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Page added on February 10, 2014
Here’s What It Looks Like When Your Country’s Economy Collapses
Argentina is a country re-entering crisis territory it knows too well. The country has defaulted on its sovereign debt three times in the past 32 years and looks poised to do so again soon.
Its currency, the peso, devalued by more than 20% in January alone. Inflation is currently running at 25%. Argentina’s budget deficit is exploding, and, based on credit default swap rates, the market is placing an 85% chance of a sovereign default within the next five years.
Want to know what it’s like living through a currency collapse? Argentina is providing us with a real-time window.
So, we’ve invited Fernando “FerFAL” Aguirre back onto the program to provide commentary on the events on the ground there. What is life like right now for the average Argentinian?
Aguirre began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. He is the author of Surviving the Economic Collapse and sees many parallels between the path that led to Argentina’s decline and the similar one most countries in the West, including the U.S., are currently on. Our 2011 interview with him “A Case Study in How An Economy Collapses” remains one of Peak Prosperity’s most well-regarded.
Chris Martenson: Okay. Bring us up to date. What is happening in Argentina right now with respect to its currency, the peso?
Fernando Aguirre: Well, actually pretty recently, January 22, the peso lost 15% of its value. It has devalued quite a bit. It ended up losing 20% of its value that week, and it has been pretty crazy since then. Inflation has been rampant in some sectors, going up to 100% in food, grocery stores 20%, 30% in some cases. So it has been pretty complicated. Lots of stores don’t want to be selling stuff until they get updated prices. Suppliers holding on, waiting to see how things go, which is something that we are familiar with because that happened back in 2001 when everything went down as we know it did.
Chris Martenson: So 100%, 20% inflation; are those yearly numbers?
Fernando Aguirre: Those are our numbers in a matter of days. In just one day, for example, cement in Balcarce, one of the towns in Southern Argentina, went up 100% overnight, doubling in price. Grocery stores in Córdoba, even in Buenos Aires, people are talking about increase of prices of 20, 30% just these days. I actually have family in Argentina that are telling me that they go to a hardware store and they aren’t even able to buy stuff from there because stores want to hold on and see how prices unfold in the following days.
Chris Martenson: Right. So this is one of those great mysteries of inflation. It is obviously ‘flying money’, so everyone is trying to get rid of their money. You would think that would actually increase commerce. But if you are on the other end of that transaction, if you happen to be the business owner, you have every incentive to withhold items for as long as possible. So one of the great ironies, I guess, is that even though money is flying around like crazy, goods start to disappear from the shelves. Is that what you are seeing?
Fernando Aguirre: Absolutely. Shelves halfway empty. The government is always trying to muscle its way through these kind of problems, just trying to force companies to stock back products and such, but they just keep holding on. For example, gas has gone up 12% these last few days. And there is really nothing they can do about it. If they don’t increase prices, companies just are not willing to sell. It is a pretty tricky situation to be in.
Chris Martenson: Are there any sort of price controls going on right now? Has anything been mandated?
Fernando Aguirre: As you know, price controls don’t really work. I mean, they tried this before in Argentina. Actually, last year one of the big news stories was that the government was freezing prices on food and certain appliances. It didn’t work. Just a few days later those supposedly “frozen” prices were going up. As soon as they officially released them, they would just double in price.
Chris Martenson: Let me ask you this, then: How many people in Argentina actually still have money in Argentine banks in dollars? One of the features in 2001 was that people had money in dollars, in the banks. There was a banking holiday; a couple of weeks later, banks open up; Surprise, you have the same number in your account, only it’s pesos, not dollars. It was an effective theft, if I could use that term. Is anybody keeping money in the banks at this point, or how is that working?
Fernando Aguirre: Well, first of all, I would like to clarify for people listening: Those banks that did that are the same banks that are found all over the world. They are not like strange South American, Argentinean banks – they are the same banks. If they are willing to steal from people in one place, don’t be surprised if they are willing to do it in other places as well.
12 Comments on "Here’s What It Looks Like When Your Country’s Economy Collapses"
Makati1 on Mon, 10th Feb 2014 1:49 am
Coming to a neighborhood near you. Are you prepared?
PrestonSturges on Mon, 10th Feb 2014 2:23 am
Was he the blogger who wrote about going to his dentist during the collapse and being told he had scurvy?
Davy, Hermann, MO on Mon, 10th Feb 2014 8:14 am
I wonder about these place that are going through the economic difficulties now. My thoughts are that these places are getting prepared sooner than other more fortunate places. These more fortunate places will have to take a bigger step down when and if the time comes. Yet, it could also mean the more fortunate places not in collapse now will maintain social fabric better to survive a social crisis when it happens. So get your ass kicked then you are tougher when the next ass kickin starts. “OR” stay healthy and fit and get the ass kickin and survive it and the other guy that has been beat on a few times already gives out. My thoughts are here and there. I think a population with no experience with crisis will be a population prone to panic. A population that has remained basically intact and also negotiated multiple previous crisis may have developed the informal “ad hoc” system to survive. These societies in gradual collapse, like Greece, will cut out the fat and become lean. There is one problem with this line of thought and it is how far the society can bend before a catastrophic bifurcation occurs and chaos takes over and large part of the essential infrastructure physical and intellectual is destroyed. Just look at a place like Syria to see this destruction.
Makati1 on Mon, 10th Feb 2014 10:49 am
Davy, I think those that have not experienced a real disaster will just go to pieces when it finally happens. The US is nowhere near prepared for what is coming, but if you watch Homeland securities preparations, I think they do. .
The US has not had a war on their turf since the Civil War. And, the Depression of 1929 was a walk in the park compared to the one coming. Then again, more than 70 million Americans are on some kind of psychotic drug, legal or other. What happens when they don’t have them? Or beer or cigarets or …
The West is not going to dodge the bullet. It is heading straight between their eyes. When the dust settles, conditions like in Bangladesh may seem like Paradise to them.
Davy, Hermann, MO on Mon, 10th Feb 2014 1:39 pm
Makati, if you have not check recently from your far off perch in the southern Hemisphere the US is already in multiple crisis at the level of barely middle class and bellow. Go to the inner cities like Detroit or any other large metro with a gang problem. I would love you to drive me around your worst areas in your country. I might add your country faces Stone Age in significant parts. Pretty well your entire overpopulated deforested country is in the cross hairs for mega typhoons. A mega typhoon and no economy to rebuild with after SHTF. This will be precisely what is in store for some coastal US areas. Yet, Makati, around here where I live country boys will survive. We are not over populated here like your perch.
You bring up a very good and valid point that of civil war. Yet, this is a danger in any part of the world including the US post collapse. Hell yours never ended with the Muslims in the south of your country.
Hard core drugs and addiction I would say is ½ your number. Then the other ½ of your number is beer, pot, cigs, wine, whiskey et al. What is your problem with that M? We have a great traditions of growing and making all this at the grass roots level.
Your country is looking at Bangladesh before SHTF. You can’t even feed yourself now. What happens when the imports are cut off. Makati getting a boat and navigating the seas to somewhere that does will not be an option for you. You are in trouble my friend
Makati1 on Mon, 10th Feb 2014 2:51 pm
I don’t think you have the current picture of the Philippines. It is not deforested, in fact most of the island of Luzon is heavily forested. And the Philippines are in the northern hemisphere.
As for over populated … most of Americans live on or near the coasts. The population density is not relevant here as it is fairly evenly scattered across the 7,000 islands except for a few cities. The density here is about 800 per square mile. The density of some areas of Missouri are equal to that, plus, the number living in neighboring states like Texas that will be wanting your water soon.
I prefer to take my chances with a culture that still knows how to live off the land because they still do than the drugged up Americans that only know WalMart. There not going to be any ‘recovery’ after the SHTF. There is only going to be the long slide into oblivion.
The drug problem is that 79% of the world’s prescription drugs are consumed by Americans, then add in the illegal ones, alcohol, etc, and you have a drugged up zombie country. Even your school age kids are drugged up to keep them docile. Not so here. Drug penalties are harsh and there is no money for unnecessary medicines.
You need to visit the Philippines and see for yourself, before you judge. It is NOT the MSM BS you see in the news there. Sure there are some poor areas, but that is true in the US too these days. The US has a lot farther to fall and the pain will be much harder there than here.
Believe what you want, but I made my choice and think it is the best one from my observations over the last six plus years.
Davy, Hermann, MO on Mon, 10th Feb 2014 3:47 pm
Damn, Makati, got a rise out of your normal calm self. Well you got me on the northern hemisphere thing forgive me. On your countries survivability it is not good as you make it sound. The deforestation is huge in regional areas there. Look, you just have been way off the mark on your infinite knowledge on the US culture, economy, and world politics. Drug problem is nowhere near as bad as you claim. The problem is spreading out of the US and throughout the world now just as obesity has but not your exaggerated claims. Walmart is a real problem in the US but their days are numbered and people will go back to the land and local distribution as best they can. It may be in rough shape but last I heard we have a breadbasket regions for everything from grain, fruits, and vegies in many regions of the US. Your country has serious import issues…remember the rice crisis just a few years ago??? Your view of our schools is way off because this country is vast and regional. Many different situations out there. The population densities of Missouri are far off. We are in good shape. We are beyond our carrying capacity but the percentages are much better than elsewhere. You need some education my friend. Plus I have nothing bad to say about your people or country. Many have been in St. Louis in our universities. People that live in glass houses should not through rocks. You are constantly bashing my country and I will call you on it when your head is in the wrong place!
SteveO on Mon, 10th Feb 2014 5:51 pm
“Then again, more than 70 million Americans are on some kind of psychotic drug, legal or other. What happens when they don’t have them?”
There are roughly 30 million Americans on blood pressure medication (myself included) and another 20 million or so on statins or some other drug for cholesterol. There are about 25 million diabetics. Granted these groups tend to overlap, but how long will it be until masses of people die from having these conditions untreated?
Davy, Hermann, MO on Mon, 10th Feb 2014 8:39 pm
Steve, good point I think about often. I imagine the pharm business will implode quickly considering how complex the manufacture is. Some drugs may be easily produced though. If you have a condition requiring drugs you may want to delve deeper into the ingredients in your important health drug. It may be easier to make than you think. I may be naive though. I am not up on chemistry of drugs. Maybe some of you can shed light. This whole drug issue will be serious especially for the aging world population
ghung on Mon, 10th Feb 2014 10:31 pm
My question is what folks in Argentina do about paying bills (mortgage, property tax, other debts) when their currency crashes. Is there some sort of debt jubilee, or are their debt essentially erased by inflation?
As for meds, just the number of insulin-dependent Americans should cause concern. My understanding is that insulin has a relatively short shelf life, even if one can get a supply of the stuff; less than a year. Many other drugs have relatively long shelf-lives, if one can talk their doctor into prescribing enough for years. Some survivalist blogs discuss these things; actually some pretty righteous info on some.
www[dot]survivalistboards[dot]com/showthread.php?t=33479
Kenjamkov on Tue, 11th Feb 2014 4:18 am
Just gotta get a pig pen of insulin pigs. Can they do that yet?
Stephen on Tue, 11th Feb 2014 3:06 pm
I see a debt jubilee as a possibility. I also think that if things no longer work due to lack of fuel, what we could have is HYPER DEFLATION of some prices, too. I think peak oil will likely cause a supply chain failure due to shortage of fuel, and that will damage more than a currency collapse.