Although Argentina has yet to arrive at hyperinflation, she is no stranger to it. Residents suffered through months of it in the 1970s and 1980s, with prices exploding at rates of up to 70 percent per month.
“These days Argentina’s inflation rate is 40 times higher than the rest of the world’s,” says Milei, “yet the discussion regarding [the out of control monetary base] is as outdated as in the 1960s.”
“This country should have a US$30,000 per capita GDP, yet what we have is US$11,000. That is a catastrophe in terms of growth. This comes from uncertainty over how much capital is available; physical capital but also human, institutional, and social capital.”
With restrictions on the purchase of foreign currencies, the free (or black-market) “blue” dollar is now at AR$13.9 per US dollar. That means Argentina’s strongest bill, the ARS$100, is now worth just US$7.19. Even after double-digit inflation for several years now and Argentinean wallets overflowing, the government has remained steadfast against a new design or the issuing of higher-denomination bills.
To put the situation into perspective, in 2003 when Nestor Kirchner took office, there were 188.2 million AR$100 notes in circulation. Eleven years later, in November 2014, this figure had risen to 2.84 billion. An increase of 1,411 percent, according to data reported in La Nación.
Moreover, in late 2003 the aforementioned bills represented only 34.1 percent of total circulating currency; in November last year they rose to 65 percent of the total.
Another local economist, Luis Secco, affirms that “inflation and dollar shortages come from an abundance of pesos, which is generated by the growth of the Central Bank’s liabilities. This is the result of financing the fiscal deficit.”
The price instability could be worse, though. Guido Sandleris, dean of the business school at Torcuato di Tella University, says the Central Bank has been increasing its liabilities by eagerly issuing promissory notes (bonds) to avoid printing more pesos to finance the Treasury.
“In this way, [the Central Bank] tries to reduce the inflationary costs of monetizing the fiscal deficit. This strategy has allowed inflation to stabilize, albeit at a high level.”