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Lessons from Argentina

by Rachel MillsSeptember 25, 2023

If the official currency inflates or hyperinflates, having an alternative can make all the difference in your quality of life.

Recently, Lear Capital's new podcast The LearCast interviewed two Argentinians to learn more about their lived experiences with hyperinflation and monetary chaos in Argentina. This episode was inspired by Tucker Carlson's recent episodes on Argentina, what it is like there right now and in particular, thoughts on presidential candidate Javier Milei. Watch on Twitter here. 

Both men we interviewed had harrowing stories of life during hyperinflation. Can you imagine:

  • Going to a grocery store and prices are not displayed because by the time you reach the front of the store with an item, the price would have gone up!
  • Leaving work on your lunch break with your wages from the morning to go out and buy something - anything - you could get your hands on before prices rise in the afternoon...
  • AND its illegal -technically- to change your pesos into dollars or other currencies.

Life is very chaotic during hyperinflation. It is no picnic during regular inflation either.

Here are some thoughts and observations on these conversations.

  1. Wealthier Argentinians fall back on the US dollar during hyperinflation. What would we fall back on?

When the money breaks, people survive through more stable, tangible alternatives. In Argentina today, the US dollar is key. If you have savings in dollars, you can live very well. (Skip to 23:15 in the episode)

However, if the dollar descended into hyperinflation, what would we have? What other currency in the world would be a better bet? There are none that exist as such today. If you wanted to prepare today for inflation tomorrow, what could be a better bet than precious metals? Their purchasing power has remained relatively stable and they have universal appeal. Gold and silver could be our life raft in the way the US dollar keeps wealthier Argentinians afloat.

  1. Money printing causes this.

Argentinian politicians have directly caused the hyperinflation by spending and printing high volumes of the currency. Each peso created lessens the value of every other peso already out there. Similarly, the US is spending and printing an astonishing amount of currency. Our national debt just reached $33 trillion for the first time in history. The rest of the world sees what is happening and is looking for alternatives, ie the BRICS alternate currency efforts. Do you think the money printing will ever slow down? Are you willing to bet your life savings on the dollar?

  1. There are definite signs it could happen here.

Slowly at first, then all at once... One striking psychological effect hyperinflation has is it shortens your timeline. People enduring hyperinflation don't think about savings. Their money is a hot potato they race to spend on anything they can get for it. You already see that mentality in the US with fewer and fewer people saving for retirement. Why would you sacrifice spending today for diminishing rewards tomorrow? The thousands you squirrel away today might get you a postage stamp later. It's not a rational proposition, so people don't do it. At least not with a hyperinflating currency. You save in something more stable if you can. For Americans, precious metals are an ideal alternative. Having a stable, tangible alternative can make all the difference in your quality of life.

Our politicians are developing the same spending mentality as politicians in Argentina. They also have a short term view. Politically, they benefit from doling out piles of cash to special interests and it doesn't come from their pocket, so why would they exercise fiscal constraint? The overwhelming pressure on each individual politician is to spend spend spend. There is nothing special about Argentinian politicians in this way. It happens over and over. Here are some other examples.

  1. Weimar Republic, Germany (1921-1923): Perhaps the most infamous case of hyperinflation, the Weimar Republic saw the German mark’s value plummet to the point where people needed wheelbarrows full of money just to buy basic goods. This period of hyperinflation was a key factor in the economic and political turmoil that eventually led to the rise of Adolf Hitler and the Nazi Party.
  2. Zimbabwe (late 2000s): In the late 2000s, Zimbabwe experienced one of the most severe hyperinflations in history. At its peak, prices doubled every 24.7 hours. The Zimbabwean dollar became virtually worthless, and the country abandoned its currency in favor of foreign currencies like the US dollar and the South African rand.
  3. Hungary (1945-1946): After World War II, Hungary faced hyperinflation as a result of war reparations, economic mismanagement, and political instability. At its height, prices were doubling every 15 hours, and the Hungarian pengo became nearly worthless.
  4. Yugoslavia (1992-1994): During the breakup of Yugoslavia, hyperinflation gripped several of its successor states, including Serbia and Montenegro. Prices were doubling daily, and the Yugoslav dinar rapidly lost its value.
  5. Venezuela (2010s): In recent years, Venezuela has experienced one of the most devastating hyperinflations in modern times. Political instability, economic mismanagement, and falling oil prices all contributed to this crisis. Prices were doubling every few weeks, leading to widespread poverty and suffering.
  6. Brazil (1980s): Brazil faced hyperinflation during the 1980s, with inflation rates reaching as high as 2,477.15% in a single month (April 1990). The country introduced several currency changes and economic stabilization plans to combat the crisis.
  7. Zaire (now the Democratic Republic of Congo) (1980s-1990s): Zaire experienced hyperinflation, partly due to the extravagance of its leader, Mobutu Sese Seko. Prices soared, and the country went through several currency changes.

Hyperinflation is just one extreme example of what can go wrong in an economy. Holding gold and silver can prevent your net worth from being printed away overnight. The benefits of precious metals can extend to any inflationary scenario, and we definitely have inflation today. We will likely have more in the near future.

You can't control what politicians are doing to our money. You CAN control what resources you have in your reserves in case of emergency. Many experts agree that holding some amount of gold and silver in your portfolio is an important part of balance and diversification. We are ready and waiting to help you get started!

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