I’ve been in Buenos Aires, Argentina, for the last month, including through the recent turmoil in the banking industry in the United States and Europe. It’s a coincidence that has, um, given me some things to think about.
For those unfamiliar, the ways people in Argentina navigate the day-to-day economy can sound wild. When you don’t think you can trust the bank, the currency, or anybody in charge, things can get pretty weird pretty fast.
Amid super-high inflation, people can’t bet on the value of the Argentine peso staying stable, so when they’re paid in them, they spend them fast or convert their money to American dollars — it’s unwise to keep your money in pesos for too long. The government limits how many US dollars people can buy at the official exchange rate, if they’re allotted any at all, and so they buy them at a much higher black market rate, called the “blue” dollar. It’s about double the official rate — at the moment, the official exchange rate is around 200 pesos to a dollar, while the blue rate is around 380 to one.
“The Argentine economy has taught the people here not to trust in institutions in general but also not to trust in one of the central institutions for the functioning of the economy, which is money,” said Santiago Cesteros, a research fellow at the University of Zurich and former consultant at the World Bank.
Argentina, like every country, is its own unique beast with a distinct set of political, economic, and historical issues that tend to render its economy a bit of a consistently inconsistent mess. There’s no one explanation on why it is the way it is, or how to fix it. But it’s worth backing into…
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