President of Argentina Javier Milei and his sister Karina Milei greet supporters as they leave the National Congress after his Inauguration Ceremony on December 10, 2023 in Buenos Aires, Argentina.
"No More Money"
The political caste, a budget chainsaw and
front row seats to the end of the world...
by Bill Bonner and Joel Bowman
Baltimore, Maryland - “There is no more money.” ~ Javier Milei. Argentina’s new president took up his post last week. And with it, he took up an enormous challenge. Among other things, he pledged to cut spending by 5% of GDP. That would be equivalent to a reduction of about $1.2 trillion in the US budget…wiping out the entire US deficit.
Colleagues Tom Dyson and Joel Bowman are down there now. They have the good fortune to be living in Argentina while it conducts one of the greatest political experiments of modern times.
Elites always control the media…and the government. And the tendency, in any stable political system, is for what Milei calls “the political caste” to rig the laws and the government so as to increase its own wealth and power. Typically, the process is only interrupted by some major event that the elites cannot control. As mentioned here yesterday, the plague of the 13th century broke up the relationship between elite landowners and the peasants who tilled the ground. With a third of the laborers dead, those remaining could demand a bigger slice of the pie.
Heads of State: Wars or revolutions can have the same effect – often by driving away the elites…or murdering them. Before the French revolution, for example, the aristocracy had given itself exorbitant privileges – including excusing itself from taxes – that left it living in luxury while most people were on the edge of starvation. The elites had the system they wanted. They thought it would last forever. And then they got their heads chopped off.
The other thing that can force a big change is a severe financial crisis. Hyperinflation wipes out the value of existing credits, up-ends relationships between haves and have-nots, and destroys the promises and pretensions of the elites. In a democracy, for example, the elite can still promise pay-offs to the voters…but as Milei told them on Sunday: ‘There is no more money.’
Without some big shock, the people in charge stay in charge…and continue to rip everyone else off. The rich get richer; the poor get (relatively) poorer. And the discontent builds. This little insight will become more important as we look more carefully at what is happening in the USA.
Breitbart: "The average monthly mortgage payment in Joe Biden’s America has soared to $3,322, per analysis from the Wall Street Journal. That $3,322 is nearly double the average monthly mortgage payment when His Fraudulency assumed office. When former President Trump left office, the average monthly mortgage payment was $1,787.
“Homeownership has become a pipe dream for more Americans,” writes the WSJ, “even those who could afford to buy just a few years ago. Many would-be buyers were already feeling stretched thin by home prices that shot quickly higher in the pandemic, but at least mortgage rates were low,” the report adds. “Now that they are high, many people are just giving up.”
The Political Caste
The 40 years, 1980-2020, that should have been the most glorious in human history turned into a puzzling period of pathetic underperformance. After such a spectacular show, 1950-1980, you would have expected a spectacular sequel. Momentum alone should have guaranteed success. But it didn’t turn out that way.
“What went wrong?” is the question on the table. Yet it is the question economists never ask. To raise the issue would put their own competence in doubt. They’ve been in the driver’s seat during the last 40 years; the ditch in which the bus now sits is the one they drove us into.
They are, of course, part of the “political caste”…or the managerial elite…who have gained so much over the last 40 years. In Argentina, they are the people whose wealth and power Milei wants to reduce. And therein the new president finds his task; in comparison, Sisyphus’s rock must have been a piece of cake. He needs to take power away from the very people who have the power to prevent him from doing it.
Can it be done? Can a democracy reform itself, without violence? Or does Argentina need to go through another bout of hyperinflation, as it did 30 years ago? And what about America…?That’s the experiment now being conducted on the pampas. We’ll watch carefully, because it might give us a hint of what will happen in the US."
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Joel’s Note: Our little barrio of Palermo Chico was quiet Sunday morning. A handful of locals stood in line at the little French boulangerie across the street, waiting for their café and croissants.
“Can you believe El Loco has done it?” whispered one gentleman, referring to Señor Javier Milei’s rise and rise to the presidency. “My whole family prayed for him. Three generations. Whether he can actually deliver from here, well…”
Added the woman behind him, a young mother. “He can’t be any worse than those other boludos [no translation provided]. They were ruining us. I don’t think we would have lasted another year. The inflation alone would have killed us…” “It can go on for much longer than you think,” chimed a Venezolano wearing an orange Rappi [food delivery] backpack. “But trust me when I say, it only gets worse. My own country is a mess. But here, I have hope…”
A 20-minute ride downtown, out front of the neoclassical Congreso building, Sr. Milei was delivering some harsh truths to the gathered masses. “The challenge before us is titanic,” he told a crowd numbering in the tens of thousands, “But I’d rather tell you an uncomfortable truth than a comfortable lie.” Argentina is in a state of “emergency,” said Milei, with four in ten citizens below the poverty line. (Almost one in ten are in a state of “extreme poverty.”) Any wonder… with inflation running at 200%… and climbing.
Already, Sr. Milei has begun eliminating government ministries, with 11 set to get the chop (#Afuera!)… including the “Ministry of Women, Gender and Diversity", as seen here:
The big question, however, is what Sr. Milei can do to the engine room of the country’s rampant inflation. On the eve of his inauguration, this past Saturday night, Milei’s supporters held a symbolic wake out front of the nation’s central bank, which Milei has vowed to “burn to the ground.” Meanwhile, Argentines await announcements this week on the next step toward dollarization. And they keep the matches and the gasoline handy…"
