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I am not impressed with Argentine anti-inflation strategies.

Posted by John Reed on

Wall Street Journal today has an article about Argentines coping with inflation by hoarding. Yeah. My hyperinflation book has a chapter titled “Advance purchase and sale.” It is about stocking up on necessities now before the prices get higher. Obvious hedge against inflation. I also say to get rid of all the stuff you may try to sell via Craiglist and eBay now rather than when everyone in America is doing that.
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I do NOT have a freezer. Hoarding is trickier than that. I have lots of UHT milk, Mormon dry pack #10 cans of food, and freeze-dried #10 cans. The latter two have 30- and 40-year expiration dates.
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I have propane tanks. Gasoline is too dangerous and #2 heating oil (diesel) requires chemical treatment for long-term storage. I also live in a mild climate which is a form of hoarding when you think about it. And we have tons of toilet paper, computer paper, shampoo, detergent, motor oil, etc.
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And as I frequently note, as soon as we get hyperinflation, the federal government will pass The Five Bad Laws: capital controls, price controls, rationing, ANTI-HOARDING LAWS, and financial repression laws.
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In Argentina, they had 3,000% inflation in the 80s. Now 40% is normal there. They have freezers to stock refrigerated food. They spend their pay check as soon as they get it or convert it into USD. Yep. Yep. My book tells about how the Germans in the early 20s got paid twice a day and left work to spend the money at lunch time.
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Converting your USD to other non-inflated currencies will likely be outlawed by capital controls. I am surprised the Argentines can still convert TO USD. They also get loans which I recommend but I have said in hyperinflation you cannot GET loans. I am surprised Argentines still can. From whom? you have to be crazy to lend money at below-inflation interest rates. In Argentina, they pay their taxes late thereby getting a loan. Ah, the answer to who’s dumb enough to make loans: the federal government.
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The Journal story says workers are increasingly paid in cryptocurrency and keep the money in cryptocurrency. They are grading crypto on the curve—better than the Argentine peso. Maybe, but the question is is crypto better than CHF or AUD and such. If not, convert whatever you get paid in to better-managed foreign currency and hold it outside of the hyperinflated country. If they do not have capital controls yet, I would expect them any minute.
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In general, today’s article about Argentina is disappointing. For experienced inflation fighters, they sound more like incredibly slow learners than wise veterans.
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The hoarding they are doing will be outlawed if 2,422 years on inflation history are any guide. In Vienna in 1921, inspectors went door to door looking for hoarded coal (fr house heating). Diarist Anna Eisenmenger heard they were doing that. She and her domestic help moved their coal from the basement to the attic of their townhouse. The day after they finished, they collapsed exhausted from the back-breaking labor, and were roused by a knock at the door: the coal hoarding inspector. He did not look at the attic.
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He WILL look in the freezer in Argentina or the US. That is why I keep saying the solution is to leave the country. That, of course, is only for those affluent enough to have $50,000 to $100,000 abroad in foreign currency located abroad.
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I figure, based on those 2,422 years of history, that the US hyperinflation will last 6 to 24 months. It ends because the voters start carrying torches, pitchforks, and nooses. $50,000 to $100,000 is about the cost of living abroad on tourist visas for 90-days at a time in relatively low-cost towns.
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For example, Toowoomba rather than Sydney Australia. https://www.numbeo.com/cost-of-living/compare_cities.jsp...
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The Argentinians laugh at our current angst over inflation saying, “You call that inflation?”
I laugh at their strategies to deal with it and say, “You call that hedging?”
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