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Comment by thesausageking | Hacker News Reader

I've hired a lot of contract developers in Argentina over the years and most now ask to be paid in Bitcoin. If I wire them USD, between fees, loss from the "official" exchange rate, and inflation, they lose 15-30%.

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It's actually much more than 15-30% if you go with the official/legal way: I would say you likely lose ~70% at the moment. Most people doing contract jobs in Argentina have a bank account in Uruguay, the US or Europe, and use cryptocurrencies or travel to bring cash.

That's pretty astounding. Would you be willing to breakdown how 70% gets lost on a transfer?

You will be compelled to exchange your dollars at the "official" exchange rate (which is about 1/2 of the real market value), so you lose ~50% there. On top of that, you have to pay taxes.

When a company sends USD to a bank account in Argentina, the bank must to convert that amount to "pesos argentinos" (ARS), using the "official rate". You can't get USD transferred to your account from other people than yourself (or a company owned by you).

Right now the "official rate" is 110,5 ARS for each USD, but if you sell your USD (using crypto or in the "dark market") and get ARS, you'll get 222,5 ARS for each USD.

And that's before the taxes.

And you can't bought more than 200 USD per month at the official rate, so the need to bought the USD through an exchange or in a "cueva".

I currently live in Argentina, the loss rate is much higher, between fees and the official exchange rate you lose about 65% of any income you perceive. Aside from crypto, Payoneer is also popular (you go outside the country regularly to get cash).

> 15-30%

What a weird way to write 60-70% (you are forgetting taxes)

Do taxes only exist in Argentina? Are you advocating tax evasion here?

In Argentina, tax evasion is a way of living, everyone there, young or old, rich or poor, looks for a way to avoid taxes, since taxes coupled with inflation make life very expensive, no matter your income ¯\_(ツ)_/¯ .

The best way to live in Argentina is to be a ghost. No bank accounts, nothing declared, everything you own should be on someone else's name, earning usd in a foreign account and you should live on cash (converting usd to pesos as needed).

Tax evasion is likely what’s causing the inflation.

Not saying I don’t get why an individual does it, but without the ability to reliably collect taxes, there’s no way to stop rampant fiscal deficits.

Not really. Tax collection from the Argentine goverment grows higher than the inflation rate year by year.

The problem is over spending.

Tax revenue as a percentage of GDP has been stable or falling since roughly 2004 [0]

[0] https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?locat...

That source does not show all the accounts (says in the details popup).

If you use the information from the argentine tax collection agency statistics page [0] and divide that result by the GDP you get a wildly different result (e.g. 23% vs 10% for 2019 using the official data vs your source)

[0] https://www.afip.gob.ar/institucional/estudios/

And either way, the data you show does not support your claim, they are not very correlated. You have a mostly flat tax collection rate on an economy with a yearly rising inflation rate since 2002.

It excludes fines and social security payments.

Perhaps it’s the pension system in Argentina that is causing the whole deficit? I’m on mobile so it’s currently a big more challenging to do proper research.

Looks like it is. This site from the economic ministry says the "Servicios Sociales" (social services), is around 72% of all expenses (with social security as the highest spender) [0]

[0] https://www.economia.gob.ar/onp/presupuesto_ciudadano/seccio...

But don't forget that no matter the amount of taxes collected, politicians will find a way to spend more, so there will always be a deficit and more money will always have to be printed and whoever wants to reduce the deficit will be accused of "tightening" (ajustar) the Argentine people.

Argentina leads a ranking of world tax pressure:

https://www.ambito.com/economia/impuestos/la-argentina-lider...

> But don't forget that no matter the amount of taxes collected, politicians will find a way to spend more

That’s just not true, there are plenty of states that run surpluses.

> Argentina leads a ranking of world tax pressure

I didn’t say their tax policy was good, only that it’s difficult to address deficits when you can’t reliably collect taxes.

It’s all related. The government doesn’t collect sufficient tax revenue => they raise taxes => people evade taxes => the government raises taxes more.

Such backwards tax policy is a sign that those who can evade taxes are (usually mostly the elites, but to an extent everyone does it), and those who can’t are footing the whole bill.

No, spending more than you earn like there is no tomorrow for 20 years has caused inflation

The US has been running deficits for decades and doesn’t face the same level of persistent inflation as Argentina.

There is no way to succinctly describe all the myriad differences between the two countries that make this comparison unhelpful for understanding Argentinian inflation.

Indeed I am using a shorthand her to summarize the issues as well.

My response is meant to highlight the fact that the situation is not nearly as “simple” as a government that runs fiscal deficits.

I don’t know every detail about Argentina, but broad strokes, when you have a failing political class that is unable to effectively levy taxes and maintain international credit worthiness, you are going to have financial trouble. People love to blame spending and get moralistic about it but that’s typically not the primary issue.

Ehh, in this case it is, they are spending much more than we earn, and to cover that they used to take debt. Now no one lends to Argentina at a nice rate, so they emit internal debt by printing a ton of ARS to finance themselves, thus generating inflation.

If they stop printing, they have to stop spending as well as cutting spending, leading to a raise in interest rates and a quick economic crash instead of the slow burn situation as of now.

The current government is just trying to hold on until next elections, so when the economy explodes they can blame the next government for it.

It’s not that what you’ve written here is incorrect, but that this doesn’t say anything about what the remedy should be.

Simply letting the economy crash isn’t a good solution as it doesn’t address the fundamental reforms that are needed and doesn’t get you any closer to solving the structural issues. All it does is create unnecessary pain for people.

Again, if an entire society is engaging in rampant tax evasion, that is going to need to be addressed in order to turn things around.

The remedy are 10 years of austerity measures and free market reforms in order to start seeing the light at the end of the tunnel.

This is also known as a political suicide.

Those fundamental reforms - which aren't only necessary in Argentina but basically in every major country, apart from maybe China - would be to: Reverse the ever more effective mechanisms big corporations have come up with in almost every jurisdiction to siphon an ever increasing proportion of all revenues from the total of economic activity and bypass taxation, making only maybe the richest ten percent (who are the shareholders) richer.

Governments can borrow as much money as they want and central banks can allow banks to create as much money as they want to feed it into the economy to try in a futile way to keep the engine going .. as long as this trickling up of revenue is happening to the extent it is right now, the whole economic/monetary/social system is instable and heading towards either collapse or drastic political reform.

Unfortunately apart from some minor patches (plans to actually tax big players in the EU) I don't see much evidence for elected politicians trying to improve the situation.

Because everyone in the world likes and uses USD. In Argentina no one wants Argentinian pesos, people outside argentina like them even less, however you can use USD all over the world, so yeah, it's not comparable.

What you’ve written is just a tautology.

USD are valuable because USD are valuable.

Pesos aren’t valuable because pesos aren’t valuable.

It doesn’t demonstrate why that is the case.

> USD are valuable because USD are valuable.

> Pesos aren’t valuable because pesos aren’t valuable.

Welcome to fiat currencies, where a big incidence on the value of the currency is what people feel about it!

Basically, it's offer and demand. The offer of pesos is huge vs the actual demand, so they lose value. That's also the reason for the inflation of the USD last year, the us government likes to print non stop.

The US prints money because it can, Argentina prints money because it has to. (The monetary course taken by the fed in 2020 has proven quite successful, we’re at full employment with only moderate inflation as a price, which will be addressed in coming year)

The money printing is a symptom of deeper issues.

That's something MMT gets right. Public deficits = net private savings. So as long as there are people willing to save in USD (and not only US residents, people all over the world save in USD, including Argentinians), you can have a persistent deficit. In case the 7% becomes persistent inflation, make sure you have a plan B, you don't want to lose reserve currency status.

MMT gets a lot of things right, most of its critics seem to simply have not actually studied it at all, or have been informed primarily by sensationalist contrary takes.

The dollar is the world reserve currency. The extra printed money is diluted over an economy more than four times as large.

France (now the EU) does the same thing by forcing its ex-colonies to use the convertible franc. France’s inflation gets exported to Africa

Can you pay for everyday items or rent in USD?

No, cash in pesos, you exchange usd from time to time.

Is tax evasion worst than trading on unofficial channels? I guess it depends on the jurisdiction doesn't it?

I mean none of it is good, but at the end of the day there’s no alternative when trust in government has totally broken down.

It's a failed state. The taxes don't go to schoolteachers or whatever, they go into the offshore account of the local boss.

I am in agreement there.

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