- With fiscal spending cuts and a monetary regime change, Milei unveils new strategy at Banking Days.
- Comparison between Bitcoin and the Argentine peso highlights; Bitcoin valued as a hedge against inflation due to limited supply.
During the Monetary and Banking Days 2024 at the Central Bank of Argentina, President Javier Milei presented an analysis of his economic strategy, which has contributed to reducing inflation in the country. Since he took office in December last year, the inflation rates, which previously hovered around 300% annually, have started to decline.
In September, the monthly inflation rate was recorded at 3.5%, down from 4.2% the previous month, marking the lowest rate since November 2021, according to data from the National Institute of Statistics.
The focus of Milei’s administration has been on what he terms “zero issuance” as a means to curb inflation. This strategy involves ending the issuance of the peso to counteract inflationary pressures.
This approach is part of a broader plan that initially aimed for a “zero deficit” through the reduction of fiscal spending. Subsequently, the focus shifted to changing the monetary regime, details of which were elaborated during the bank’s conference on October 15.
Milei emphasized the delicate balance required in managing the money supply. He stated:
“If the central bank expands the supply, it causes harm, and if it contracts, it also causes harm. It always causes harm; the issue is how much harm it causes. The least harmful way is when it does not move a large amount of money.”
This philosophy echoes the monetary policy established by Satoshi Nakamoto in 2008 with the creation of Bitcoin.
It’s worth noting that Bitcoin has a fixed supply limit of 21 million coins. Over time, the rate at which new coins are added to the supply continually decreases, leading to a deflationary situation as the rate of new supply approaches zero.
The aspect of Bitcoin is valued as a hedge against inflation because the limited supply means it gains more value in the market, contrasting with fiat money, which can be minted at will by central banks and tends to lead to inflation.
This strategy is supported by a technological, automated, and progressive process that adheres to its own timing and rules. The scarcity of Bitcoin, coupled with the difficulty of its issuance, stands in stark contrast to the limitless printing of fiat money and the way it generates inflation.
