This could be you: how it is to live with high inflation

A Spanish tourist visited Argentina and was surprised by the country’s inflation, exchange rate, and saving habits. He opened a long Twitter thread to share his thoughts on how Argentina’s economy works.

After the Spanish tourist Javier López finished his visit to Argentina, he began to write a thread on Twitter that would be liked and shared more than 10,000 times. In it, he explains how the inflationary Argentine economy works, according to what he saw during his stay.

A great explanation of inflation, and in tweets

The thread is a great way to get a feel for what someone from another part of the world thinks about how it is like to live with high inflation. The tourist is clearly interested in economics, so it wouldn’t be surprising if he had a good grasp of things. Some highlights below:

– The value of the Argentine peso has been decreasing over time because inflation has been so high. The peso is now worth 1/130th of what it was when the country was founded in 1816.

The Spaniard also said he was surprised at how much inflation is talked about, what the exchange rate with the dollar is, and how Argentines save their money.

– “In Spain, you do not talk about inflation all day long because it is very low and stable. Nor do people (or companies) have dollars ‘hidden’ or in their pockets. Nor do you worry about losing your savings because of inflation or devaluation,” says López in his thread.

The thread is quite long, but it’s worth reading it to the end because it explains very well the situation of inflation and exchange rate that Argentina is going through.

In addition, the thread details how Argentines have to resort to saving in dollars -or pesos but with a very high price- because inflation erases all or most of their savings in pesos.

Later, the thread continues to explain how Argentines use Bitcoin as a store of value -for reasons similar to those of dollars- and how complicated it is for them to send money abroad (like paying for an Xbox game).

The thread

“I have been in Argentina for a week and I have learned a lot. I thought that the inflation of 40% would be a bad joke, but no.

This is what it is like to live with an annual inflation rate of 40%. I was shocked.”

“Imagine you go to a supermarket and the price of milk has gone up. Then you go again and it has increased again, and so on. It’s really hard to believe that the milk is more expensive every time you go back.”

“I have also realized how difficult it is to adapt to this situation and how much you need to change some habits, such as shopping every day or buying many products at once because they will increase in price very soon.”

“To give you an idea, I had to pay 1,200 pesos (approximately 15 euros) for a lunch of two courses with drinks. In Spain, these 15 euros can buy a three-course lunch with drinks for 4 people!”

“I also noticed that many people take out loans in order to save money in Argentinian pesos—which is about as counterintuitive as it gets. Apparently, this is because Argentinians believe that their currency will depreciate so much over time that they want to save on something else (like US dollars).”

“And inflation is not the only problem. In Argentina, 4 out of 10 people are living in poverty, and 1 out of 10 are in extreme poverty.”

“The minimum wage in Argentina is supposedly u$s 300 per month. But many earn considerably less than that. A decent salary in Buenos Aires for someone working in technology for an Argentine company can be u$s 500 per month. Only those who achieve the golden dream of working for a company in the USA (or another country) will be able to exceed US$ 1,000 per month,” he said.

“How did what was once the sixth-largest power in the world come to this? A century ago its GDP rivaled that of France and Germany! There is no easy answer. Some will talk about political inconsistency, economic mismanagement, poor connection with international trade, or deficient investment in the industry. Others of hard pressures from imperialist powers, and even some plain and simple bad luck. Of course, everyone will agree that Argentina is a country of breathtaking beauty. That is undeniable.”

“But with such high inflation rates, this kind of price fluctuation is not only common but expected in Argentina. The prices of menus in restaurants change so often, that sometimes they don’t even have time to print up new ones.”

“This kind of political and economic instability has created a culture in which everyone looks out for themselves, for the most part—but the kindness and hospitality you’ll find in Argentines is something that’s truly special.”

Imagine saving for a house

“It turns out that the price of houses has gone up a lot, but not every Argentine can afford to buy one. This is because the annualized interest rates on mortgages are variable and may even be higher than inflation. So, for example, if your mortgage interest rate is at 2% annualized, imagine what it’d be like if it were at 50%! Nobody buys houses with a mortgage in Argentina because it’s too expensive to do so. That’s why anyone who wants to save money must beat inflation.”

“In addition, no one saves Argentine pesos because they have very little value. Unfortunately, they may be worth more for their paper value than their symbolic value because they’re worth so little otherwise. Shopping with a wheelbarrow full of old bills isn’t practical either. That’s why Argentine pesos are like hot potatoes: they must be disposed of as soon as possible.”

Millions of financial experts

“When you go to a foreign country, you always hope to learn something from their culture. When I went to Argentina, I learned that inflation of over 40% annually is enough to turn every individual (and family) into a savvy investor… or at least that’s what it seemed like.”

“I met people who were experts in financial management and finding inventive ways of saving money and beating inflation. Even the people who couldn’t afford it invested in anything that would maintain its value over time—if not increase in value. They bought several pairs of sneakers they liked, so they could use them over the course of many years. If they had cash, they bought more expensive things like large TV screens, because they knew they would be too expensive later on.”

“The most popular way to save money was by holding U.S. dollars. The Argentine peso was very weak compared to the dollar, which was lucky for Argentinian citizens and tourists alike… but only if they were careful with their money.”

An “illegal” dollar market

“But beware, there is more! The government limits the monthly amount that each Argentinean can exchange per month: 200$ USD per person per month. And it does so at a NOT very advantageous exchange rate. The official exchange rate would also apply to you as a tourist if you come from abroad.”

“And here is where the interesting part comes -he stressed-. Pay attention, as I promised you, your head will explode: there is a parallel currency market, illegal but in daily use, called ‘dollar blue‘ whose exchange rate is currently 2x the official exchange rate. That is to say, if you exchange your pesos in this illegal market, you will get twice as many dollars as in the official market. And vice versa for someone like a tourist coming from abroad. Really crazy.”

“Despite being illegal, the ‘blue dollar’ has become part of everyday life for Argentines, who have created an informal system to carry out exchanges with relative ease and safety.”

Of course, they use crypto

“For obvious reasons, Argentina is the 9th country in the world in crypto usage.”

“Who could be surprised by such a thing? Crypto thrives in emerging markets, especially those with weak currencies, high banking costs, and capital controls. So of course cryptos have a big pull in Argentina.”

“You can find it and invest it almost everywhere. The size of the community and the level of projects here is incredible, it’s much more than I expected and what I’ve seen in the world so far.”

“But let’s face it, cryptos are still far from mainstream. They are not yet used on a day-to-day basis to buy and sell goods and services. And few Argentines can reach the level of savings to access them”.

You don’t have to try to understand Argentina, you just have to love it

“I hope that it has helped you to understand a little more this multiple reality that it is to live in an inflationary economic system. I will add that these 7 days that I have enjoyed in Buenos Aires have made me fall in love with Argentina”.By way of closing, the Spaniard wrote: “Argentines are among you, but they are not like you. Do not try to know them, because their soul lives in the impenetrable world of duality. Argentines drink joy and bitterness in the same glass“.