The context of Argentine hyperinflation is also vastly different from what I set forth. In the late 1970s-early 1980s, the nation opened its financial markets. A rash of government and private sector dollar-denominated borrowing took place. Later, the military government ‘socialized’ much of the private debt. It assumed the private debt. This amounted to a grant to big international and domestic business. It would crush the government under a heavy debt burden. Worse, this was a time of Reagan and tight money in America. Interest rates on dollar debts exceeded historic norms. To pay the spiraling dollar debt and interest burden, Argentina printed pesos in order to purchase the dollars needed to redeem the debt. Hyperinflation came.

My recommendations will not produce this situation. More instructive to our circumstance is the Argentine depression of 2001. At the behest of the IMF from which our present government takes guidance, Argentina did a curiously destructive thing in the 1990s. It established a currency board pegging its peso the dollar at a one-to-one ratio that was purely convertible. Much of the government debt was converted into long-term, 10-year dollar denominated bonds. The peg placed the nation on a dollar standard that functioned like the extinct gold standard. It would prove to be just as deflationary and ruinous.

The nation’s exports became too expensive because the currency was overvalued. Earnings fell. Business activity shrunk. This was masked for a time by the influx of foreign capital taking advantage of the relatively high yields on government debt. The currency peg amounted to a trap. Due to the peg, creditors could lend government a peso yet demand payment of principal and interest in dollars. With the peso overvalued, this process effectively constituted a government subsidy to big investors. Worse, the peg-attenuated government’s ability to engage in expansionary fiscal policy because every peso issued became a potential dollar obligation. The government could not issue its own currency without incurring a proportionate contingent debt in a currency not of its ability to issue or control. Argentina had relinquished significant control over its monetary policy to those who control the dollar. In short, this was a calamitous attempt at turning a peso economy into a dollar one. It was as foolhardy as using a short rope to tie a canoe to the anchor of an ocean liner. Once the massive anchor was dropped that the canoe sank would become a certainty.

More apposite to this situation is present-day Greece. By entering the Euro zone, that nation slipped itself in a vice. With its goods denominated in Euro, Grecian exports shrank because the exports had become more costly to the nation’s principal export recipients. These partners were not members of the common currency. Meanwhile, imports from Germany and other nations became cheaper and thus more plentiful. Also, European investors eagerly lent money to the Grecian government since bond yields in Greece were relatively higher than other euro zone countries. As long as creditors rescheduled the loans, things were fine.