Milei’s Austerity Plan Pushes Argentina Into Recession

[Murray Rothbard]

There are very few economies today that are organised on sustainable lines so Argentina is not unique. Most Western countries are built on a sea of debt. In the US for example, consumer and public debt is at record highs. This will all come crashing down as interest rates rise, like during the Global Financial Crisis of 2007-2009.

Regarding Japan it has been in a recession and/or stagnation since the 1990s. Increasing government spending has failed to cure sluggish growth, which is what free market economists like Milei would predict. You can read more about it in the following articles: Benjamin Powell, "Explaining Japan's Recession", Quarterly Journal of Austrian Economics (2002) and another article by Jason Morgan, "The Origin of the Prolonged Economic Stagnation in Contemporary Japan", Quarterly Journal of Austrian Economics (2019).

 

[Ceviche]

They have to remove all taxes or follow Dubai or Singapore or Hong Kong or El Salvador tax models to create new opportunities

 

[dilmah]

an artificially cheap dollar (hurts exports)

How is this about Milei?? Artificially cheap dollar is exactly what was the previous government doing -- exporters had to sell their dollars for official rate which was artificially set to half a market rate.

 

[LuckyLuke]

How is this about Milei?? Artificially cheap dollar is exactly what was the previous government doing -- exporters had to sell their dollars for official rate which was artificially set to half a market rate.

A floating peso vs crawling peg would be an interesting analysis here. It's hard to imagine a floating peso not causing so many domestic markets here to go haywire with frontrunning the depreciation. While I think 2% is obviously too slow of a crawl, it does provide some market stability. Sadly the frontrunning happens regardless, as seen when the the dollar plateaued and inflation carried on regardless. But I shudder to think of how any consumer would survive a floating currency here.

 

[Quilombo]

How is this about Milei?? Artificially cheap dollar is exactly what was the previous government doing -- exporters had to sell their dollars for official rate which was artificially set to half a market rate.

Because the BCRA is intervening in the forex market to keep the peso overvalued, he's literally continuing the same policies as the Ks, and wasting the reserved to do so:

Bloomberg - Are you a robot?

Time is a flat circle in Argentina

 

[carride]

Bloomberg - Are you a robot?

The paywall free link to previous mentioned article

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Central Bank President Santiago Bausili has cut the policy interest rate six times since December, bringing it to 40%. That’s so far below 276% annual inflation that it discourages Argentines to save in pesos and risks increasing demand for dollars.

Agricultural exporters have sold only a quarter of their soy harvest so far this year, compared to an average of half the crop for the same period last year, according to a person with direct knowledge. There’s still some $13.5 billion of the harvest to be sold, the person said.​