The President of Argentina, Javier Milei, faces the difficult task of correcting an economy that has suffered many years of mismanagement. Central bank advocate Javier Milei promoted Bitcoin as a means to resolve the nation’s fiscal mismanagement during his candidacy. The odds are against Argentina’s new president, who has to fight many years of mismanagement and failures by other politicians.
In Argentina, libertarian capitalist Javier Milei was sworn in as the new president yesterday. Coming from the Austrian School of Economics, Milei was once in favor of Bitcoin as a solution to years of mismanagement of the Argentine economy, which could see inflation exceed 200% this year.
Milei now faces fiscal and social challenges that have caused many young citizens to leave the country. He plans to cut public spending by 5% and has signed a presidential decree to reduce the number of ministries by half.
Argentina: Javier Milei Faces Difficult Task of Fixing Economy
The inflation was due in part to the devaluation of the Argentine peso, which caused a significant oversupply of banknotes in circulation in the country. The country started up its money printers after its ninth sovereign default prevented it from borrowing in the capital markets.
Now, JPMorgan predicts the nation’s inflation could soon reach parity with Zimbabwe and Sudan. Alberto Ramos, an economist at Goldman Sachs, said Argentina could be an emerging-market success story if Milei can pull off an unlikely coup.
“He may try to do the right thing, but he may not succeed. It is nitroglycerin. It can explode overnight. Once the economic adjustment begins, control can be lost,” Ramos said.
According to Guido Moscoso, Director of Public Opinion at Opinaia, there have only been two liberal and pro-market reforms in Argentina in the last 50 years. To control hyperinflation and potentially adopt Bitcoin, Milei will have to change the economy. But doing so and maintaining your popularity is a feat that will require you to be “intelligent and pragmatic.”
However, like other politicians who have promoted Bitcoin in the United States and elsewhere, it is difficult to know to what extent Milei will succeed. Miami Mayor Francis Suarez set news agencies buzzing by accepting a salary in Bitcoin, but dashed his hopes for support in the White House by withdrawing from the race for the 2024 presidential nomination.
Another Florida official, Governor Ron DeSantis, who passed a bill against central bank digital currency and expressed support for Bitcoin, will likely lose the state to former President Donald Trump.
Anti-CBDC candidate Robert F. Kennedy recently decided to run as an independent candidate, potentially reducing his chances of winning.
Is Bitcoin the Solution to Hyperinflation in Argentina?
During his run for the presidency, Milei promoted Bitcoin as a way for Argentina to overcome its economic problems. A Financial Action Task Force and Financial Stability Board document from earlier this year stated that cryptocurrencies allow central bank policy to be circumvented.
However, Milei’s stance against central banks means that he does not consider the promotion of cryptocurrencies to be detrimental to fiscal policy.
The president of El Salvador, Nayib Bukele, recently celebrated the nation’s commitment to Bitcoin. The government currently holds about 2,700 BTC and has made $3 million in unrealized profits. He adopted Bitcoin as legal tender on the advice of the International Monetary Fund, but Bukele continues to challenge that purchasing Bitcoin was the right decision.
By Leonardo Perez
