More Good Results from Argentina

The most important election of 2023 took place in Argentina, where that nation’s voters elected the libertarian candidate, Javier Milei, as their new president.

I discussed the outlook for Milei’s agenda on a recent appearance of the Schilling Show. Here’s a brief excerpt.

As you can see, I’m worried that Milei faces enormous obstacles. Argentina desperately needs big reductions in the size and scope of government. Yet the legislature is controlled by the Peronist politicians who have spend the past 75-plus years turning the country into a statist hellhole.

But I wrote two months ago that Milei was surprisingly successful in his first month. Thanks to his executive actions to reduce the burden of spending, Argentina achieved its first monthly balanced budget in more than 10 years.

That was a remarkable development.

But that was just the beginning. Here’s a chart showing that Argentina’s currency has dramatically strengthened since Milei took office.

The chart comes from a Bloomberg report by Ignacio Olivera Doll. Here’s some of what he wrote.

Four months into office, Argentine President Javier Milei has pulled off a critical feat in a country long ravaged by runaway inflation: He stabilized the currency. The peso has, in fact, not only stopped plunging day after day but in one key foreign exchange market…it’s actually rallying sharply. The peso has soared 25% against the dollar over the past three months in the market, known as the blue-chip swap… That’s more than the gains posted by any of the 148 currencies that Bloomberg tracks against the dollar. It’s a shocking statistic in a country where the currency is seemingly in a never-ending state of freefall. (The smallest annual decline in the past decade was 15%.) And it underscores the lengths that Milei has gone to to rein in bloated government spending…and tame inflation that’s skyrocketed to an annual pace of almost 300%. …The cuts he imposed add up to the equivalent of almost 4% of the country’s economic output, an adjustment so aggressive that central bank officials estimate it’s larger than 90% of all those carried out in the world over the last several decades.

Spending restraint has not only reduced inflation and strengthened the currency, it also produced a balanced budget in the first quarter of 2024.

Here are some details from an AFP report published by Yahoo!Finance.

Argentina’s spending-slashing new President Javier Milei has hailed his country’s first quarterly budget surplus since 2008 as an “historic achievement.” In the first quarter of 2024, the South American country recorded a budget surplus of about 275 billion pesos… This amounted to a surplus of 0.2 percent of GDP. …”If the state does not spend more than it collects and does not issue (money), there is no inflation. This is not magic,” the self-described “anarcho-capitalist” said. …Thousands of public servants have lost their jobs. “Don’t expect a way out through public spending,” Milei warned on Monday.

To give you an idea of what Milei has accomplished, a 4-percentage point reduction in the burden of government spending would be over $1 trillion in the United States. If we had a leader like Milei, we could almost immediately eliminate three-fourths of the deficit.

I now feel very squishy since I’ve merely been recommending that American politicians cap the growth of spending.