Argentina 1991
Things here started to go downhill circa 1975. The end of military government left Argentina in a shambles by 1983. Unemployment was high, so was debt. The Falklands War didn’t help. To fix things, they introduced a new currency—the austral—and made new loans. When Argentina couldn’t pay even the interest on its debt, confidence in the austral collapsed. By 1989, the inflation rate topped 4,923 percent for the year.
After a period of raging hyperinflation, mass supermarket rioting, price controls, and other chaos, something had to be done.
On April 1, 1991, Argentina’s Congress restored confidence. It put a currency board in place, guaranteeing a one-to-one peg with the dollar. And they only printed the amount of pesos they needed to get dollars on the foreign exchange market. So each peso in circulation was backed by a U.S. dollar. Dollar prices didn’t change as quickly.
At the time, the strategy worked. (But as we’ll see later, such boons don’t last for long.)
Get The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
