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Comment by throwaway4good | Hacker News Reader

Milei is pledging economic shock therapy. His plans include shutting the central bank, ditching the peso, and slashing spending, potentially painful reforms that resonated with voters angry at the economic malaise.

Sounds fun and unrealistic - for sure to lead to more of the same.

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What else can leaders do? Take your medicine for 10 years and then things will be alright is never going to work out politically. All the things Argentina needs to do suck in the short term; stop taking giant loans, stop printing money, stop overly generous government programs, stop protectionism.

You say taking your medicine will never work, but it has worked at least in some places. India was in an economic crisis in 1991 and needed an IMF bailout. That bailout was made under the condition that they “took their medicine”. They did, fundamentally changing their approach to everything related to the economy. And it worked. India has done pretty well since 1991.

I agree that many countries never fall out of the cycle of lurching from bailout to bailout, never implementing the needed reforms because they’re too painful. Pakistan, Egypt, Argentina and others, that’s the norm for countries in IMF programs. But there are success stories too.

The problem is that the current govt wasn't taking its medicine. It continued spending more, subsidizing everything and supressing the exchange rates ARS-USD.

I'm from Argentina, and I didn't want either of the final options, but I knew that choosing the continuity of the current govt would bring us closer and closer to what's happening in Venezuela

Let's see what happens. The big issue is government spending which causes the printing of more money which leads to inflation. Changing to the dollar will help but it's going to lead to many government programs ending and a lot of misery for many in the lower rung of the economy. It sounds like a good fix but eventually, we'll see people demonstrating against the government and asking for change. That will be the real test to see if they can really follow the reforms they voted for today. I suspect we'll be seeing a back tract to the same. I wish them luck.

> Changing to the dollar will help

I fail to see how that would work. Argentina doesn't have a lot of US$ reserves. In order to have currency circulating, they're going to have to get a lot more. How? By purchasing it with AR Pesos? But they won't have those either without a central bank.

Pegging goods directly to the dollar will help with inflation. People will earn relative to the dollar and price goods relative to the dollar not the peso so people will see the prices go up at a slower pace. Inflation is partly due to the anticipation of prices going up. It's a psychological fix. As time continues more dollars will get into the economy and the move to dollar will may be possible. It's a longer term solution. Also the central bank won't go away tomorrow if ever. The man is a president not a dictator so he still needs to deal with the rest of the government to get things done. He may want to get rid of the central bank but I doubt everyone will go with his ideas. It's only a possibility not a definite.

People think he will do all the changes on day one but it's going to be years if ever.

> for sure to lead to more of the same

How is trying something else sure to lead to the same? Possible it works out, no? Even if small chance. You never know, there's some individuals if empowered can do good things. Let's hope someone in his circle is capable of doing good and is empowered to do so.

>How is trying something else sure to lead to the same?

Because that's kind of how Latin America has worked for decades. Pivot from shock therapy Chigago school free marketeer to the other end of the spectrum and back again, usually because leaders are either eccentric, strongmen or plain crazy and radical reforms start to cause social upheaval.

What would be an actual change would be just putting a competent, moderate administrator in charge.

You have a bad headache. Try trepanning! You never know!

Decades of Peronism a headache? Analogies only go so far.

Getting off the peso means a huge loan to buy all the existing money to get it on USD. It'll be real interesting to see if it can happen. Argentina has and can be great. I wish them luck.

Argentina is effectively on the USD anyway. The peso has lost so much value that people quote prices in dollars for real estate and other large items, and convert dollars every day to pesos to buy ordinary things, but not from the official channels because they do not give you a market rate.

I wonder if dollarization will be an improvement just from the less bureaucracy and need to get around the government to do things as they are already done.

Yes, but also from the point of view that it will get rid of 140%+ year over year inflation.

Yes, that's one way. The other is to price everything in both dollars and pesos and accept both. Eventually, the dollar will dominate and they can work towards the complete change. It's also something they can do very quickly and it's less shocking to the economy.

I doubt they can come up with enough dollars in one shot to switch over all at once so that's unlikely.

Good point about dual acceptance as this is already occuring anyway. Thanks!

Would they need to do it all at once like this? How have other countries that have officially dollarized handled the transition, if there are any major ones?

It looks like the list of countries besides US that exclusively use USD is small, none with a population over 100k, although I know several economies have de facto dollarized: https://en.wikipedia.org/wiki/Currency_substitution#Countrie...

Maybe that Wikipedia list is out of date. I'd thought Ecuador was running on dollars.

The entirety of the European Union changed their national currencies to a new one, from scratch (no prior partial euroization), essentially overnight, in 2002. It’s definitely doable, if properly planned.

Ecuador and El Salvador both use the US Dollar as their official currency. It isn’t as if there is a lack of precedence when it comes to ditching your own currency for something more stable.

There are also countries using Euro without being in the Eurozone but those countries are tiny. It is going to be extremely interesting experiment.

Most countries are heavily exposed to the dollar already as it’s the currency of global trade. The same is not true of the euro.

You are very well exposed to Euro if you are in Europe or Middle East.

It is important to highlight that he just won the executive branch and does not have enough presence in the other branches or state governors.

He said it was fair game to use the military to enforce its will.

He literally did not say that. Why are you making stuff up?

Indeed, only his VP that believes the US-backed coup was fake news.

https://www.theguardian.com/world/2016/aug/29/argentina-deni...

I love how libertarians are in favour of the state murdering 22 thousands people. Freedom!

There was a dirty war between 'guerrilleros' (leftists revolutionaries) and the military and a lot of innocent people were killed as a result of both sides. She asked people to stop pretending that the revolutionaries were saints and that these victims' human rights should also be recognized. She has never made any claim like 'being in favour of state murdering people' or 'thinking the state didn't commit crimes against humanity'.

Stop spreading misinformation.

Could you please expand?

He should retain HN's favorite internet economist and Greek politician. I think Varoufakis would be pretty useful here.

maybe, though Varoufakis is socialist/liberal and this guy is super not.

Eh, he knows his stuff. You don't have to like or agree with him to appreciate his insights on the political economy and international monetary systems.

https://www.project-syndicate.org/columnist/yanis-varoufakis

It's like if Dave Cutler starts a blog series on OS dev. Most HN users are Unix users but that doesn't mean there's nothing to be gained from reading the thoughts of somebody at the top of their field.

There are thousands of economists who know their stuff, probably even more than Varoufakis, who spent the last decade doing a lot more politics not economics. (And that might be a lot more important for navigating the situation in Argentina, but then that just means there are likely even better candidates who know more about Argentina than Varoufakis.)

Ditching the peso is not a bad move. Ditching the military might be a better move (like Costa Rica)

Ditching those who drove the country into the ground might be an even better idea.

He said he was planning to pay himself zero as president and that he may apply the same rate to many career politicians (often from second generation btw: being, like monarchs, heir of politicians). Now that I'd like to see.

Do their salaries matter? Presumably they make all their money from bribes.

A better approach is to give everyone a giant raise, but make it clear they will be first against the wall if they or any of their relatives accepts any additional payments or gifts.

Honestly, if shuttering the central bank and dollarizing the economy were his only plans I'd actually think it sounds reasonable. I'm pretty leftist but Argentina has pretty well proven they'd be better-off without managing their own currency.

The problem is that the man is absolutely batcrap in every way imaginable. He's climate-change-denying, hateful, constantly insults and threatens progressives with ludicrous insults like "libtards", considers sex-ed to be "brainwashing", etc. It's like if a country had elected Tucker Carlson for president.

Finally someone in this whole HN post saying _true_ negative things about Milei. I also consider myself left leaning. And yes, Milei said he doesn't believe in global warming and he was insulting people on the left a huge load. After he won, he invited everyone, no matter which side, to work together to make Argentina better (great again :D). I'd give him a benefit of the doubt. If he proposes something, and that makes sense, I'd be supportive of the proposal. Unfortunately, what I'm most afraid of, is the people who will be against anything he proposes, only because it was him who proposed it.

They really buried the lede. This is going to be a disaster.

> Sounds fun and unrealistic - for sure to lead to more of the same.

https://en.wikipedia.org/wiki/Miracle_of_Chile

I'm going to buy stock in Lockheed Martin, Argentina will need to buy so many helicopters to throw people into the ocean.

"For sure to lead to more of the same"? It seems to me more likely to lead to something different. It may still be terrible, but it might be terrible in a different way.

Or he could turn out to be one more tin-pot dictator. Or he could turn out to create a disaster, and that disaster could set the stage for the next tin-pot dictator. But for a moment, I think it will be different rather than just "more of the same".

Disclaimer: I don't live in Argentina. This is just my opinion.

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