Could Argentina Start a Global Monetary Revolution?

Remember to which currency Alexander Hamilton turned when he wrote, in 1792, America’s first and famed coinage act.

Tomas Cuesta/Getty Images
The newly elected President of Argentina, Javier Milei, on November 19, 2023 at Buenos Aires. Tomas Cuesta/Getty Images

Are we the only newspaper that sees a certain irony in the vow of Argentina’s next president to abandon its puffed up peso and adopt the fiat American dollar as its money? We ask because we Yanks have been fit to be tied over our own debased dollar and how it has enabled vast deficit spending and given us soaring prices. Now comes Javier Milei, an actual economist, vowing to cure Argentina’s inflation by making the greenback its currency.

Why not go for a more radical reform, we say? Meaning, if Mr. Milei wants to stand on principle, why not establish the goal of his monetary policy as a return to the gold standard? Argentina was on el estándar dorado in the first decades of the 20th century. That was the era of America’s own reform, the Gold Standard Act of 1900, which gave us an honest dollar until the accession to the presidency of Franklin Roosevelt.

Just to mark the point, the new Argentine president, a man of principle, wants to get rid of Argentina’s own central bank and adopt as the country’s currency the notes issued by our own Federal Reserve. We can see the logic of relativity. When you’ve been running inflation of 140 percent, three and a half percent inflation has an attraction. Economist Steve Hanke, who knows this beat, thinks dollarization could be done.

Argentina, Mr. Hanke tells us, has more dollars stashed away than any country in the world other than the continental United States. The estimate is that its horde of dollars is $265 billion.* The difference between the United States one-dollar Federal Reserve Note and the busted flush of the Argentine peso is only a question of degree. The gold value of our own dollar has plunged more than 98 percent since the end of Bretton Woods. 

Argentina’s prospects for achieving dollarization are also bolstered by the fact that, as the Cato Institute reports, the shift has, in effect, already happened. The peso has lost more than 95 percent of its value in terms of the dollar since 2019, Cato reports. Some “80 percent of used cars are now being sold” in dollar-denominated transactions, Cato says, meaning “the country is already unofficially dollarized.”

Given that Mr. Milei is a devotee of the Austrian school, though, it’s hard to imagine that he sees dollarizing as anything other than a first step toward honest money. Other Latin American nations, including Ecuador and El Salvador, have already proven the success of dollarization. What would make Mr. Milei a historic figure would be to go for gold (one could discuss silver, for which Argentina is named, another time).

What a chance for a professor, like Mr. Milei, to educate Argentines — and others — on the merits of a metallic standard. The scale and challenge of the task could appeal, too, to a contrarian like Mr. Milei. Achieving the objective would require Argentina to again define its peso in terms of specie and make the currency convertible into gold, as was the case before the country abandoned the estándar dorado in 1929. 

Before then, Argentina was an economic rival of America — both were “young, dynamic nations with fertile farmlands and confident exporters,” journalist historian Alan Beattie observes, putting Argentina “among the 10 richest economies in the world.” The abandonment of honest money, and the rise of the statist Perónist regime, drove the country’s economy into the ground. Restoring a sound peso would help reverse that course.

Such a restoration would, if Mr. Milei could keep it, give his country an enormous moral authority and a chance to challenge the logic of the age of fiat money. Recall how Hamilton, in the Coinage Act of 1792, defined the weight of America’s unit of account as “the same as in the Spanish milled dollar.” If Mr. Milei makes Argentina the issuer of the world’s only honest currency America could, again, turn to a Spanish currency as a model.


* Other estimates, Reuters reports, are higher.

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