With inflation accelerating to 138% annually in Argentina, or prices more than doubling multiple times per year, classical monetarist Javier Milei is slated to win the South American nation's presidency thanks to his radical promise to replace its peso with the United States dollar. The ruling regime, correctly terrified that Milei will end Argentina's ability to fund its Peronist policies at the expense of its citizens's savings, has launched an eleventh-hour attack on Milei, prosecuting the economist for the crime of telling the truth.
At the behest of Peronist President Alberto Fernandez, prosecutors have charged Milei and his party, La Liberdad Avanza, with "inciting public fear," a crime that faces a penalty of up to six years in prison if convicted. How have these classical economists supposedly wronged the public? Fernandez cited Milei's assertion that the "peso is the currency issued by the Argentine politician, and therefore it is not worth crap," and his party's warning that Argentines should not save in pesos.
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There's just one problem beyond the obvious political persecution of a front-runner threatening to overturn a corrupt bureaucracy: Milei is simply speaking truth to centuries of proven, empirical economics.
To illustrate the obvious with an example, compare the peso to the greenback. While the U.S. inflation rate is still higher than the Federal Reserve's maximum target, it has fallen from near double-digit highs to 4%. Whereas the value of a U.S. dollar would halve in roughly 36 years if inflation falls back to 2%, according to the Rule of 72, the current rate would erode the value of a greenback by 18 years if it held constant.
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By contrast, under Argentina's current inflation rate of more than 10% each month, the value of an Argentine paycheck halves about twice a year. The most basic, back-of-the-envelope math informs anyone with common sense that they would be a moron to try and save money that will be worth a quarter of its original value in one year. Milei is correctly urging his followers to either spend their cash to realize its maximum value now or to convert it into a better store of value, like gold, or as is his eventual goal for the country, the U.S. dollar.
Of course, the phenomenon Milei is describing is why inflation is so pernicious. While a stable currency encourages people to save for and in assets that appreciate in value, such as homes or equity, inflation encourages profligacy because it would be illogical not to spend money that's quickly depreciating in value. And a Peronist government that has given up on growth but refuses to cut government spending relies on this seigniorage, or depreciation of the value of ordinary folks' paychecks and savings, to fund their bloated welfare states. Make no mistake: Milei is being politically prosecuted because he threatens to end this vile government theft from the people once and for all.