Javier Milei

Argentina has removed 13 zeros from its currency.

It has had three hyperinflations without a war.

So there is...

a primary problem regarding the currency in Argentina, and that is the mechanism by which agents, economic agents, form expectations.

If we were to work with a traditional rational expectations model, like the one we've all studied, we have so much celebrated Robert Lucas Jr., well, so much so,

You know, I've named two of my four-legged children after him.

Besides, I have even much more liberal, libertarian versions of me.

But I would like to note that under normal pressure and temperature conditions, so to speak, the price level in the economy would be governed by the money amount.

And the exchange rate is one more price in the economy.

Strictly speaking,

We have set the money amount.

This was in mid-2024.

And what we are getting to feel now is the effect, the hangover effect, after the monetary disaster of the previous administration, which printed money

in an amount according to 28% of GDP, and all the more so during the last few months before they left office to win the election.

You know, this is the sort of sequence that prices follow that I'm going to explain.

Let's suppose you have

A fall in money demand, that leads to a leap in the exchange rate, and that leads to an increase in the price of tradables, then in wholesale prices, then retail prices, and then wages, of course.

If you have spent almost 90 years with that sort of dynamic, it's quite likely that people will think that if the exchange rate goes up, then the prices will go up too.

angry because of the way people form their expectations because, I mean, they've been proven right for 90 years.

volatility in the exchange rate can translate into price volatility.