Can the newly elected President of Argentina, who supports Bitcoin, stop Argentina from crying?

Will Argentina's newly elected President, who favors Bitcoin, be able to stop the nation from weeping?

Author: LianGuaiMaxwell

Three years ago, few could have predicted that a libertarian, an anarcho-capitalist, an Austrian school economist, and a TV commentator named Javier Milei would become the president of Argentina three years later.

After two rounds of elections, Javier Milei defeated his opponent, Sergio Massa, the Belonist Argentine Minister of Economy, on November 20, 2023, and successfully won the presidential election in Argentina.

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Argentina’s second-round presidential election results source: Bloomberg

Why was Milei elected?

To understand why Milei was able to be elected president of Argentina, just look at the exchange rate situation of the Argentine peso over the past twenty years. The official exchange rate is currently 350 pesos to 1 US dollar, but the black market rate is as high as 900 pesos.

Source: Google Finance

Also, take a look at Argentina’s inflation rate since 1960. Argentina is an extremely abnormal country, with its currency experiencing high inflation in the long term.

Source: The Case of Argentina

Prior to 1990, inflation was consistently over 100%, with inflation rates exceeding 1000% in 1974 and 1985, and reaching 20,000% in 1989. From 1994 to 2001, inflation rates were briefly in the single digits due to the Argentine peso being pegged to the US dollar, but it began to rise again in 2001. Starting from 2012, inflation soared from 20% and in 2019, it reached over 50%. The latest data from 2023 shows that Argentina’s inflation rate is as high as 143% and still rising.

From the above data, you can probably get a sense of how Argentina became the only negative example of “falling from a developed country to a developing country.” In addition to the “middle-income trap,” there is also the “developed country trap.” Argentina is a prime example of the “developed country trap.”

Despite Madonna’s song “Don’t Cry For Me Argentina” winning countless sympathy and praise for Eva Perón, Belelism is the main reason Argentines cry. Belelism advocates for big government, central planning, increased regulation, support for labor unions, social welfare, and exclusion of foreign investment. Since World War II, Argentina has been governed by Peronist governments, and even with changes in political parties, the degree of Peronism only varies.

Therefore, Argentina has been living in high inflation for three generations, and they have had enough. Argentinians want change. Many people believe that Mile is their best choice.

As 28-year-old voter Ayrton Ortiz said at a rally before the Mile election, “Mile is the change Argentina needs.”

Although Mile opposes abortion, female voters still choose to support Mile. One female voter said in an interview with Agence France-Presse, “We want to see a new face, I bet on change, I bet on Mile.”

Who is Mile? What is his true nature?

What kind of person is Mile? We can get a glimpse from the various labels on him.

Birth: Born in October 1970 in Buenos Aires, his mother is a housewife and his father is a bus driver.

Singer: In his youth, he was the lead singer of the cover band Everest, which mainly sang songs by The Rolling Stones.

Player: In his youth and early adulthood, he was a goalkeeper for Chacarita Juniors until 1989.

Economics Scholar: Mile entered Belgrano University in 1989 and obtained a degree in economics. He later earned two master’s degrees from the Institute of Economic and Social Development (IDES) and Torcuato di Tella University.

Economist: After graduating from university, Mile served as the chief economist for several companies, such as Máxima AFJP, Estudio Broda, Corporación América, as well as senior economist at HSBC Argentina, member of B20, economic policy design consultant for G20, member of the World Economic Forum, and head of the economic research department of the national think tank Fundación Acordar.

TV Personality: Before entering politics, Mile was a TV personality. According to Ejes’ 2018 ranking, Mile was the economist who appeared in the most TV interviews in Argentina, with a total of 235 interviews.

Social Media Influencer: He registered his personal Twitter account in 2015, and currently has over 1.6 million followers. He also hosts his own podcast “Demoliendo mitos” (Demolishing myths), with 320,000 subscribers on YouTube and 640,000 subscribers on Facebook.

Professor: He has taught macroeconomics, growth economics, and microeconomics at multiple universities in Argentina and abroad.

Author: He is a prolific writer who promotes freedom and criticizes inflation, and has written several economic works.

Source: Goodreads

Last but not least, the politician and President of Argentina: In 2020, Mila joined Avanza Libertad (Advance Freedom), and in 2021, he established La Libertad Avanza (Advance Freedom Alliance) and became the leader of the alliance, running for a seat in the Argentine National House of Representatives. In 2023, he successfully won the presidential election and became the new president of Argentina.

Among all these roles, what is Mila’s background? The author believes it is the Austrian School of Economics. Inspired by the inflation that several generations of Argentines have experienced, he started to think about what is the correct economics.

In an interview, Mila stated that it was his interest in the currency crash and inflation of the 1980s that led him to become an economist. Especially the severe inflation in 1989 when he decided to quit the football association and officially delve into economic studies. Later, he obtained a degree in economics from the University of Belgrano and two master’s degrees from the Institute for Economic and Social Development (Instituto de Desarrollo Económicoy Social, IDES) and Torcuato di Tella University.

In 2013, Mila read the famous Austrian economist Murray Rothbard’s masterpiece “Man, Economy, and State.” Since then, Mila calls himself an anarcho-capitalist.

Mila also considers the renowned Austrian economist Jesús Huerta de Soto as his intellectual mentor. De Soto is currently a professor at the Juan Carlos University of Spain. Mila has publicly expressed admiration for de Soto. Mila was also one of the 52 authors in a tribute collection dedicated to Professor de Soto. After Mila was elected as the President of Argentina, de Soto stated, “We are now closely advising him, especially regarding the need to establish a 100% reserve ratio in the dollarization process.”

Chain saws, dogs, and “radical” ideas

During Mila’s presidential campaign in Argentina, traditional media outlets such as Reuters, Bloomberg, BBC, and others labeled him as “far-right,” “populist,” “madman,” “Argentina’s Trump,” “radical,” and so on. These labels clearly stem from the lack of understanding of the Austrian School of Economics and libertarianism by the traditional media.

“Ideas” shape people. To thoroughly understand a person, the best approach is to examine their beliefs.

Now let’s take a look at Mila’s various “radical” ideas:

Abolish the Central Bank of Argentina, reduce government departments (from 20 to 8), replace the Argentine Peso with the US Dollar, abolish labor laws and social welfare, blame Keynesianism as the root of all evil, support the right to bear arms, support bodily autonomy (organ trading, legalization of prostitution, etc.), oppose abortion rights, oppose women’s rights and LGBT rights, freeze relations with China (but respect agreements already signed with Chinese companies), praise former British Prime Minister Thatcher (Thatcher initiated the 1982 Falklands War, in which Argentina was defeated), believe climate change is a “socialist hoax,” and so on.

These so-called “radical” propositions may sound shocking to some, but for libertarians and the Austrian School, they are nothing out of the ordinary. Libertarianism advocates for a free market, limited government, personal responsibility, sound monetary policy, 100% reserves, voluntary transactions, and opposition to welfare, among other things.

Three of Milei’s core propositions are the abolition of the Argentine central bank, the reduction of government departments, and the replacement of the Argentine peso with the US dollar.

For example, Milei’s proposition to “close the central bank” reminds me of a famous scene involving Ludwig von Mises in the 1920s.

In the 1920s, after World War I, Austria experienced severe hyperinflation similar to Germany. The Austrian government was at a loss and sought help from the greatest economist of the 20th century, Ludwig von Mises. At midnight, government officials visited Mises at the government printing press, expecting him to provide a brilliant solution. Right before midnight, Mises told them, “Do you hear the sound of the printing presses next door? Turn them off.” The Austrian government heeded Mises’ advice, tightly controlled the issuance of banknotes, and successfully put an end to hyperinflation in Austria, taking a different path from Germany.

A picture of Milei and Mises’ “Human Action” in Spanish

Whether it’s coincidence or destiny, it brings to mind the fact that Mises gave six lectures at the Argentine Center for Economic Research in 1959, which were later published in a collection titled “Economic Policy: Thoughts for Today and Tomorrow.” Mises expressed his hope at the time that “in a few years the number of people in Argentina and other countries supporting the concept of liberty will greatly increase.” Over 60 years later, we are witnessing Mises’ wish come true.

Milei’s second proposition stems from the empirical evidence of the 1990s in Argentina. The convertible plan implemented by President Carlos Menem in the 1990s pegged the peso to the US dollar and put an end to hyperinflation. The convertible plan began on April 1, 1991, and by 1993, Argentina became the country with the lowest inflation rate in the world. Milei suggests that he hopes for currency freedom and a comprehensive reform of the financial system. “The most likely scenario is that Argentines will directly choose the US dollar.”

One symbol of Milei’s election campaign is the “chainsaw,” which represents his third proposition. He strongly advocates for cutting government departments. During the Argentine elections, some of Milei’s videos circulated online, showing him tearing off sticky notes with the names of government departments he intends to cut, while chanting his slogan, “Damn the free market!”

Argentine voters holding the icons representing the two major campaign promises of Milei.

In the previous section, it was mentioned that Milei’s background is that of a libertarian economist. This can also be seen from the five dogs he owns.

Milei has five dogs, named Conan (the protagonist of the 1980s film “Conan the Barbarian” starring Arnold Schwarzenegger), Murry (Austrian school economist Murray Rothbard), Milton (Chicago school economist Milton Friedman), Robert, and Lucas (Chicago school economists, Nobel laureates in economics, rational expectations economists Robert Lucas). Murray Rothbard, Milton Friedman, and Robert Lucas are all famous economists in the field of business cycle theory, which focuses on inflation and central banks. Murray Rothbard is a leading figure in the resurgence of libertarianism in the 1970s and 1980s, and the pioneer of anarchocapitalism.

Milei and the flag of libertarianism, the Gadsden flag.

Milei supports Bitcoin

As a follower of the Austrian school of economics, it is understandable that Milei advocates for the abolition of central banks. He would undoubtedly support Bitcoin as well.

He has publicly declared “central banks are a scam” and “supports Bitcoin” in multiple occasions, although Milei has not yet advocated for the use of Bitcoin as legal tender or as a national reserve asset.

He argues that central banks are a scam, a mechanism through which politicians deceive the good people through inflation tax. Fiat currency issued by central banks allows politicians to deceive people through inflation tax. Bitcoin, on the other hand, is a natural response to the scam of central banks and represents the return of currency to its original creators, the “private sector.” The algorithm of Bitcoin determines that it will no longer be issued after reaching a certain quantity on a given day.

Milei states that the scam issue is more severe in economies with high inflation rates, which is why he proposes the closure of central banks.

Will Bitcoin become the official currency of Argentina?

Although Milei openly supports Bitcoin on multiple occasions, will Argentina follow in the footsteps of El Salvador and make Bitcoin its official currency?

The reason why El Salvador was able to pass the “Bitcoin Law” in 2021 and become the first country to make Bitcoin legal tender is related to its unique national situation. El Salvador is located in Central America, close to the United States, and its citizens have long relied on remittances in US dollars, resulting in a high level of dollarization in its economy.

Since January 1, 2001, the Central Bank of El Salvador has stopped issuing its own currency, the colon, but it can still circulate. The official currency of El Salvador has been the US dollar. This means that since 2001, El Salvador has not had its own independent monetary system. Therefore, in 2021, El Salvador decided to use Bitcoin as a legal currency alongside the US dollar. The political resistance was minimal, and the impact on the Salvadoran economy was also minimal.

Unlike El Salvador, the Argentine economy does not have the same US dollar foundation. Moreover, although Milei successfully won the presidency in Argentina, his political foundation is weak. The party he leads, the Liberal Front, was only established in 2021. Currently, it only holds 8 out of 72 seats in the Argentine Senate and less than 40 out of 257 seats in the House of Representatives. It also does not have any governors in the 23 provinces of Argentina.

This means that even based on Milei’s ideals, the resistance to the “Bitcoin Bill” in parliament would be significant.

Unless Milei can achieve significant economic accomplishments, gain high political prestige and public support in the short term.

Conclusion

But regardless, the Argentine people ultimately chose the libertarian and Austrian School economist Milei as their president.

Perhaps the Argentine people are not particularly supportive of Milei’s “radical” proposals, but they have had enough of inflation and Peronism in their country’s history. Perhaps the mentality of the Argentine people is: “We’ve hit rock bottom, so any direction is upward.”

Because for the ordinary people, as long as they can live a decent life, they don’t care about concepts like “libertarianism,” “anarcho-capitalism,” or the “Austrian School.”

But Milei’s election has popularized libertarianism and the Austrian School of economics. Just like the emergence of Bitcoin has spread the ideas of the Austrian School of economics.

Hopefully, they can take root and become mainstream in Argentina, so that the Argentine people will no longer cry.

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