Does "Shock Therapy" Really Work?
Who would have thought that under the collective pressure on global currencies, the Argentine peso's exchange rate against the US dollar would actually surge by 25%, becoming the best-performing currency in the world.
For a while, the controversial "shock therapy" of Argentine President Milei has attracted many people to sing its praises.
What's going on, could it be that Argentina has really made the right move? Why has the Argentine peso exchange rate soared? What price has been paid for this?
The Argentine peso soars
With frequent hyperinflation and severe economic crises, Argentina can be described as a country walking on the edge of a cliff, with the slightest carelessness leading to a plunge into the abyss.
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The route planned by the previous president, Fernandez, for Argentina was to gradually repay debts and alleviate these issues through strengthening trade, step by step resolving the crisis, and even signing a cooperation agreement with the BRICS countries at the time.
As a result, the Argentine people did not have such patience and instead pushed the economist Milei into power.
Logically, the new person should be better than the old one. Since it is the choice of the people, it must be stronger than the previous one and more capable of leading Argentina out of the abyss.But this new president, Miley, advocates for "shock therapy," not only privatizing all state-owned assets but also promoting the legalization of human organ trading.
In a nutshell, everything is handed over to the market, and the government is completely "shocked."
But just as the whole world was preparing to laugh at Argentina and watch Miley "die in various ways," an amazing scene occurred:
In the past three months, the "parallel peso" transactions in the blue-chip swap exchange have risen by 25% against the US dollar, surpassing 148 other currencies.
What a surprise, when Miley took office, he directly called the peso "feces" and said he wanted to completely abolish the peso and fully use the US dollar instead.
But now, the peso exchange rate has actually risen, who would believe it?
Even Bloomberg couldn't help but publish an article, calling it "a shocking statistical data."
Although this is already quite outrageous, it's not over yet, and what's even more outrageous is that Argentina, which has always been insolvent, has actually had a fiscal surplus!
In the first quarter of this year, after the Argentine government settled the accounts, they found that they still had 320 million US dollars left, which is simply a fairy tale for Argentina, which has been addicted to debt.
Miley is extremely proud of this, not only excitedly claiming "we have created an economic miracle" to the outside world, but also greatly increasing his confidence in "shock therapy."But the key question is, is it really that simple for the Argentine peso exchange rate to soar and for Argentina to achieve a fiscal surplus?
How did Miley create an "economic miracle"?
Whether it's an individual household or a country, there are essentially two ways to save money: increasing income and cutting expenses.
Let's first talk about increasing income.
When Miley took office, he had a clear plan:
He tried hard to distance himself from China, his largest trading partner, and moved closer to the West, hoping to gain support from the United States.
So the first thing Miley did after taking office was to give up the membership qualification of the BRICS countries and instead apply to NATO.
At the same time, Miley also rushed to the United States, met with Biden three times in two months, but didn't even see a shadow of a person. Later, he turned to Wall Street to borrow money, and in the end, he returned empty-handed.
Helpless, Miley had to slink back to Argentina.
Since he couldn't borrow money, what should he do?The world has underestimated the level of madness of Milai —— directly putting Argentina's state-owned assets on the shelf.
What oil and gas companies, what national airlines, water companies, post offices, railways, what television and radio companies, telecommunications enterprises, all are heavily discounted.
Crazy sale of state-owned assets, Argentina naturally made a big profit, and it can also be said to have successfully "opened up sources."
Next, let's look at the savings.
There are countless foreign debts owed outside, and it is also a matter of course to tighten the belt to repay the money, but extraordinary people do extraordinary things, and Milai is obviously not the master who plays by the rules.
After Milai came to power, he did another thing, which was to massively reduce the number of government departments, directly from the original 21 to 9.
As for national infrastructure projects, transportation subsidies, energy subsidies, and so on, all kinds of expenditures can be cut if possible, and if not possible, they are greatly reduced.
The ultimate result is that government expenditures directly decreased by 70%.
So on the surface, the exchange rate of the Argentine peso has indeed risen, and a fiscal surplus has been achieved, but the root cause is Milai's unprecedented crazy policy, to put it bluntly, it is directly selling the country.
More importantly, the one who pays for Milai's madness is the countless ordinary people of Argentina.The Argentine people are heartbroken.
After Macri took office, he recklessly cut spending, and it is clear that ordinary people are the ones who ultimately suffer.
Take education as an example, the University of Buenos Aires in Argentina is one of the top institutions in South America, but the Argentine government cut its total budget by 91% this year.
The university stated that the funds allocated by the government are not even enough to cover the electricity bills.
As a result, the situation becomes interesting, with the university not daring to turn on the air conditioning, professors teaching with "communication mainly by shouting," and the entire school is on the verge of paralysis.
If it were just an educational issue, it might be tolerable in the short term, but the people can no longer endure Macri's series of reckless policies.
In just a few months after Macri took office, Argentina's poverty rate soared to 57.4%, and the extreme poverty rate reached 15.6%.
What does extreme poverty mean?
According to the United Nations' standards, to put it bluntly, it means being so poor that one cannot afford to eat, so can the Argentines not be anxious?
This has led to an incredibly darkly humorous scene in Argentina:On one side, Argentine President Miley was on stage boasting about his "great achievements," while on the other side, nationwide strikes were erupting one after another, with streets filled with protesting crowds, blocking the entire city to the point of being watertight.
Of course, although Miley is far from being a qualified politician, he still possesses the basic skill of "drawing cakes," publicly stating in speeches, "I will definitely spend the fiscal surplus on the people."
However, after witnessing the president's puzzling actions, the Argentine people have already had enough and now have only one demand: to immediately and quickly remove this "traitor."
Nevertheless, Miley has already completely let loose and is not willing to leave. He encourages everyone to chant "Long live freedom" and to carry out the "shock therapy" to the end.