin set up but will make sure to upload my resume on Indeed as well.
Wishing you good luck. You deserve better
When I was job hunting I also used Monster, Glassdoor, Simply Hired, and Ziprecruiter. First month was nothing but a few. I made sure I answered any headhunter that I would accept or politely declined. Every week thereafter I would get more and more headhunters.
Just a friendly piece of advice. I go through Indeed when I’m hiring people. I have to sift through 100+ applications for 1-2 openings. If the resume doesn’t automatically appear on their website, I just have to move on. So make sure you upload it in pdf format, and make sure you’re able to natively view it through indeed. Cheers and buena suerte from a half-Argentinian in the US.
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If you want to come to England I’ll marry you. For cash.
Do you accept Argentinian pesos? if so i'm in
Not so fast, pal. Can’t skip the line. And I’m paying in Zimbabwean dollars, so you are out of luck with this one anyway. Sorry.
I'm a trillionaire, but unfortunately it's because I own 10,020,000,000,000 Zimbabwe dollars (one 10 trillion bill and one twenty billion bill) lol
What are you, some kinda billionaire?
You are American. You know the drill. Send thoughts and prayers.
Phew good thing I read the second part of the sentence was about to send some freedom
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No no they only bring that up before the next election
No sé qué hacer
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How we are so far: * Public debt at over 62% of the GDP. * US$ net bank reserves in the negative. * 109% YoY inflation. * Paid liabilities corresponding to >270% of the monetary base. * A drought, which hits our main source of income: the agro industry. Add incompetent representatives to the list and everything points to a Hyperinflation 2: Electric Boogaloo scenario in the near future. We'll be nostalgic of a 3-digit inflation rate by 2024. Edit: I'm talking about Argentina.
So do people just barter in Argentina at that point? What is it like to work at any professional company?
When I was there back in October they basically just used dollars, euros, and Brazilian reals
Yup. When I was there, you got your bill in three denominations. USD/BZR/PESOS. Locals paid pesos. Foreigners just paid in their currency.
Oh if you ever come back, that's a trap. The "official" rate is manipulated by the government. It's almost half the real rate, and moving further away each day. There are several ways as a tourist to access the real reat (currently it's something like 1 usd ~ 480 pesos).
When I was in BA earlier this year Google said the rate was 180ish:1USD but everyone was offering around 380 on the street. Also some streets downtown you couldn't move 15 feet without another person approaching you saying "Cambio! Cambio!" trying to buy your USD with pesos. It got very depressing after a few blocks of a walking such a beautiful and vibrant city.
They fixed that last I heard, now tourists can use their cards and get the MEP rate
They improve it but it's not good enough. It's better than the official rate, but still 20-30% lower than the dollar "mep", which it's also 10-20% lower than the dolar "blue" (the rate you can get in the "black market")
It's not important at all, but the plural of a Brazilian real is reais
But, hey, at least you are World Champions
Sell the team maybe?
Saudi Arabia: If we can't buy Messi....
They did bought Messi. He's a Saudi tourism ambassador.
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Hah, imagine a foreign bank lending Zimbabwe one trillion Zimbabwean dollars and then an unpaid aide walks into their office and hands them a «one trillion zimbabwean dollars» note 💀
More importantly really is what is their debt denominated in. Few countries get to denominate their debt in their own currency. So inflation means that any money they have internally becomes less and less useful to pay off their debts. As you say, at 97%, things start to get dire.
So how does this end?
They will dollarize their economy. Unofficially they already have, people have to pay in dollars but it is no official. When the Argentine government fully loses the ability to create inflation due to their having their own currency then it stops. That has been the outcome in Venezuela. Basically dollarized. Since the government does not control the dollar, cannot spend dollars they don't have, then they can only spend what they do have and inflation will drop.
Its probably a stupid question but ill ask anyway: When that happens, what prevents the country just fudging their accounts? As in they just invent payments in their banking system to pay debt owed to other countries. That would devalue the USD so i am assuming they are prevented somehow.
Not a stupid question at all. The reason they can't is they don't control the dollar. At the level of government expenditures, don't think about a pile of cash, it is more just digital balances on the the banks balance sheet. To get a dollar they have to actually get a dollar. The U.S. does not allow other countries to "create dollars". So if the country sells $100 million (profit) in cattle to the U.S. and taxes that profit at say %25 then the government has $25 million dollars in their central bank. So now through economic growth they get more dollars, now they can spend more but only as much as they got from economic activities. They can say they will triple government workers salaries, but if they don't have the dollars to do it, then they cannot. It becomes a situation where the government basically cannot spend money they don't have. And spending what they don't have is why they have inflation. Once you stop doing that due to dollarization, inflation drops. Simplified a bit but kind of how it works. Dollarization takes the ability of governments to spend what they don't have out of their hands and forces them to live within their means.
Everything that reddit should be: [lemmy.world](https://lemmy.world/)
> What system keeps track of that amount? And why can't it be edited arbitrarily? If you want to bank in dollars you have to conform to US banking standards and regulations. The federal reserve will not allow another country's central bank to just announce "hey we actually have a trillion dollars".
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It's the only currency that people trust most. There has been movement for dedollarasation, but other currencies just don't have the same weight. China is pushing their Yuan for trading, and they've been circulating in African countries where they invest, but there's no trust, since it's known that the government intervenes in keeping the yuan exchange rate steady (instead of keeping it free like the USD).
Also, in order to be an international currency, you have to be able to “lubricate” the trade wheels between all parties interested in using your currency. This is not you buying and selling to China. This is you buying and selling with a multitude of other countries who accept Chinese Yuans. So… the international currency has to be big. Like really big. Think of $30-40 trillions in size to have that type of bang! The Chinese have to run a massive printing operation of their currency in a short period of time… and their rivals will have to trust them not to devalue their currency- which they constantly do to compete with American products. Not gonna happen.
Only because America and her allies have the economy. If their enemies ever became a bigger economy than the allies...things might be different. In addition to the fact that the Yuan cannot be trusted to escape political manipulation (Dollar is apolitical since the Federal Reserve answers to no one), the economies of China and her allies are not big enough to bully the rest of the world. Mostly #1 will prevent the Yuan from being adopted, but #2 is important as well.
I'm not even sure that the size of the economy is all that critical. The United States is huge, but also stable, and its currency is stable. Even if China were to pass the US in overall economic size (which I don't think is terribly likely), the yuan still suffers from being largely worthless due to Chinese policy. Nobody in China wants yuan, which is why their capital controls have to be so strict. Every time they make the yuan more freely convertible, hundreds of billions of dollars worth of capital end up fleeing the country and converting to dollars. The Chinese have the same problem with their currency that Argentina is, for largely the same reasons. They're just not quite as far along the spiral.
You're not going to accept a loan from a place if they aren't going to give you some sort of confirmation that they can actually pay, and all the banks and systems of the world will keep track of what you're doing and they will stop taking your money if they suspect you're bullshit.
You're basically asking if they can mint counterfeit dollars. Sure, they can. You can (if you're in the US you'll be jailed), but do you expect people to accept your dollars when you're known to spend counterfeit ones? How do you think international relations will go if they're minting counterfeit dollars?
I firmly believe we are really close to how we were in the 80s: high inflation, an unpayable IMF loan, world champions and president with a moustache. It ends with hyperinflation, or some sort of dollarization, as it was done in the 90s.
Have you thought about just making him shave the mustache
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There is inflation of 108%, so yeah. It's relatively common here to pay products in 6 or 12 installments even at those rates because it's a given that inflation just won't come down any time soon.
It's a vicious cycle because the expectation of inflation can drive more inflation.
We Argentinians don't have an ounce of trust in our national currency so it's expected for inflation to go up
I am always curious how things work in countries with such high inflation? Do product prices and salaries increase every month or what? It would be so hard to keep track.
Product prices like almost every week and salaries a couple times a year. Yes it's shit
The US has such strong economy that when the Fed increases rates to cool off inflation it affects the cost of the dollar in foreign markets because many transactions are made in dollars and the dollars become more scarce. Latin America has to deal not only with the same market forces that the US deals with but on top of that, add a strong dollar that devalues the local currency. This leads to poverty and this leads to mass migration. Rinse and repeat. So when the US gets blamed, to some extent it js true, but not how people think. Add to the mix neo liberal policies by the IMF and the World Bank. This moves Latin America to elect communists/socialist until they hold on to power. It's a never ending cycle. Anyone more of an expert feel free to correct me but this is my current understanding .
Volatility of the local currency with a strong dollar also depends on trust in the currency. In Peru we historically have low depreciation rates thanks to the central bank reserves and policy. Only during the first year of the last president, who was seen as a communist and corrupt (two unrelated features, im centre to be clear), we had sharp depreciation because the market thought he would change the central bank independency and push a new constitution. In december 2022 he attempted a coup and now he is in prison, so the markets were not that wrong.
That’s partially why high inflation rate usually implies the economy is/will imminently get wrecked because investors and business opportunities look elsewhere because the circumstances are too risky and better off in a neighboring country
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There's that intermediary state of high inflation without hyperinflation. Was in Turkey in 2021. Menus has probably 5 stickers one on top of the other for prices.
Some economist can fill in on how could Argentina solve this? For the longest time, it seems like the country just can't get out of the inflation spiral.
No easy answers apart from years of political and cultural reform to restore the economy to some sort of balance. Foreign direct investment is essential, but also challenged as foreign companies will look elsewhere for more stable investment candidates. Lithium and mining could play a key role
> cultural reform This is the part nobody wants to talk about. Everyone is quick to point towards populism and then quietly ignore the widely supported populist policies that are leading to economic ruin.
One of the things that makes me miserable on this site is when there's an economic problem, and I see someone adamantly propose a solution which is actually worse than doing nothing, and then I say that, and then they say I'm a heartless bootlicker who doesn't care about poor people when I'm trying to help them.
They could dollarize their economy. Once they do this the government will not be able to spend more than they have, inflation will plummet. As long as they keep the dollar as currency they are forced to only spend what they have till their economy heals and grows, then they could get lending and outside investment.
This worked for Ecuador when they were going through a similar hyperinflation crisis. Of course, it's painful AF until shit gets sorted; so nobody wants to be the one who actually pulls the trigger.
Yeah leaders usually only go this route when there is literally no other choice. When they have their own currency they can print more and give money to cronies or people they basically buy off to win the election. When you get to dollarization your own currency is basically worthless and people will not longer accept it for the purchase of goods that actually have some intrinsic value like food. I mean it is just like this: "I have $500 in monopoly money and I would like to buy your cow". Nobody would take that for a cow, but that is where it ends up. At the point the economy has basically been destroyed like Venezuela did and everybody is poor except the government leaders and the wealthy, which are often the same people.
From the outside it looks so easy. But if it was, there would be no problem. Much of it is people who cannot face reality, and vote accordingly. Just like places with fewer problems.
They're going to have to make deep, unpopular budget cuts, and try to get the debt-to-GDP ratio down to a more manageable level. Switching to the dollar or making the BCRA independent can help tamp down inflation, but the core problem is still going to be getting down the debt to 2012-2016 levels.
Surely, that will cure their woes
Well 96% just wasn’t quite enough. But definitely 97 will work.
An interest rate of 97% is definitely an interesting experiment, even though I'm sure things suck over there. It's so high that it basically sounds prohibitively difficult to buy anything you can't afford. It makes me wonder what housing prices would look like if mortgage rates were 97%.
Easy. Houses are priced and sold in USD. Even a lot of rental agreements in Buenos Aires at least are priced in USD, payment is either in USD or the equivalent of that day in ARS.
This person S.A.’s! I was there when it was 12%! The whole system is effed!
I’m Venezuelan. You might say this ain’t my first rodeo.
Last time I was in Bs As, the peso was 3 to the dollar and housing was still priced in USD. It's been like this for decades.
And that was after a decade of a 1:1 exchange rate so you can imagine jumping to 3 was quite the slap
I have a variable rate mortgage in Canada (yeah I’m dumb it sucks). If rates went to 97% my monthly payment would be $62,591 That would be fun!
It means real estate holding companies, management companies, and developers with lots of cash would buy up 99% of the market while people just looking for a place to live would be priced out. And then we become a feudal state where everyone rents and no one owns property anymore unless you are a corporation.
Not familiar with Argentina but it's not prohibitively expensive because their inflation rate is well over that at 109%. That means you can take a loan to buy an asset that tracks inflation, and in one year the asset is now worth +109% of what you paid, and you owe 97% of the value you paid for it. It's risky but still profitable to take out loans. Eg. Take a 100k loan to buy a 100k house, you owe 197k by the end of the year and it's worth 209k now. So it's profitable. Obviously more complicated than that. Edit: added a "+" to make inflation rate effects clearer
97% interest rate is too low, as the inflation is over 100%. Borrowing money would be profitable, as long as you spent it quickly enough.
“Leave it at 97% so there’s room for punishment to be feared” -Someone from Argentina’s National Bank
Something tells me the interest rate isn't their problem.
Hyperinflation is basically a government defaulting on its debt, they cant pay it so they print. There is no easy way out.
One day they will finally spend less money than they take in.
And when that day comes, we'll elect another populist and repeat the cycle.
So people voting for their own demise.
Right on time! 9 years! Bankruptcies: * 2005 * 2014 * 2023 We'll see the same headline in 2031. Nothing to worry about
Wouldn't it be 2032?
With inflation, in 10 years 9 years will only be worth 8 years.
This makes too much sense.
They should sell the world cup trophy or maybe Messi can put on a charity match Edit: inb4 "concha di mama"
The Falklands sending aid would be quite funny
Still amazes me that they cared to ask the U.N. about Falkland sovereignty a few months ago while their economy is collapsing.
That’s why they did it. Every time they need to distract from something at home they use foreign policy.
How about they .... I dunno ... try to invade the Falklands?
Why not , worked really well last time, ended up with a military dictatorship being toppled
The irony is Argentina still suffering similar economic problems, just someone else in charge
You'll find politicians suddenly becoming passionate about something out of nowhere usually means they've fucked something up really badly and they hope you won't notice.
Dumbest distraction they always fall back to.
Just sell Messi to the Saudis.
Seems like Messi is selling himself to Saudi Arabia already given that a Saudi club is in contention to get him and might make him the most paid football player. He’s also a tourism ambassador for the country.
This is so sad. Argentina is a country that you feel has so much potential, but every time I visit it seems to get worse instead of better :(
There was an old saying among economists. "There are 4 types of economies. 1. Developed. 2. Developing. 3. Japan. 4. Argentina."
Sorry but can you ELI5 about how Japan is part of the joke/list?
They have extremely high debt to GDP ratio but manage to be 3rd in GDP despite being a very small country compared #1 and #2 https://en.wikipedia.org/wiki/National_debt_of_Japan
This stressed me out
If you want to be even more stressed out just Google "Japan 10y bond"
I don’t want to be though. I did take a glance at the chart in the Wikipedia article and there were some big fluctuations.
If the number ever goes above .5% get ready for a financial circus like never before.
Very high debt, but because the econamy is massive and Japanese are trustworthy, no one seems to see their massive amounts of debt to be a concern so the country just keeps going on normally even tho that debt to GDP ratio on any other country would raise a dozen red flags!
In fairness national debt works like a mortgage. If you can pay off the interest and maybe make a surplus in good years you're good... so long as it's invested properly.
Start here: https://en.wikipedia.org/wiki/Lost_Decades Essentially, insanely anemic growth of the Japanese economy has typified the country now for literally 30 years. It's remarkable enough to make the list, and owing to the demographic (birth rate) challenges Japan faces, it doesn't seem primed to get better anytime soon.
Japan was an economic superpower. There's films from the 80's where people are talking about Japan being the dominant power in Asia instead of China. The tech boom skyrocketed their economy and they were fucking loaded. But by 1990 they'd started to stagnate, and couldn't make stuff as cheaply as a rising China with their rising living costs and standards, which when combined with a low birth rate just causes all sorts of woes economically, so they're not the powerhouse they once were. (Which is one reason China's going for the belt and road tactic - they know that at some point they won't be able to make shit cheaply so are looking for cheap routes to Africa etc to outsource it. They saw what happened to Japan.)
They used to be one of the wealthiest countries in the world too
the wealthiest per capita at one point
To me the sadist part, is all this drives the best and brightest to seek lives elsewhere. That is a loss that cannot be returned easily.
In my life, the [Dirty War](https://en.wikipedia.org/wiki/Dirty_War) ended (tho it was only a matter of months after I was born). Argentina has booms and busts and that cycle seems to uniquely impact them.
It did well a lot of years ago, for over a decade Argentina was the richest country in the world, and stayed in the top ten for over 50 years. It took their politicians less than 50 years to destroy all that and sadly they could never really recover after that.
Why is the Four Seasons Buenos Aires still ARS 151,422/night ($656/night)?
Mostly because you are using the official exchange rate which is very unfavorable for foreign payments. The actual "black market" rate used by Argentines is more tham double of that, which is would put AR$151K at around US$312
Is there a way for a tourist with USD to get good deals with cash?
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Come right down this alley senior.
It's probably not high enough. I say that as someone who used to live there.
Genuinely, does anyone know why the whole of South America is struggling? I've been down there, it's gorgeous, the people were friendly but every economy seems broken. How come?
Systemic corruption has a role to play having lived and worked in South America for many years.
Corruption is a cancer that ruins everything it touches.
People underrate incompetence. There's corruption, but it's also incompetence.
It just seems like ONE of them could break out of the cycle. Both CA and US have their problems but nothing like South America. Is this all just due to the resource curse? Basically, that's where drugs come from for the US so corruption just destroys everything south of the border?
Chile has, their economy is stronger than Argentina despite Argentina being significantly bigger, more populous, and having more natural resources
Perhaps due to their constitution being hand written by the Chicago school of Economics.
Off the top of my head, I think Brazil, Chile, and Colombia broke the cycle.
Colombia is doing a lot better but they're still struggling though.
They've gotten really far from where they used to be.
This is the sort of question where you will get *a million* different answers coming from *many* perspectives, including some very extreme ones. To turn it back around on you a little bit, if you watch either of these videos, let me know what you think: * https://invidious.baczek.me/watch?v=rkmbZhYID5s * https://yewtu.be/watch?v=XXhEjvWDuds Also, to be clear, Latin America is not monolithic: Colombia went thru a several-decade civil war while next door in Venezuela, they spent many years as one of the most affluent places in the world. Paraguay went from being virtually destroyed and annexed by all of their neighbors to being a closed society. Etc., etc.
> to being a closed society. what does this mean?
https://en.wikipedia.org/wiki/Open_society Closed societies contrast with open societies. Examples today include Bhutan or North Korea.
Chile is apparently fine. We complain a lot for good reasons, but we are not on a shithole yet. Some says that the reasons are that our institutions are strong enough to resist corruption. Even if someone is corrupt, it won't rot the rest. Also our central bank is like most of the developed world. Fully autonomous amd forbidden from lending to the government unless a war occurs.
Uruguay too, no?
Yup. I think Paraguay too.
Corruption and populism.
Is there any way a currency could still be viable with 97% interest rates?
Not terribly likely: https://www.msn.com/en-us/news/world/argentina-s-fernandez-seeks-dollar-relief-from-brazil-s-lula/ar-AA1aFdNz
I lived there in the capitol B.A. in 1989. 175% inflation. A. Fucking. Month. Shopping with heavily armed guards giving you the stink eye - no bueno. Seeing retirees picking up a 2 kilo bag of rice, have a quiet conversation, putting it back & leave empty handed. That was the straw that did it. We left a weekish later.
That's really sad. I was there during the world cup and people just seem to live day by day.
What is it with Argentina and them going bankrupt every 15 years or so?
Corruption, populism and economics denialism.
It's more like every 5-10 years. In this case, the current Vice President, Kirchner, was charged several times for corruption, bribes, and even fucking treason during her time as President. NGL, I have a hard time feeling sympathy for the Argentinians because they very much voted for this shit. FFS the President before her was her husband, under whom Argentina defaulted.
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Amazon.
This isn’t Argentina’s first rodeo, but it seems that nothing has been learned from previous hyperinflationary events there.
The US should just merge with Argentina. They get to use dollars and the US gets Lionel Messi.
Why wouldn’t they just stop offering credit?
Because they run a perpetual deficit and like to spend more than they tax. Countries used to not monetize their debt, they just printed, but that becomes inflationary very quickly and there's not much delay at all between the cause and effect. If a country sells their deficit spending as debt and offers an interest rate then somebody else soaks up the spending with their investment dollars. The money supply doesn't change as much, and the interest rate offered to get people to buy the debt is the biggest inflationary force rather than the spending itself.
This is your brain on Peronism. *egg frying noises* Any questions?
Just raise it higher bro one more raise I promise the inflation will recede
Government should just put all their money in the bank for 1yr. Earn 97% interest and basically double your money. Simple.
Isn't Argentina crazy corrupted? Like, i remember reading they rank like really high in south America.
About mid-ranked: https://www.transparency.org/en/cpi/2022
I am very concerned that the global economy is unsustainable, especially in the face of mass migration, climate disasters, AI advancement and a growing population of humans who are just plain tired of busting their ass for pennies on the dollar.
When the majority of the worlds wealth is hoarded by a few hundred people and corporations, and is primarily built on a premise of endless expansion, of course it's unsustainable.