Nobel laureate in economics, Kuznets, once said: There are only four countries in the world: developed countries, underdeveloped countries, Japan, and Argentina.
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At a time when the world is closely watching the Palestinian-Israeli conflict, Argentina in South America has also reached the edge of a cliff.
The Argentine people have ushered in a historic moment a few days ago!
The exchange rate between the black market US dollar and the Argentine peso has risen to an unprecedented 1040!
In a week, the Argentine peso depreciated by a quarter!
Argentina's currency market is completely out of control.
But the loss of control faced by the Argentine people goes beyond that.
1. Inflation is out of control
According to the latest data, Argentina's annual inflation rate in September has reached 138%! The Argentine central bank predicts that the inflation rate will exceed 180% by the end of this year.
At the middle of this year, economists predicted that Argentina's inflation rate was expected to reach a staggering 147% in 2023.
Economists are still conservative!
2. Interest rates are out of control
The Argentine central bank has raised its benchmark interest rate from 118% to 133%, marking Argentina's sixth rate hike this year.
That is to say, if you deposit 100 yuan in the bank, it will become 233 yuan in one year. This amazing number, God looked at it with an 'o' mouth.
But even with this radical interest rate hike, it still cannot stop the depreciation of the Argentine peso and the pace of inflation!
Five years ago, one dollar could be exchanged for about 20 pesos; Now, the black market can exchange for 1040 pesos.
Argentinians, watching their pesos turn into waste paper.
3. The debt ratio is out of control
Argentina has long been an internationally renowned 'rogue' country and has had 9 debt crises.
In 2022, Argentina's GDP was approximately 324 trillion pesos, equivalent to approximately $462.2 billion, while the total external debt owed by the government, central bank, and enterprises reached $271.9 billion, accounting for approximately 58.8% of GDP.
Due to debt issues, Argentina's credit rating was once downgraded to junk level and is moving towards its 10th debt crisis.
Argentina's inflated debt
4. Poverty rate is out of control
In 2022, Argentina's impoverished population reached 42.5 million, with two-thirds of the population falling below the poverty line and a poverty rate of over 37%, the highest in 10 years. The employment rate was less than 50%, and a large number of middle class people returned to poverty.
Homeless Argentinians sleeping in the lobby of the bank
5. The Argentine government is losing control
This year is Argentina's election year, and out of control Argentina has elected a runaway presidential candidate - Javier Mile.
Millay, 52 years old this year, has an astonishing resume. He comes from a rock singer background, is a professional football player, a TV station celebrity, internet celebrity, and an employee of HSBC.
Miley's iconic 'chainsaw'
His political views are increasingly outrageous, almost outrageous to her ancestors:
Abolish the Argentine central bank and streamline government institutions. All the hardships that the Argentine people have experienced now are due to the central bank, which has been abolished and everyone is running naked together;
Privatization of education, healthcare, and even prisons;
Free trade, comprehensive market liberalization towards Europe and America, and complete elimination of tariffs and import and export controls;
Full dollarization of currency;
Legalization of sales of human organs;
Prohibition of abortion and relaxation of arms sales;
Mile believes that the reason for Argentina's economic decline is entirely due to the government's excessive regulation of the economy. As long as the regulation is lifted, everything will immediately improve.
He explicitly stated that the first institution to be abolished after his election was the Argentine Institute for Scientific and Technological Research.
The Argentinians, like the wind on the Pampas grassland, always enjoy excitement. There is no most excitement, only more excitement.
If Mile is ultimately elected, then Argentina will completely lose control from top to bottom, from inside out.
Economic collapse, political turmoil, capital flight, inflation, currency depreciation, coupled with the addition of crazy rulers, Argentina can only be said to be critically ill.
From developed countries to developing countries, Argentina's reverse development model is unparalleled globally.
Argentina, why are you here?
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Once in Argentina, their ancestors were rich and prosperous.
At the beginning of the last century, in 1908, Argentina's per capita income surpassed that of established powers such as Germany and the Netherlands, ranking 8th in the world.
At that time, Europe boasted that people were rich and said, "You really look like an Argentinian". The popular Crispy fried chicken was full of noodles.
At the turn of the last century, Argentina was also one of the top destinations for global immigration.
As long as Argentina doesn't struggle, relying solely on God's bounty can lead a comfortable life.
Buenos Aires, the capital of Argentina
Argentina's economic foundation, especially in terms of natural resources, has received all the blessings of God, including vast grasslands, rich natural resource reserves, and magnificent natural scenery.
With its fertile land, Argentina has developed agriculture, livestock and animal husbandry, becoming an important producer and exporter of food and meat in the world, known as the "world granary and meat depot".
With abundant natural gas and lithium resources underground, lithium resources are currently the most popular natural resource in the world. Argentina's lithium resources have the third largest reserves in the world. In 2021, the world's proven lithium resource reserves reached 89 million metal tons.
Just these two things alone can generate a large amount of foreign exchange income for Argentina every year.
However, in this century, in 2001, Argentina announced a suspension of principal and interest payments on its $132 billion maturing debt, directly defaulting on its debts.
Magic Latin America, Magic Argentina.
World Ranking of Argentina's Per Capita Gross Domestic Product (1900-2008)
Argentina, why are you here?
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In summary, they are all the consequences of reckless efforts. On the one hand, they are the failure of economic transformation, and on the other hand, they are a drag on the welfare of the whole nation.
1. The failure of economic transformation
Argentina lives happily with its agriculture.
However, due to the outbreak of World War I and World War II, overseas demand plummeted, Argentina's products could not be sold, the economy stagnated, and the wealth gap was huge.
In order to solve sharp social contradictions, Argentina has started endless tinkering: encouraging foreign investment, confiscating foreign investment, developing state-owned enterprises, and selling state-owned enterprises;
Between these repeated horizontal jumps, Argentina's economic pillar was not found, but its economy was completely "played bad"!
Argentina has truly verified the sentence: Money earned by luck is truly lost by strength.
Until now, Argentina has completely lost its macroeconomic control ability, as all enterprises related to the national economic lifeline are in the hands of European and American countries.
Export proportion of Argentine economy
2. National welfare
On the one hand, there has been no emergence of new economic pillars, and on the other hand, public welfare expenditures are increasing.
Why has the country gone bankrupt so many times, and Argentina still needs to show off as a fat man and continue to enjoy comprehensive high welfare?
The reason is very simple, it is difficult to shift from extravagance to frugality.
Because their ancestors were once wealthy, Argentina's welfare continued to follow the European and American model, and even the benefits were even better than those of Europe and America.
Even if there is no money left, the benefits given cannot be collected. Once reduced, the public will immediately take to the streets to protest, and even force the government to step down.
And how can these candidates, who are frantically trying to please the voters for the sake of their votes? Distribute benefits.
But where does the money for welfare come from?
Argentina first began a frenzy of borrowing foreign debt to provide benefits, but even if it did, it did not develop its economy and directly issued it.
So, whoever promises more, he is the president.
However, as the debt grew larger and fewer people were willing to lend him money, the Argentine government had to figure out how to repay it every day, and the country had seven consecutive debt default crises.
After multiple defaults, other countries are not fools, and no country is willing to lend money to Argentina.
The Argentine government, which cannot borrow money, has taken a different approach by printing money crazily and providing welfare.
As a result, Argentina kept printing money, and inflation became increasingly high. The Argentine peso has directly depreciated by nearly 100 times in the past 20 years.
Faced with triple digit inflation, Argentina issued a new version of the 2000 peso banknote (approximately $8 at the time) in May 2023.
The common people of European and American countries have been suffering from inflation in the past two years, but the Argentine people have been under inflation for a long time.
In short, Argentina has fallen into a vicious cycle of inflation, with ordinary people demanding higher wages and the government printing money recklessly, continuing to inflate, increase welfare, and print money······
It may seem that the welfare of Argentinians is getting better, but in reality, Argentinians are getting poorer.
Mile, who has the highest support rate, has also watched his middle-class parents become increasingly impoverished, and now the new generation of Argentine young people are also experiencing first-hand the return of middle-class families to poverty.
And this vicious cycle is also the source of the long-term debt problem that has plagued Argentina. The development of the Argentine economy makes it difficult to break away from the fate of bankruptcy every 20 years.
The increasingly poor Argentinians, seeing that they were about to miss out on their meal, took the lead, and Argentina's Trump Mille stood out.
As for what will happen to Argentina in the future, it depends on whether Mile can be successfully elected as president. Currently, he is leading, let's see their big picture.
However, no matter who is elected, no matter how Argentina's situation is, it is the ordinary Argentine people who ultimately bear the consequences.
Ukraine found a comedian, Argentina found a rock singer, and the past glory in history books can only be recorded in history books.
Since 2006, 7 regions have declared bankruptcy. What are the reasons for their bankruptcy? Will high debts be repaid after bankruptcy?
In addition, developed countries led by the United States all have the problem of high inflation, high debt, and high interest rates. Why wouldn't they go bankrupt?
Finally, how does money printing and inflation affect asset prices?
I have prepared three materials to address these issues: "Why has the United States not yet declined?", "Which cities and countries have gone bankrupt?", and "The Logic of the Interaction between Money Printing, Inflation, and Asset Prices.
Scan the code to join the group and send the keyword 'bankruptcy' to share with you for free. Believe me, if you are confused at this moment, the above information is very useful to you!