‘Bitcoin Standard’ author: Argentina’s bond ‘Ponzi’ near collapse, Bitcoin is exit
News Summary
Economist Saifedean Ammous, author of “The Bitcoin Standard,” has warned that Argentina’s financial system is on the brink of collapse, labeling President Javier Milei’s economic program a “debt and inflation Ponzi” propped up by unsustainable bond yields and money printing. Ammous asserts that the Argentine government has created a financial system where bond speculation is the sole path to financial security, calling it a “shitcoin casino.” Central to this crisis is “la bicicleta financiera,” a high-yield carry trade involving short-term government bonds that offer interest rates exceeding the pace of peso devaluation. Ammous argues this setup is unsustainable, as the government must create more pesos to offer high yields, thereby devaluing the currency further. He warns of an imminent peso collapse, noting that it has already breached its target exchange band despite forex interventions, and bond rates have hit 88%, causing Argentine stocks and bonds to plunge. Ammous also highlights corruption allegations and recent election losses faced by the Milei administration. He predicts that once peso devaluation overtakes bond returns, investors will dump both bonds and pesos, triggering a rush to safer assets like the US dollar or Bitcoin (BTC), ultimately forcing the government to seek an IMF bailout.
Background
Argentina has a long history of economic instability, marked by persistent high inflation and recurrent sovereign debt crises. In response to these challenges, libertarian economist Javier Milei was elected president in 2023, promising radical reforms, including dollarizing the economy and shutting down the central bank, to stabilize the nation. "La bicicleta financiera" (financial bicycle) is a recurring phenomenon in Argentina, where investors exploit the high inflation and interest rates of the local currency by buying and selling short-term government bonds for arbitrage. While potentially lucrative in the short term, this strategy, which relies on continuous rollover of debt, poses significant risks to government finances and monetary stability.
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