Milei followed “Satoshi’s recipe” to lower inflation in Argentina

During his participation in the 2024 Monetary and Banking Conference of the Central Bank of Argentina, President Javier Milei explained the plan that he has been implementing and that has allowed him to lower inflation rates.

This is a plan through which the country’s inflation rates – which reached almost 300% annually – they are getting cold. A downward trend that has been accentuated in recent months, since Milei assumed the presidency last December. In fact, the intermonthly rate stood at 3.5% for this month of September, compared to 4.2% the previous month, the lowest index since November 2021 according to data of the National Institute of Statistics.

The issue is not without controversy, given the discontent that many sectors of the country still express regarding the economic situation. Nevertheless, the dissertation de Milei in the central bank conference emphasized the measures applied to achieve the reduction of inflation, which are based in what the president calls “zero emission”.

As reported by CriptoNoticias, last June the government indicated that its objective was to end the issuance of the peso to counteract inflation. This as part of a plan whose first phase was identified as “zero deficit”which consisted of the reduction of fiscal spending. What has been applied later is the change in the monetary regime, which was explained in more detail in the banking session on October 15.

«When we decided to apply the zero deficit, we looked for a way to cut monetary emission to finance the treasury. Of the 23 crises that Argentina has had throughout the 20th century, 21 have fiscal origins. That is why it was essential to cut spending and prevent the government from issuing debt,” Milei clarified, adding that by not issuing debt and reducing the excess supply of money prices fall.

Limiting emissions is the key, as Nakamoto stated

In this way, as part of the explanation of his economic plan, the president began to review a series of concepts of economic theory. Before an auditorium full of economists and representatives of financial entities and multilateral organizations questioned the work of central banks and the policies that are usually followed for the issuance of money, as a way to respond to demand.

If I increase the supply of money, prices obviously rise, a situation where inflation will always be a monetary phenomenon generated by an excess of money supply. On the contrary, if a constant amount of money is issued in an environment where there are more and more transactions, deflation is generated.

Javier Milei, president of Argentina.

At this point Milei spoke more forcefully against the work of the central bankreiterating many of the criticisms against this institution that he raised during his electoral campaign.

«If the central bank expands supply, it causes damage, and if it contracts it, it also causes damage. It always causes damage, the issue is how much damage it causes. And the way it affects the least is when it doesn’t move a large amount of money. An approach with which, knowing it or not, the Argentine president cited the monetary policy established by Satoshi Nakamoto when he created Bitcoin in 2008.

It is worth remembering in that sense, that Bitcoin has a fixed supply limit of 21 million coins . As time passes, the rate at which new coins are added to the supply continually decreases, eventually causing a deflationary situation as the rate of new supply approaches zero.

It is precisely this guideline that makes the digital currency be appreciated as a refuge from inflationsince the limited supply of the offer makes it acquire more value in the market. This means that currency cannot be minted at will, as a central bank can with fiat currencies, since there is a cap.

All of this is supported by a technological, automated and progressive process, which has its own times and standards. The scarcity of Bitcoin, along with the difficulty of issuing it, contrasts with the unlimited printing of fiat money and the way it generates inflation.

These are ideas that bear a certain similarity to those raised by Milei in his speech – and that support his anti-inflationary economic plan – by pointing out that The greatest difficulties arise when the offer is not limited monetary.

On this topic, the president referred to the view of deflation as something negative. He recalled that before the 20th century this situation was not a problem. “It’s a problem now because we get used to inflation.” Following this monetary rule, central banks set the way in which the amount of money grows, so that there is no deflation. The growth of the economy and exogenous factors are not taken into account.

But, «who sets that emission rate? “Why do you set it and on what basis?” Milei questioned. «I have such great guys who are going to set it according to what people want. And then, why don’t people notice it? he expressed, remembering that his libertarian beliefs are against any type of control.

Hence their opposition to exchange controls, interest rate setting and price fixing, practices commonly applied by central banks. Although, for now it has no choice but to maintain some of these controls in Argentina, including exchange control (known as stocks).

«When inflation disappears, the money overhang. And when that happens there will be no excess supply of pesos, and there I will be able to open the stocks even when I don’t have dollars, because I am going to a flexible exchange rate system. But this will depend on how the agents handle the dynamics. “I don’t know how long it will take, there is no date for that,” he concluded.