If Javier Milei Trusts the Markets, He Doesn't Need to 'Dollarize'
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Javier Milei’s stature among free thinkers is presently substantial. His recent speech at the World Economic Forum shows why. How rare for a country’s leader to so powerfully make a case for free markets and freedom.

Despite this, some who doubtlessly cheered Milei’s speech feel he’s erred in not pursuing dollarization for Argentina. With the peso having been routinely devalued over the decades, Milei supporters want Argentina’s president to abide his campaign promise and officially adopt the dollar. Their sentiment is wise, but their grasp of money isn’t.

Evidence supporting the above claim is the aforementioned, and routine devaluation of the Argentine peso itself. The latter is the surest sign that Argentina’s economy is already dollarized, no decrees or laws needed.

To see why, it’s useful to remember that no one buys, sells, borrows, or lends “money.” In reality, money movements reflect the movement of real goods, services, and labor. Which is why Milei needn’t bother decreeing the dollar Argentina’s official currency. The act of doing so would be superfluous. That is so because no one is going to exchange actual goods, services or labor for money that exchanges for substantially less than what they’re bringing to market.

Since the Argentine peso has long been untrustworthy, reasonably trusted currencies like the dollar have long been substituted for it. Crucial about the substitution is contra myriad libertarians who think the circulation of money is a consequence of wise central bankers managing so-called “money supply,” the reality is quite different. And this is true well beyond Argentina.

The simple truth is that if you’re bringing quality goods and services to the market, trusted money will be there in exchange for those goods and services. Good money is quite happily present wherever quality goods and services are, and as if placed there by an “invisible hand.” No central bankers, Treasuries, or Mints needed.

They’re not needed simply because we produce in order to consume. And since we do, we’ll only bring to market insofar as we can get in the market. Thus the constant circulation of trusted money in countries where it’s not “legal tender.” Money in circulation is a market phenomenon, and it’s one that’s every bit as natural as the circulation of actual goods and services.

Put another way, the enormous presence of dollars in Argentina wasn’t born of a central plan, nor were the dollars placed there by the Federal Reserve. Dollars circulate in sizable amounts throughout Argentina simply because there are products, services and labor in Argentina. The routine devaluation of the peso means that acceptance of it brings with it high odds of being ripped off as pesos in one’s pocket exchange for fewer goods, services and labor.  And the providers of all three don’t want to get ripped off. That’s the why behind dollar in countries not the United States.

It’s also an explanation to Milei’s critics for why he needn’t dollarize. He needn’t because doing so would amount to a proud non-interventionist decreeing what is legal tender. How very unlike Javier Milei to do something like that!

Instead, the much better path is for Milei to just be Milei, in which case he can let actual market forces within Argentina decide what monetary mediums circulate, and which ones do not. It cannot be stressed enough that the producers who comprise any market are very particular about what they’ll receive in return for what they’re producing. Markets work, Milei trusts the markets, which means he doesn’t need to intervene in the markets with legal tender decrees.

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book, set for release in April of 2024 and co-authored with Jack Ryan, is Bringing Adam Smith Into the American Home: A Case Against Homeownership

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