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Happy Sunday, everyone! I owe you guys another MONEY CLASS, since I short-changed you earlier this week, but since it's Sunday I thought to be more personal than usual—and instead describe my journey into monetary economics.

“Monetary theory belongs to monetary history, in a way that economic theory does not always belong to economic history.” (Sir John Hicks, Nobel 1972, fourth-ever Nobel Prize in economics) 1
What’s so beautiful—and thankful—about studying money is that everybody has a relationship to it.
Everybody understands money at some practical level, even if they don’t have the faintest idea of how or why it works. We all live and operate in a monetary economy; we all have to make our way around, and so we quickly work out things by trial and error. In an economy with 30% inflation, let alone 300% inflation, you simply can’t hold cash for even pretty immediate future expenses.
My monetary awakening and life-long fascination for money/monetary economics began in the fall of 2012—though I didn’t know it at the time. I had fumbled about for a few years after high school: doing policy events for an NGO, volunteer work in Costa Rica, a year at an arts school, and some assortment of various jobs (manual labor, sales, ferry company).
In 2012, I excitedly packed my bags and hopped the Atlantic for a couple of months in Buenos Aires, primarily to study Spanish. I ended up staying in Argentina and Chile for upward of a year, looking as I was for some sort of adventure or guiding path; travelling, as a way to discover one’s inner self (alternative interpretation=postpone growing up).
Far from thinking about monetary systems, my mind was filled with ecological considerations and conjugation of Spanish verbs. I planted trees, rallied against capitalism, and mastered the Argentinian (ʃ/"sh"). The daily wielding of convoluted ways to turn my stash of Swedish and Norwegian currency into real-world goods and services halfway across the world were just an irrelevant nuisance—like getting dressed, brushing my teeth, or showering. Hopping through monetary obstacles is just what people do here; when in Rome, etc.
In hindsight, I should have paid more attention. 
Of the many countries that suffer from monetary mismanagement, Argentina is a classic culprit. As I later studied economics and trained as an economic historian, my professors would occasionally joke that there were four types of countries in the world: rich, poor, Japan, and Argentina 2. The history of those two outliers have tended to defy the general pattern of things, especially in monetary matters. (In Argentina's case, “misbehaving” is putting it mildly.)
It seems cosmically poetic that as I think about this the President of Argentina is slashing his country’s mismanaged fiscal state and calls for a dollarization of the economy. The country has rarely had this much positive momentum. 3 (shout-out, @Undisciplined: #745721)
During the year I spent in this fascinating country, this monetary hooligan was doing well relatively speaking. Official inflation was "only" 30%, and black-market currency exchange rates were only a little above the official rate. For all Argentina’s monetary and fiscal sins, it seemed to be doing better than it had in a long time.
But Argentina suffered a problem of small change 4. This was still a time where contactless/card payments were novelties, so most transactions took place in cash. Banks and ATMs would give you nothing but 100-peso notes, a large-ish sum at the time. And Buenos Aires bus traffic operated on small coins—1-, 5-, and 10-peso coins. As shops couldn’t easily access small change from the central bank—which would have recycled the 100-peso notes back to where they came from—and customers who needed to ride the bus hoarded their small change, traders in shops across the city found themselves at an impasse. A customer had the funds to pay for the goods, and the seller wanted to sell them at agreeable prices, but doing so would mean accepting a 100-peso note and giving away what little change the merchant had. Either grocery store clerks denied the current customer in order to satisfy the next one, or accepted the current trade only to end up losing the next customer.
The life of retail in Buenos Aires as late as the 2010s was thus a constant haggle over small change. Plenty of mutually beneficial trades were left by the wayside, all because the money didn’t come to users in the way and form that they desired; it wasn’t divisible enough. The spheres of the real economy and the monetary economic clashed, with the money itself causing a drag on the real consumption and production decisions people had to make.
Peter McCormack would, years later in his many podcasts, say that every Argentinian he met told him they had two jobs: their day jobs, and their side-hustle as a money manager trying to get out of the peso in any way, shape, or form possible.
A decade before, many of my Argentinian friends and their families complained loudly over that same difficulty of saving and planning their finances. Holding physical dollars instead of pesos protected my friends’ families in two ways: first, the peso predictably fell in value in foreign exchange markets, which holding dollars protected against. Secondly, physical cash stashed under the mattress is hard for an overbearing government to confiscate in a pinch. Many of them used the opportunity of (semi-illegally) bringing back U.S. dollars whenever they travelled abroad. The same reason that made my Argentinian friends scramble for dollars—exiting a faulty money as quickly as possible—allowed me to financially benefit by holding outside monies.
I was pretty insulated from the local monetary madness in a way that powerfully resonates with me today (most of my social environment struggle under mismanaged money, but I have access to bitcoin, so once more I'm pretty well protected). Despite having no interest in economics back then, I noticed that the currency exchange rates were rapidly and predictably falling and I quickly worked out that I could get more things (albeit at higher peso numbers) by holding SEK and NOK in foreign banks and only withdraw pesos from local ATMs on the day of consumption. This minor way in which money was broken was staring me in the face, but it never occurred to me to investigate it, or ask the critical questions of why this was happening. Without understanding it, I was hedging my future peso expenditures by holding foreign currency which would offset the inflation or even appreciate in real value against the dismal peso. Hold the appreciating money: #738907
On my daily walks to Spanish class, I observed the sticker prices at the local pizza place shift numbers every other week. Odd, of course, because where I came from I almost never saw prices shifting—and for the next decade or so, policymakers and economists were arguing loudly over too low an inflation rate. It seemed that the troubles facing Argentina in the early 2010s were completely at odds with the major financial and economic debates in the part of the world I was familiar with.
Over the course of these months in a dysfunctional monetary economic environment, I began asking all the right questions that in hindsight seem so obvious:
  • What was going on?
  • Why wasn’t this happening in other countries I had been to?
  • What is inflation and how does it happen?
  • What do central banks, or indeed any banks, do?
  • How do financial systems work?
  • What is money?
I have lots more to say and opine on regarding those topics today than I did back then, but the confusion and astonishment at witnessing monetary madness in action was definitely a turning point for my intellectual development. It was the beginning of my interest in money and, by extension, bitcoin.
That's today's not-so-little money lesson. Peace, J

Footnotes

  1. J.R. Hicks, ‘Monetary Theory and History –An Attempt at Perspective’, in J.R. Hicks, (ed) Critical Essays in Monetary Theory, (Oxford, 1967[1935]), p. 156.
Thank you for sharing!
I've been to Argentina once and only for a day - in February of 2013 on a detour from a Brazil trip, to see the Argentine side of the Iguazú falls. I remember arriving by bus in Puerto Iguazú and going to an ATM around the corner, incidentally with a Japanese tourist (and by the way myself I grew up in Poland and remember hyperinflation and the redenomination in the transformational 1990s, which trimmed off four zeroes).
I can't remember how much I withdrew, but it may have been 100 pesos if that indeed was the minimum withdrawal. Entry to the national park, complete with unlimited train rides within it, was maybe half that and I bought some food too. I brought back a leftover 10 peso note, which I own to this day. More recently someone told me that denomination was "only a coin now" and it was like a penny.
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niiice. Such anecdotes are always fascinating. Hope you keep that 10-peso note forever :)
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Thank you for sharing your unique story and how your travels with Bitcoin have been? Argentina is the first country you have visited?.I have recently started with Bitcoin and it encourages me to include my family in this.
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Nah, I had been around a bunch before :)
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That's such an interesting case of lack of divisibility in money. I had no idea this had happened.
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Great read, as usual. Thanks for posting. I really appreciate these background stories where we get a window into your motivations, experiences, etc. You have already lived an interesting life.
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some tips for exchanging p2p in Argentina
Start Small with Trusted Contacts For your first exchanges, trade small amounts with people you know or have verified through trusted channels. If you're new to P2P, try starting with Bitcoin communities in your area (like Telegram or WhatsApp groups) where members are vetted and rated by the community. Use Multi-Signature Escrows When using online platforms, prioritize those with multi-sig escrow services, like Hodl Hodl or Bisq. This setup reduces risks, as the funds are held securely until both parties agree to release them. Multi-sig offers a level of security that simple transactions often lack.
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out of curiosity, did they manage to fix the divisibility issue eventually, or is it still an issue today?
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I believe it's better today (haven't been back since), also because card/mobile takes away this need for having change or paper money/coins
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ah true, paying by card does solve that issue , as long as they have terminals i suppose all good
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Everyone knows that everyone keeps better notes out, so everyone negotiates/gambles for better.
have you ever seen a merchant, who takes not damaged and acceptable for everyone banknote, and then... out of sudden try to negotiate for another banknote, insisting for his customer to show him the content of his wallet, just because his customer maybe is hiding a banknote in better condition, etc...
Because I haven't seen such situation in my quite long life :)
no, sir - you are very wrong, these both parties are not in the exact same position, sorry ;)
P.S. yeah, I know it's hard to admit own failure in the battle with random guy regarding the Law, which is not even Gresham's but Copernicus' (who knows, maybe sir Thomas just stole it... ;)
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Jesus. No need to be rude (read: stuck up).
No man, happens all the time: Merchants deny sale for payment issues.
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haha, there is no payment issue in ten-dollar, acceptable for everyone banknote, LOL
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Wait, dude -- why are you in the wrong thread?
Didn't even realize, but now you're following me around with your Gresham/Copernicus crap...?
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anyway, there is at least one good thing from your epic failure regarding Copernicus' Law (i.e. "Bad money drives out good money.")
Now, whenever you will type: "Gresham's Law" - you will well remember that you are lying yourself and others... ;) and who knows, maybe even promoting intellectual property thief... ;)
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Is there a block/mute feature on SN?
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"Nothing induces a bigger annoyance than the Truth."
bye ;)
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ChatGPT: "Yes, Thomas Gresham, the 16th-century English economist, likely knew Latin, a staple of education for the English elite and upper classes during his time. Latin proficiency was essential for international business, accessing scientific works, and understanding legal documents. Gresham, who was involved in finance and served as an advisor at the royal court, would have needed at least a functional knowledge of Latin to engage with documents and scholarly works effectively." ;)
...and maybe engage with documents like economic treatise named: "De monetae cudendae ratione", written in A.D. 1526... ;) https://www.jstor.org/stable/25776118
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Thanks for the lesson, J
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