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Argentina Cut Spending and Posted a Budget Surplus. Why Can’t America?

3342 sats \ 37 comments \ @kr 25 Feb econ

Argentina is seeing its first budget surplus in 12 years just a few months into Javier Milei’s term as President.

It may be too early to draw conclusions, but I’m a little more optimistic that the task of stopping excessive spending and balancing the budget is actually an easy one (assuming the leader is motivated to do so).

However, Bitcoiners often speak about the ills of money printing as if the state absolutely must continue to print more and more money once they’ve begun down the road of fiat money, and all money printing ends in hyperinflation and ruin.

Maybe that’s not true. Maybe it is easier for a state to course-correct than most Bitcoiners believe it is. I’m not saying it certainly is, but let’s entertain the possibility that it is.

What does it mean for Bitcoin adoption if governments are able to shut off money printing in a matter of months in a similar way to Argentina?
Does this change your expected value of Bitcoin?
Does this change your timeframe for Bitcoin adoption?

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871 sats \ 0 replies \ @21millioins 26 Feb

As a Bitcoin argie I can tell you this:

Add to your analysis that things should be stable in time to be, well, stable. Stopping to print money is "physically" but it is not stable as a political strategy because it is sub-optimal and competes with other agents who are willing to use more effective strategies (like short-sight inflationism + gaslighting).

A basketball team can physically apply a sub optimal strategy in his games and since they are competing with others who will apply a better strategy they will end up losing. In the political realm being fiscally responsible is suicide, you are competing with lairs who try and sell "hot ice cream" to naïve voters who are eager to have their cake and eat it too.

Here there is a deep statist culture, rooted in Peronism (like a Mussolini leader, 100% interventionist and statist) that is fueled by generations of public schools brainwashing people into believing that the state should "guarantee" whatever the hell they want, housing, health, jobs...

What you are seeing can't be described in any other way but as "a glitch in the matrix" because the perfect storm, Milei won because he is 1 in a billion, and seems to be autistic enough to try to deliver on what he promised, but only time will tell. There is still the case that his strategy is sub optimal in competing with politicians who will sell your future in a heart bit to gain an edge in the next election, at the expense of more debt, inflation or taxes tomorrow.

With regards to Bitcoin, the same argument applies, I thing that switching to a Bitcoin standard on a personal basis is the Most Effective Tactic Available rn, so fiscal responsability can slow things down a bit, but won't change anything in the long run. Those who adopt Bitcoin will have an edge, will hold the product of they effort and delayed reward for longer, and continue to have better incentives than those who goes for fiat.

483 sats \ 7 replies \ @kingzing131 26 Feb

Not all money printing will lead to a complete collapse. Too many bitcoiners are way over concerned about it.

Japan has been running decades long money printers and still in deflation until recently. This should be enough to say this isn’t so simplistic and can be outright incorrect.

In the case of Japan, most of the liquidity just got stuck in banking sector and never flow into the economy for any money creation process like spending/investment.

For nations like Zimbabwe, it’s over supplying crap that no one actually wants.

budget balance is more important in these nations where their currency just don’t have much reason for existence, most of the time though, economic growth is even more important.

Also while money is important, power is the most important of almost all resources. Kim runs North Korea because of his power, not because people know he can pay back any debt. US is the same, just at a global stage. The immeasurable power and influence it has is very strong

0 sats \ 6 replies \ @21millioins 26 Feb

Saying that printing money doesn't cause inflation because is stuck inside the banks is like saying that someone who jumped from the top of a building is "flying".

I think you are Jerry-mandering your time frame in order to support your point

0 sats \ 5 replies \ @kingzing131 27 Feb

Japan ran the longest and largest scale QE ever, it's probably the most relevant one.

And it really isn't "printing money" as in sense that they are literally printing yen.

Whether they translate to more money supply depends on whether the liquidity injection is what was needed to encourage actual money creation process.

0 sats \ 4 replies \ @21millioins 27 Feb

can you elaborate a bit more on this please?

if the money is not injected in the economy, then how can that had any effect? isn't it the same as not being created at all?

and if the money did end up in the economy and distributed unevenly, how could that not end up in a wealth redistribution via Cantillion effect?

0 sats \ 3 replies \ @kingzing131 28 Feb freebie

Essentially money is created through borrowing and lending.

Central banks encourage banks to do more of it by injecting liquidity, most often through bank reserves.

Bank reserves can't be used in the economy, so it is more of a monopoly money within the banking system. That means this won’t have direct impact on inflation.

whether inflation can be caused by liquidity injection, is entirely dependent on whether banks do more lending and burrowing.

If the real reason why there's such a low lending and burrowing isn't related to liquidity issue, eg the risk/reward just isn’t there, then it doesn’t matter how much bank reserves they get.

This is also known as liquidity trap, where QE pretty much has no influence on Money supply at all and is extremely challenging for central banks.

What would cause inflation, is a direct stimulus cheques to the public, that is a direct increase in money supply.

I haven’t done econ in a few years, but you can read up velocity of money, Lyn Alden would definitely be a good economist to listen to as well

506 sats \ 1 reply \ @Atreus 26 Feb

Argentina has incentive because Argentina doesn't control the dollar supply—the United States does.

The United States doesn't have that incentive. This government can raise or lower the supply of money "at will"—this is a simplification in the sense that they don't just pull a lever or press a button, but it is true nonetheless.

Viz., your questions...

It doesn't mean anything for Bitcoin adoption because we know a government can stop, raise, or reduce the supply of the money it controls. That's what control means.
There will always be another crisis, emergency, disaster, calamity, or tragedy to justify more money printing and corresponding devaluation of America's dollar.
Timeframes are for chumps. 🤷

126 sats \ 0 replies \ @kr OP 26 Feb

we know a government can stop, raise, or reduce the supply of the money it controls

i think there are many bitcoiners who don’t believe governments have the capacity to reduce the supply of money for more than a few months at a time.

to me, that’s one way to surprise bitcoiners. if we’re all anticipating hyperinflation and the end of fiat money, sustained austerity may deflate the hopes of bitcoiners and cause us to reconsider bitcoin’s addressable market.

453 sats \ 0 replies \ @TheBTCManual 26 Feb

Hope he keeps this up and it does start to turn Argentina around, if he can prove the policies work, it really makes a big impact on support for him, people don't understand complex systems they just want to see end results.

Argentina is coming off a pretty low base, so there a lot of room to fix things, but what happens when you reach that upper ranges again where your cost-cutting doesn't have such a big effect?

I don't think this changes my perspective on things, If your currency starts to appreciate, it becomes harder to export, goods, services, labour and makes you less competitive for global revenues

Also, new regimes come and go, but the temptation for money printing will always persist

453 sats \ 0 replies \ @TwoLargePizzas 26 Feb

I think most Bitcoiners that think this way still understand it's a game of probabilities.

Could the United States reverse course? Of course. Is it likely? Probably not.

An interesting thought experiment would be to think through how it might happen? I don't really know but that story probably starts with someone out of the ordinary getting elected president. Working backwards, what would change people's opinions on who to vote for?

286 sats \ 2 replies \ @JesseJames 26 Feb

The jury is still out on Argentina. He did what anyone with a brain would do, stop stupid spending and re-organize. I know it's easier said than done, so does deserve credit for that. It is way too early to say anything regarding BTC support. There is some hope in South America and El Salvador leads the pack, who knows maybe they can create a coalition of South BTC countries and help each other out. Too early to tell. This doesn't change anything about Bitcoin though or how we (or myself) feel about it. Did any of the fundamentals change? We still have a pool of 21Mil right? If nothing changed then Keep calm and stack sats :-)

10 sats \ 1 reply \ @kr OP 26 Feb freebie

This doesn't change anything about Bitcoin though or how we (or myself) feel about it. Did any of the fundamentals change? We still have a pool of 21Mil right? If nothing changed then Keep calm and stack sats :-)

we had a pool of 21 million in 2009 too, but over the years there were some big shifts in the perception people had about bitcoin that ultimately got us to a $1 trillion asset.

for example: the first pizza purchase with bitcoin didn’t change anything about bitcoin’s code, but it gave people a new perception that bitcoin had a monetary value.

to date most perception changes have been positive for bitcoin, but there is no reason they can’t also be negative.

265 sats \ 0 replies \ @JesseJames 26 Feb

Agreed, the perception can/will change but I think for the majority that understands it, it's nothing to see here IMHO. YMMV

275 sats \ 2 replies \ @aoeu 26 Feb

The Keynesian's that run the country will say that will move the US into a recession if not a new depression.

30 sats \ 1 reply \ @kr OP 26 Feb

sure, but that’s probably what the previous administration in argentina said too

0 sats \ 0 replies \ @aoeu 26 Feb freebie

I agree with you. I wish one of the US politicians would really have the guts to do what Milei is doing. I'd vote for that person in a heart beat. I'm not advocating for this, but what we'd need first in the US is some serious hyperinflation, otherwise the average person would not vote someone into office that would take away their "benefits." I'm thinking that we'll sooner see a guaranteed basic income as an election promise from one of the future democrats than a candidate that will promise to cut government programs. That candidate would probably win in a landslide because who wouldn't turn down "free money." It wouldn't be any different than offering bribes as you walk to the poling booth, but in this case would be allowed to be legal.

1 sat \ 1 reply \ @DiedOnTitan 26 Feb

Bravo for Argentina! However, when central banks and their governments manage to control the debasement of fiat and draw down debt by reducing spending and increasing taxes, their currency remains unsound money. This may temporarily restore the people's trust in their currency managers. But, where is the PoW? PoW underpins sound money. Having a printing press controlled by politicians will almost certainly be used to hold onto power. Despite long term negative consequences they will print to counter rising unemployment, stimulate a sluggish economy, reduce debt load, etc.

To answer your question, a well constrained monetary policy does extend the timeframe for Bitcoin adoption, it would indeed slow down adoption along with the sense of urgency to move out of cash, but this does not completely remove adoption.

Bitcoin, under these circumstances, remains sounder and therefore better money than even reasonably well controlled fiat. The angle of adoption may soften, but Gresham's Law remains unchanged.

https://m.stacker.news/17519

0 sats \ 0 replies \ @jk_14 26 Feb

#128857

0 sats \ 0 replies \ @Undisciplined 26 Feb

What does it mean for Bitcoin adoption if governments are able to shut off money printing in a matter of months in a similar way to Argentina?

I don't think it means much, unless we see a major global movement following Argentina's lead. It's always been known that governments can stop running deficits (for instance, many US states balance their budgets regularly). The issue is that we know governments are not inclined to behave this way.

If governments were to begin balancing their budgets en masse, it would reduce the rate of btc adoption. There are people who hold bitcoin defensively and that use case would be temporarily undermined.

Does this change your expected value of Bitcoin?

No, I don't think fiscal responsibility will catch on.

Does this change your timeframe for Bitcoin adoption?

Only locally for Argentinians

0 sats \ 0 replies \ @fm 26 Feb

What does it mean for Bitcoin adoption if governments are able to shut off money printing in a matter of months in a similar way to Argentina?

Governments cant really shut down the money printer.. FIAT scam is too big. If they do cancel issuance, they will adopt another FIAT coin subjected to the same issuance problem.
Does not matter if peso or dollar. What Milei did is not shut down the money printing, he is just not paying stuff.. Remember Caputo got 4.700M from FMI past January..

Does this change your expected value of Bitcoin?

Bitcoin as no top as fiat as no bottom :)

0 sats \ 2 replies \ @Bell_curve 26 Feb

The focus should be on the budget and total government spending vs a deficit or surplus.

Argentina like almost every country has too many government employees and too many programs that need to be cut.

0 sats \ 1 reply \ @nout 26 Feb

In most countries getting rid of government employees is usually only a small change in terms of money and budget. It's a nice gesture, but by itself not enough.

0 sats \ 0 replies \ @Bell_curve 26 Feb freebie

I disagree vehemently. Headcount is the largest and hardest to reduce.

Please don’t say military is the largest expense and only if we eliminate defense we can achieve fiscal responsibility

0 sats \ 0 replies \ @Coinsreporter 26 Feb

America is always in budget surplus with that dollar printing machine.

0 sats \ 3 replies \ @arrivederci 26 Feb

"Bitcoin is for enemies"

We might find common cause in Bitcoin, because the above quote really is true. But any admirer of Milei is either my political enemy (if their support is conscious of Milei's true motivations and agenda) or simply a credulous fool (as I have been at times too)

10 sats \ 2 replies \ @doofus 26 Feb

Admirers of Milei who are politically aligned with him might see his support for Bitcoin as a strategic move to challenge the status quo, while others might view it as a credulous acceptance of Milei's claims without a deep understanding of his motivations or the broader implications of his policies.

5 sats \ 1 reply \ @arrivederci 26 Feb

might see his support for Bitcoin

What support ? I've only seen pre-election posturing so far.

10 sats \ 0 replies \ @doofus 26 Feb

That's true

99 sats \ 2 replies \ @doofus 25 Feb

Argentina's recent budget surplus is seen as a positive sign, but it's important to remember that fiscal responsibility is a long-term commitment. Argentina has faced economic challenges, including periods of volatility and structural problems, which cannot be resolved by a quick fix like a budget surplus. The government's approach to austerity, under the leadership of Milei, is notable, but it's still too early to predict the long-term effects and social outcomes of these policies. While the mainstream adoption of Bitcoin might face some slowdowns, it's unlikely to be completely stopped. Factors like technological advancements, increased acceptance among merchants, geopolitical uncertainties, and growing awareness are expected to continue driving Bitcoin's adoption.