Javier Milei Ended a DC-Sized Deficit in... 9 weeks
Argentina’s Javier Milei is racking up some solid wins, with the fiscal basketcase seeing its first monthly budget surplus in 12 years.
Apparently it took Milei just 9 and a half weeks to balance a budget that was projected at 5% of GDP under the previous government. In US terms, he turned a 1.2 trillion dollar annual deficit into a 400 billion surplus. In 9 and a half weeks.
How did he do it? Easy: he cut a host of central government agency budgets by 50% while slashing crony contracts and activist handouts.
For perspective, if you cut the entirety of Washington's budget by 50% you'd save a fast 3 trillion dollars and start paying off the national debt.
It turns out it can be done and the world doesn't actually collapse into chaos.
Milei Making Fast Progress
Deficits aren’t the only win Milei's logged. He’s slashed crony regulation, got rid of currency controls, and he recently slashed rent prices by removing controls -- that actually led to a doubling of apartments for rent in Buenos Aires, slashing rent costs.
Unfortunately, it's not all smooth sailing: a bill to privatize corrupt state-owned companies -- to effectively de-Soviet the Argentine economy -- was blocked by the socialist opposition who serve the government unions who would lose their jobs.
Meanwhile, a major Milei reform to make it a lot easier to hire people but would hurt unions was struck down by the high court, who said it has to go through Congress.
Having said, for the average Argentinian these are deck-chairs on the titanic compared to the elephant in the economy: Argentina's hyperinflation.
Just last week the monthly inflation figure came in at 20.6% -- on the month. That was a lot better than the outgoing government, but it still left year-on-year inflation at 254%.
Why so high? Partly because Milei had to free up the exchange rate to smooth the path to dollarization -- for Argentina adopting the US dollar instead of the local confetti.
But mostly because the rivers of money printed by the previous socialists continue to run throught the battered ruins they left of Argentina's economy. After all, Milei's only been in office for 2 months.
Argentina’s Dollarization
Milei's reforms will continue to be trench warfare. But his inflation progress is going to be key to retaining support.
He just notched a big win with the deficit, but it only stops the bleeding -- the patient is still on life support.
To fully kill Argentina's hyperinflation inflation, Milei would need to make real progress on the dollarization -- or, dare we dream, a gold standard. On dollarization, that would involve announcing a months-long window for peso assets to be revalued in dollars.
He's been preparing the goundwork so far -- the currency controls and deficits are a big help. And he's surely motivated to do it, since dollarization in other countries like did it like Ecuador has 90% public support. But it is a complicated process, and if done badly he'll be dead in the water.
The stakes are high. And not just for Argentina: If Milei succeeds, he'll be a model for radically shrinking government in other countries in Latin America, in the rest of the world, and even for our spineless goblins in Washington.
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Excellent read Peter.
Gives America, the UK, France, Germany and the rest hope.
It's possible to restrict bloodflow to the Gov parasite.
Prayers, prayers, and more prayers for his continued success!