Argentines Keep Cash Under Mattresses As Milei Pushes Bank Accounts

[LuckyLuke]

Milei knows people have savings and he wants it. Which is exactly why people keep it in cash.

Milei doesn't want your savings like some ghoulish vampire wants your blood. Banks, by regulation, can only lend a certain percentage of their deposits on hand. By encouraging you to deposit your savings, banks can generate more loans. Loans that could help businesses turn over inventory, buy machinery, expand their plants, etc. But that's all nonsense I suppose, because the store down the street offers a 20% effectivo discount "sin factura"...and your handyman prefers cash because the he's got a "retencion" on his Mercado Pago because he never registered for Monotributo.... Come on...are we really talking about "2001" anymore??

 

[SlowWalker]

Milei doesn't want your savings like some ghoulish vampire wants your blood. Banks, by regulation, can only lend a certain percentage of their deposits on hand. By encouraging you to deposit your savings, banks can generate more loans. Loans that could help businesses turn over inventory, buy machinery, expand their plants, etc. But that's all nonsense I suppose, because the store down the street offers a 20% effectivo discount "sin factura"...and your handyman prefers cash because the he's got a "retencion" on his Mercado Pago because he never registered for Monotributo.... Come on...are we really talking about "2001" anymore??

Agree. This isn't some conspiracy.

There is a small detail though and I don't really know it.
Not all capital is treated equally though. In Argentina, there are separate laws regarding how banks can treat USD deposit and if and how they are allowed to loan in USD. There was an article about one of the bank CEOs in Infobae months ago and he mentioned that.

Having money in the system makes the system more robust. It will allow for expansive credit market without the government just printing money/liquidity. It also allows the parties to earn interest instead of losing against inlfation in USD or they can invest in other things, ETFs etc.

I think a major issue, and not just in Argentina is a lack of understanding of how the financial system really works, and how it essentially underpins the economy/society.

Public projects are starting back up soon, but I think some Argentinians are just expecting things to get better like flicking a switch and for everything to be done by the government, which is unrealistic. As you suggest, people do much in cash to avoid paying taxes, but they continue to demand the government pay and fix everything. My question is with what resources?

I think 2001 still rings in people's heads. I don't really think that it is going to happen now, but unless you have lived through it yourself and had your savings wiped out, I don't think its fair to judge people on that.

 

[Ries]

You guys are very optimistic about the stablilty of governments and banks.
Argentines are not, based on experience.
I am 70.
Many of my Argentine contemporaries, friends of mine, recall things like 6 different "presidents" in 4 years (1970-1974) many of whom were generals. They recall 40 years of constant coups, counter coups, stories of the aerial strafing of Plaza de Mayo, unilateral devaluation of bank accounts, inflation so bad you reprice merchandise every week, sometimes every day. They have seen corruption, especially in terms of public works, worthy of the days of Boss Tweed in NYC.
They have seen financial roller coasters, especially of pesos and their value, and they have learned in the school of hard knocks that, over the last 50 years, holding physical dollars has ALWAYS been safer.
They have a very different idea of "how the financial system really works", one based on lived experience.

There are many ways economies work.
The most successful, say, Korea, Japan, or the Nordics, use a more fair system of taxation, and the "resources" are based on a much wider, fairer set of taxes.
I have suggested again and again, the solution is progessive taxation, tax reform to tax the actual wealthy, as well as an industrial policy that encourages value added manufacturing and exports that create jobs, as opposed to flat percentages of fees on the export of raw materials.
But hey, thats just me.