French fries, Tater tots, Colombian ahiago.
They're always kind of denigrated. There's a long history of racializing potatoes.
“Have a potato became an insult around the world.”
Listen to NPR's code switch podcasts in the NPR app or wherever you get your podcasts. This is Planet Money, from NPR. [MUSIC] Welcome back, everyone, to Planet Money Summer School World Tour. The only international economics degree that studies the flows of capital, goods, and lost
luggage. I'm Robert Smith. Every Wednesday this summer, we are visiting a different continent,
listening to some classic Planet Money case studies, and figuring out the economic lessons we can bring back home. I hope you're back to sweater today because where we're going,
“it is winter in August. Argin Tina, where the tango is smooth, the soccer is aggressive,”
and the monetary policy is a cautionary tale. Noble prize winning economist Simon Kusnetz once said, "There are four sorts of countries developed underdeveloped Japan and Argentina." The point of the observation is that there's nothing in world history quite like the rise in fall and rise in fallen fall and rise of Argentina. In 1910, it was one of the richest countries on earth. The people there had more wealth per person than France or Germany. Argentina had natural resources,
a cultural capital to rival Paris, and dreams of being a superpower, but it wasn't going to happen. Argentina became instead a country of lost hopes. As one government after another made economic and political choices that erased much of the wealth over the last 100 years. Entire books have been written about what happened to the Argentinean economy. Here's a quick and simplified recap in 35 seconds. The challenges started with a military coup
in 1930. That ushered in decades of political instability. There was another coup and one of the plotters, Juan Parón, was elected in 1946 as a populist. He empowered unions, manufacturing, nationalized the railroads, and started to spend away the money reserves of the country. After another coup, Argentina fell into a cycle. Governments that would spend wildly raising wages, creating inflation, and then came budget cutting and recessions and unemployment.
The country was yo-yoing between crises, coups, debt defaults, and then in 2001 the big one, the economy collapsed. We'll talk about the economic lessons later in the show, but I wanted you to understand how traumatic this was for the people who live there, a personal story. NPR reporter Jasmine Garves grew up in Argentina during this time, 2001, and she watched the collapse happen as a young woman. Here are a few minutes of Jasmine's story.
“There's this one memory I have of my country coming apart. To this day I think about it more”
often than I like to admit. It's the memory of this young man. I saw him on TV. He was protesting outside the presidential palace, not far from where I used to live. This guy, he's a kid. He must have been like in his early 20s, and he's been dragged away by cops, and as they're taking him, he screams. We're dying of starvation. They're starving us. And then he yells his name. It was December 2001, and here in a nutshell is how the country reached its breaking point.
A brutal dictatorship ruled over Argentina in the 70s and early 80s. During that time, foreign debt increased five-fold. At to that decades of disastrous economic and monetary policies rampant corruption in the 90s, that's just a few of the things that led to this totally unsustainable situation. People started going hungry. Hospitals started having shortages. It got so bad. Groups of people started busting into supermarkets, grabbing whatever they could eat and running.
The morning, the government declared a state of siege. I was watching the news when the broadcast
was interrupted by an official announcement from the president. The president was basically saying
some of our rights were no longer guaranteed. No moving freely in public spaces, no gathering in groups, you could be arrested without explanation, and militarized police were deployed. And
The response from the police was brutal.
elderly people, women, minors. It didn't matter. Eventually protesters ran the president out of office. Over the next month or so, we would get four more presidents. That was Jasmine Gars from her planet money episode and podcasts, the last cup. Her family left Argentina soon after that 2001 crisis. The 25 years since have seen much of the same sort of political and economic troubles in Argentina. Today, on summer school, we will focus on how economic turmoil, especially inflation,
can affect everyday people. Just trying to save money, work a job, run a business. And there's
a big lesson here to take home. One of the most important things you need in an economy is stability.
The ability to plan what your money will buy tomorrow or next month. What are the rules for businesses? Without stability, well, we'll show you the lengths people go to just to survive. Coming up, we'll meet our guest, summer school professor, and see what happens when your
“currency is so unstable that you have to invent different kinds of money, just to get a band like”
cold play to perform a concert after the break. Attention, a PSA from Shoreway and PR Science podcast. You need to be paying more attention to your poop. I really do think that this deep stigma we have about talking about pooping is tied to these early onset chloractyl cancer cases.
What to watch out for and how to decode the secret messages hidden in your poop? On Shoreway,
listen on the NPR app or wherever you get your podcasts. How will a historically unpopular president navigate a midterm election season that may leave him with a lot less power? Stay caught up with the latest news with Trump's terms, the podcast where we curate NPR's coverage of President Trump and short episodes focused on a single story. Follow Trump's terms on the NPR app or wherever you get your podcasts. Our class, back from the break, each week on summer school,
“we bring in a professor to give us the big picture concepts about the country we're visiting,”
and today we have Sebastian Galliani, the Weatherhead Presidential Chair and Economics
at Tulane University, and a proud Argentine, by the way, hey professor. Hey, nice to be here.
I was hoping that we'd have a little bit of good news for our trip to Argentina during this lesson, but I suppose that people in Buenos Aires will still be crying about their loss in the final of the World Cup. People will be crying for four years, really, on the Linux and World Cup. I just have more of a view that at the end of the day, one game, you can win, you can lose, it's what it is. It is what it is. That could be the motto of Argentina for this episode.
I know that you have studied and lived the economic history of Argentina, and written about how they are very different political factions there. One group wants free trade and openness and wants to interact with the world, and the other political faction wants to protect the country, protect labor unions, build up manufacturing, local products, be self-sufficient. We have these same disagreements in the US, but how does this result in
“these unique economic problems for Argentina? Yeah, I think it's a good question. One group gets”
to power, goes in one direction, another group gets to power, goes in another direction, and that creates a highly volatile country. Not only that. One group, they want that transfer to make the economy modern and integrated to the world, it's appealing to the world. So when they are in power, many people want to invest in Argentina, but unfortunately, they all decide when they get into power, they undo all their reforms and they expand the state,
and they spend a lot. And so the economy has been bouncing between the two groups and the two styles of political economy over the decades now. And that creates a constant volatility, I imagine, where it's hard to plan an economy and that political instability becomes an unstable currency, unstable debt levels, unstable business climate? Oh, yeah, let's get one example. So suppose you are someone in the upper middle class in Argentina, and you are the same as someone
in the upper middle class in Chile. But in Chile, that person can buy a house with a mortgage to 30-year mortgage. So a fixed rate, 30-year mortgage, where what you pay every month, is relatively predictable. Yeah, Argentina, you can't, because there's not such thing because of the volatility. And that makes a whole difference. So that these things may say, yeah, they are equally wealthy, but the people in Chile lived much better, right? Because there are many things that are not
Captured in those statistics.
in those statistics. We will try to tell you those personal stories today. Our next stop in the
timeline of Argentina is 2022, just a few years ago. Severe inflation is starting to rise again. And yeah, we all complain about inflation. But in Argentina at this time, prices were doubling every year. Students, as you listen to this story, think about what it would be like if you had no idea what your paycheck would be able to buy next week. How would you plan a purchase or vacation? And of course with all that inflation exchange rates, the amount of dollars you can get
“with an Argentinian peso, are also unstable. Would you be able to even leave the country?”
Planet many hosts Jeff Groow and Amanda Rancic talked to one person trying to plan their
life in Argentina in 2022. Just to note, because everything is changing so fast, the numbers you will hear in this story are just for 2022. The economy in Argentina is so chaotic that everyone there has become an amateur economist. You can call it pretty much anyone to find out what they're doing to outrun this chaos. My name is Lucas Babic, BABIC. Lucas is in his early 40s. He's a freelance video editor. And I'll admit I just found him through some guy who wrote into Planet Money.
Lucas is originally from Brazil, but he's lived in Argentina for 30 years. I've been suffering
“Argentina since '92, okay? And why do you stay? Because Argentina is awesome, like for real,”
but everything is wrong with this place, like everything is wrong with Argentina. And one of the
biggest things that's wrong, according to Lucas, is that you can't trust the peso. So like a lot of people in the country, he stashes away US dollars. If you can hold on like a grudge to dollars in Argentina, yes, you're rich. So I'm not rich, but yes, I do have like $500 in my shoebox, like Jay-Z said it. You got to start with the shoebox. So Lucas and I are talking over zoom. It's mid sentence. I'm really like standing up and go in a way. I'm sorry. Okay, Lucas is like
wandering away, but like for real. This is my shoebox. Lucas, what are you saving the American dollars for? I hold this thing because this is not gonna devaluate. I $10 is gonna steal $10. Bro, I can leave like a week and a half with this. Just this. Next he picks up some Argentine money. This is a thousand pesos. Lucas waves it at me and he's kind of like, what can I buy with this? I can go to McDonald's and buy like a really big combo with like
bacon and cheese and like for real, like a big combo on McDonald's. I'm not gonna be able to pay it with a thousand pesos. I gotta go with two of this. He shakes his sad peso. And in a year or two, he might need to take three or four of these thousand peso bills to go get that combo meal. Because inflation might hit 100%. And what Lucas wants to buy with his pesos, it's not combo meals. It's more US dollars to stash in his shoebox. And this is where the story gets kind of weird
because buying dollars is not straightforward. The Argentine government controls foreign exchange transactions because they don't want US dollars to run off and leave Argentina. Okay, so here we go. There is an official rate. So if Lucas wants to play by the rules, he can go to a bank and buy dollars. But the government says there's a limit. No more than $200 a month. And this is gonna cost Lucas a lot because they add on a 75% tax. Instead, what most people do is go to one of these
not really legal, but they're kind of everywhere places known as Quivas or caves. These have a different exchange rate than the bank. No $200 limit. No 75% tax to get dollars this way.
“That's what we call the blue dollar. Okay. It's still an American dollar. It's not like literally”
blue. The blue dollar just means you bought it on the black market. Lucas says that if you've got a guy, you might even be able to get a better deal. I have a friend, the girl, like he's giving me a pretty elaborate wink. I have a friend that will give me more money for this bill. So there is the official rate, black market rate. You got a friend rate. But then on top of that,
There are these other rates, which like the official rate are set by the gove...
for buying stocks and bonds. There's another for using a credit card. There are more than a dozen of these different rates. Some even have cute names, like the soy dollar, or the tech dollar. Now, at this point in Lucas's explanation, he's kind of fuming. He's also literally fuming. I'm watching him chain smoke three cigarettes in a row. And you know what? Call play. Call play. It's coming towards Insina. They're going to come towards Insina. I'm play the songs that I hate
“like boring or whatever. But there's a call play dollar. Can you believe it?”
The call to play dollar. Call play. Supposed to play 10 shows in Argentina. Lucas says he will not be there. And call play. Well, the band doesn't want to be paid in quickly devaluing pesos. But the show promoters, they need to pay call play, probably in dollars. And a lot more than the 200 that they're officially allowed to get each month. So, the government set up a special exchange rate for promoters so they can pay international talent. And I guess that describes call play.
Basically, the Argentine government is using all these different rules and rates to fix problems,
like with the call play dollar. But more importantly, they're doing this as a way to keep scare dollars from leaving the country. And to try to prevent their peso from collapsing. Now for Lucas, like a lot of people in Argentina right now, hit by rising inflation,
“a shrinking peso, rising dollar. You have to really work it out like to get to the end of the”
month. You have to really, really, really work it out to get to pay the rent and the light. And the water and your phone, which is also what the government of Argentina is now doing. Try and work it out. Because most of their bills, billions of dollars of debt, need to be paid back in dollars. And with the value of the U.S. dollar so high, it makes it that much harder to pay all those debts back.
In Argentina's government, their shoe box is looking at pretty empty. Just like Lucas, they still need to pay for their phone and their water. And they want to keep the lights on. Amanda Ranschick and Jeff Grove from 2022. After the story aired, the inflation did get worse. The government tried even harder to control the exchange rates. A lot of these rules and exchange rates changed. And Argentina's would elect a new president to
try to fix it. But we'll get to that in a moment. First, let's talk about how sometimes
trying to make the money more stable can have the opposite effect. I want to invite back in our professor for the day. Sebastian Galiani from Tulane University. Hey, Sebastian. Great to be here. Sebastian, when when I was listening to the story, it just it just felt like so much work. All those different exchange rates, the shoe box, trying to keep the value of currency from disappearing. Money is supposed to be boring and stable. This seems exhausting.
It might look exhausting for someone that don't live in such an economy. And I'm not saying it's not a bad thing. I'm just saying that if you are someone in my age, you've been through so many of these ups and downs. Because then it came to the opposite situation where things are stabilised and you want to get rid of the dollars, right? Because the peso is going to operate this day. And somehow people are less than understand things and know what they have to do.
It's not the first time they go through that. Of course, it's not just the inflation. It's also
what the government is trying to do to control that inflation, to control the value of the peso, to control who gets the good exchange rate, control who gets dollars. It kind of is called this technique capital controls. Now, pesos are printed by the Argentinian government, so they have
“some influence. But these capital controls never seem to work for a country. Why is that?”
Well, it doesn't work because obviously when you put a price that is below the market equilibrium, there's a lot of buyers and soon you get out of what you're selling, which is dollars, right? But at the end it's going to collapse, right? So they are very ineffective. But there is a lot of corruption around that, because now you decide. Coldplay has a good dollar. Lola Palasa didn't go that dollar. And I know that well, because they hired me to advise them how to preserve the value
of the peso in Argentina. Well, the producer, the concert tours that you're talking about? Yeah, yeah, they didn't have the same dollar as Coldplay. So they stay with pesos. And they didn't know
What to do.
They can't go to black market to buy dollars. So they have to keep it in pesos. And we're seeing what's the best investment in pesos. So that's where I got to know about this. It is so funny to be that in Argentina is so complicated that a company who wants to bring a concert tour there has to hire their own economist. Yeah. Of course, the outcome of all these currency systems is really to
make the government even more powerful. Because everyone who wants to do business has to go to the
government to beg for their own perfect, great exchange rate. Right, right. The government began
“very powerful. And that's why I say there is a lot of corruption around that, because the government”
done decide this just using formula or criteria, some logic. It's all about I'm going to sell you the last cheap. This is what they cost. In other words, what the government says goes. And this is one of the biggest lessons from Argentina's history. You can make your money up your stable. By forcing everyone to use all these different exchange rates, but the real way to stability is to run a country that is growing where people are working and you're making things the world wants.
Stable countries create stable money. We will rejoin our professor in a moment with a third story
from Argentina. We talk about how inflation affects people saving money at home in a shoe box, but what happens when you have a business trying to sell the shoes themselves and the box, when all your costs keep changing, what do you do? Let's just say we are going to need a lot of
“price tax after the break. Okay, so you're driving to work or you're on a walk or you're at the”
gym or whatever and you just need to clear your head. That's the perfect time to hit the play button on NPR's all songs considered. It's not the news, it's not work or whatever else is weighing you down. It's just a good time with good friends and great tunes. Listen to all songs considered every Tuesday in the NPR music podcast. From the light bulb to the internet, human history has been driven by innovation and shortwave is exploring how the technology of tomorrow will transform our
future. Would you write in a flying taxi? Will AI models fight wars? Here about the technological frontier every Monday on tech camp, the new series from shorewave. Listen on the NPR app or wherever
you get your podcasts. Okay, class we are back with our third case study and a little tango lesson.
Not the actual steps, unfortunately, it's hard to teach ballroom on an audio podcast,
“but a tango lesson about economics. In 2023, a year after our last story, inflation in the”
country got even worse for the shoebox holders of Argentina. And so planet many hosts Amanda Ronchick and Erica Barres flew to the country. This was also the year of a presidential election in Argentina. And one of the candidates, Havia Mule was promising drastic changes to the economy. More on him in just a moment. We talked earlier about how everyone in Argentina has to act like an economist. And that is what Erica and Amanda found. As you listen to this case study
students, thinking about how much time everyone is wasting trying to deal with inflation. When Erica and Amanda flew to Argentina, it just so happened that there was a tango competition in town. Probably happens a lot in Argentina. And so that is where they start their story. When we walk into the competition, there are nine couples on stage. All dressed very formally, men in dark suits, the women in gold lame, dark red velvet,
black satin. We are here to meet one dancer in particular. Pernayne is Saya Dapet. Hi, nice to meet you. Saya works in tech in India and late last year she sold a company she founded. She decided she could afford to spend a few months on this thing that she loves. Tango. So now she's part of the first couple to ever represent India at this competition.
Saya is finished dancing for the day and she wants to run a few tango-related errands in town. And we decide to tag along with her in her Uber. First thing we're going to do is go see a shoe seller. Tango, she's of course. We're going to Newtango. I guess one of the more popular ones among my Indian friends and my teacher back home has sent me a list of designs that she wants and asked me to go and buy it for her. So like everyone else in this country,
Saya has been watching the dramatic drop in value of the peso over the last few weeks. People here watch the exchange rate between the dollar and the peso. As you might watch the weather forecast, checking a few times a day,
Treating it as a barometer of the overall economic health of the country.
in June, one U.S. dollar was worth about 490 pesos. Two months later, one U.S. dollar is worth more
than 700 pesos. Saya planned her shoe shopping, knowing her dollars were only going to go up in value. For me, I bought like two pairs so that I can practice and compete right off the bat, like I said as soon as I got here. But I saved my shopping for the very end. We're going to go visit the shoe seller because we want to know how a small business deals with a currency in freefall. But we start to see things immediately. Even before we get to Neotango,
like on our car ride, we get in, start chatting with the driver, his name is Juan Pablo, Guestpinga Gomez, and I ask him the question we plan to ask pretty much everyone we meet here.
“When the peso starts to get devalued, what do you have to do differently?”
I have to find another job. It will be complicated for Juan Pablo to find another job, because he's already got three. He's week and Uber driving selling Natura products, which are kind of like a mom, but from Brazil, and then there is his main job. I work with you, you probably know these brands that I'm going to tell you. Orio? Orio? Orio? Meca? I know Melca. I know Melca bars. I want to be them. Okay, what do you do for them?
I want to be a customer service. So if I have a complaint about my Oreo, I can also call you. Who has complaints about Oreos? I mean, come on, what a cookie. Also turns out, not a bad job. Thankfully, I am working in a good company, so like the inflation and stuff is not so hard for me. There are other people that are suffering more or have been more trouble to get to the end of the month. Sia is listening to all this, and she gets stuck on one inflation means if you have a regular job and paycheck.
She jumps in with a question. Does Oreos also adjust your salary based on inflation? Yes, because inflation is like 10%. He's talking about monthly inflation. In August, it was over 12%. They increase our salary at least three times per year. This is wild to me.
Inflation is so ordinary here, many employers promise regular raises. Otherwise, their workers standard of living would just drop and drop and drop. Getting a raise two or three times a year, it's pretty normal. Not just if you work for a big company, it works this way for a lot of government employees too. Which is unsustainable.
The government is essentially printing money to fund those raises. And printing money, that causes more inflation. We pull up to the address. Does it look open? Yes. It's open.
Yeah, amazing. We say goodbye to Juan Pablo, and Sia Erika and I walk up to a very, she-she boutique. We get buzzed in, and there are shelves and shelves of strappy high heels.
“And not only are they three inches high, Sia reveals a tango secret.”
For tango shoes, I have to buy shoes, two sizes smaller than what I actually wear. Why? Because it's supposed to be tighter than regular shoes. Because it's supposed to be like an extension of your foot. So it's actually really painful in the beginning.
And then they kind of open up a little bit.
Yeah, always shoes that are too small for your feet.
It's going to be painful. Good boy. I still can't get over that. Sia finds what she's looking for and goes up to pay. How much is it going to cost?
$1.69. $69? Okay, and what would it be in pesos? $49,000 pesos. Okay.
$49,000 pesos.
“In a country where the largest denomination is 2,000 pesos,”
people sometimes end up walking around with very, very large stacks of bills, just to buy regular things, like a pair of shoes. And businesses sometimes have stashes of different currencies on hand. Like Juan Pablo Veganotti, the guy selling us the shoes. Would he accept dollars and pesos?
Yes. Tea. Okay, let's do this. Yeah, it would. Okay, and euros.
And what would it be? He has dollars and euros in addition to pesos, because the store caters to both a local crowd and an international one. But this business still has a lot to contend with because of the peso. The shoes they sell are assembled in Argentina,
but some of the materials they're made with are imported. So if those imported materials stay the same price as the peso falls in value, they become more expensive. And that means Nielthango has to raise their shoe prices. How often is the price changing?
Ultimately, for the less, one out of four months.
He says lately, at least once a month. And in two weeks, three places.
You had to change the price three times in the last two weeks.
Yes.
“And you were changing it to go up or to go down,”
cambiándolo para que lo preso bang. No. No. siempre para abajo. siempre para arriba.
siempre. nunca para abajo.
Prices here, he says, always go up, never down.
Now, inflation has been a problem in Argentina for a long time. So his store is used to raising prices. But in August, the peso really took a hit. It happened after this far right, presidential candidate. Have you ever met?
Unexpectedly, it came out ahead in a primary election. People freaked out. There was a run on dollars. The peso got devalued. And inflation spiked.
When that happened, some store owners just stopped selling their stuff. It was too chaotic. They had no idea what price to charge. And that is what led Newtango to raise their prices three times in the last two weeks.
Si ales es asúta venir y que salga un valor.
Talking about how much the peso has fallen recently. Juan Pablo says that sometimes it's scary to have one value come out and then it changes the next week. And then the next week. He goes on to say it's surprising.
“He makes a big gesture like, what are you going to do, man?”
This, we've come to learn, is a very Argentinian response. People are sort of like, it's Argentina. We're used to it. [MUSIC PLAYING] Amanda Ranchic and Erika Barras from 2023.
As they mentioned, they're tripped to Argentina coincided with the run up to a presidential election there. That far right candidate that they mentioned, haviamile, eventually won. Malay had vowed to slash the budget in Argentina.
Even appeared on stage with a chainsaw to demonstrate how harsh he would be. He said the peso had become hopeless and talked about replacing the peso with the American dollar. Literal American money circulating in Argentina. You've heard how frustrated Argentines were with their economy.
They wanted something dramatic and they gave Malay a shot. We'll talk with our professor about how it's working after the break. [MUSIC PLAYING] The working class. It's a term politician to throw around a lot these days,
but do we know what it actually means? Midterm elections are coming up. And on it's been a minute, we discuss who these candidates are really talking about. Watch the full it's been a minute episode on YouTube or listen in the MPR app or wherever you get your podcasts.
[MUSIC PLAYING] All right, everyone. phones down, pencils ready, the bell is about to ring so we're going to hurry up and get our lessons from Argentina. The story we've been telling is not just a sad song, like a tango.
It's a demonstration about how something that might seem obscure, like exchange rates, can really reach into all of our lives every single day. Here in 2026, in Argentina, President Javier Malay has slowed inflation. Big news. Prices are still going up sure, but at only around 30% a year.
That number would get you booted out of office in the US, but it is relatively low inflation for Argentina. The way Malay did it, though, was divisive. He radically cut the government, and that was painful for a lot of people. Massive layoffs, businesses closed.
President Malay also got rid of many of the restrictions on buying and selling dollars. Rather than try to keep the peso artificially strong, you let the value go down. The government kept some control over the official exchange rate, a floor, and a ceiling.
But a lot of the value of the peso is now controlled by supply and demand. Let's welcome back our professor one last time, Sebastian Galiani. Hey, Sebastian. Hey, nice to be here. So you saw in this story how the shoe store had to keep changing prices.
Economists have a term for this. They call it menu costs, which comes from the world of restaurants, like us, where a huge pain if you had to print a new menu every time prices change. But this is menu costs for the entire economy.
“What's the practical effect of having to change your price tags all the time?”
Well, there are many practical effects. I think the one that is really, really bad for the economy is that this destroys competition, because I think that different stores may want to compete by offering lower prices.
But the problem is that for that, customers need to know,
okay, this store has a lower price than that store. But if prices change every day, that's true one day, that's not true another day. So those incentive to compete through prices are very distorted. And I think that's very bad. And if you're a business that imports what they sell, like shoes,
I imagine that sometimes you stop carrying products all together. It is impossible to buy shoes from China one week.
If you don't even know if you can make a profit on them the next week.
One of the things that have been highly volatile,
“agonomy system, many markets this up here.”
It's interesting, so many of the Argentines we heard from today shrug their shoulders and said, "Uh, what are you going to do about it?" But eventually, they did do something about it. They elected this libertarian economist, Havir Malay, to the presidency. And he promised shock therapy.
And the inflation rate did come down. I mentioned how you loosen the restrictions on the exchange rates.
But what else did you do that was crucial?
God, the fiscal deficit, and the stock, basically, bringing the money to finance the deficit. Stopped, printing money. The economic term for what Malay did is austerity. That is, he cut government programs, government employment,
government government pay, government subsidies. And at first, this had a really dramatic effect. The country slipped deeper into recession, unemployment shot up. But since he started doing it, things have stabilized.
“I think the unemployment rate in Argentina right now is between seven and eight percent, not the worst.”
So the changes were dramatic, but the economy seems better than it has been. Yes.
And in Paris, because inflation is also a tax, right?
There's inflation tax that people pay. And when you cut inflation, you are giving that tax back to society. So it's not as hard as it seems. If you were doing the same fiscal assessment at an inflation rate that is five percent or 10, that will be much, much harder hit in the population, yes.
So you're saying that because inflation was so high and it's so distorted everything in the economy, it also gave Malay room to make these drastic changes. There was one drastic change that Malay has not done yet. And that was to get rid of the peso altogether and use the American dollar as the currency for the whole country. Which does solve all those exchange rate problems if everyone is using the dollar.
But it hasn't tried it yet. Like will he do this? Is this the final thing that can stabilize Argentina? No, I think that's not a good idea because you lose all the flexibility when you have real shocks. And real shocks happen in this world. We are in a period in where the world is reshaping.
It's new war or there because of the rise of China. And the United States not being any more the sole superpower. And in that war, the last thing you want to do is to lose real-est change flexibility. So the lesson we've learned today is that flexibility is good. Volatility is bad. Yeah.
We're asking all of our professors this season to offer some advice from their country that we can use back in the United States. This is hard with Argentina because it is such a unique situation. But professor, what lesson can we learn from all of this?
“I think cutting the fiscal deficit is key in the United States.”
United States is running very large fiscal deficit. And this is something that is very bad for the superpower. Because the superpower has to have again fiscal flexibility. Physical space if you have to solve a crisis in Iran or in Taiwan. And it can be just, we can't be the superpower because we cannot sell our bonds.
That's where you stop being for sure the superpower. So Argentina waited until it was a real crisis before they cut their deficit. Yeah. Your saying to me is don't wait. Don't wait until your inflation is 30% or 40% of your 100% of your year before you do the right thing. Right. You say you have these two principles.
Right? Volatility is bad flexibility is good.
And the third one is don't wait the market to make their assessment.
So do it while you could do it in an orderly way. Yeah. Okay students, who we have covered a lot of ground today. We're just going to remind you of the concepts that might be on the test at the end of the semester. Yes, we have a test. Yes, you can get it to Ploma. We talked about the impacts of volatility, how hard it is to run a business when you can't
predict even basic things about what will happen next month, like the value of the money in your savings account. We also discussed capital controls, which is what a country just passes laws to restrict money going into and out of the country trying to stabilize things and usually it doesn't work. Another way to try to combat inflation is austerity. When a government dramatically cuts its spending, still remains to be seen if this is the answer
for Argentina. I want to thank our professor today, Sebastian Galiani, who teaches economics at Tulane University, and as we learned, advised Lola Palusa. Thanks so much for our Argentinian lesson. It was a pleasure.
I'm going to tell you your story about Argentina.
questions and economics. Like, what is money? Anyway, is it a collective delusion?
“We did write a book with the answers to that question. It's called planet money, a guide to the”
economic forces that shake your life. And hey, if you live somewhere that is trying out a new economic idea or habit, the rest of the world should know about, perhaps your country uses many
different principles. Maybe you had a government that actually fixed inflation. Get in touch with
us and tell us about an idea the world should know about. Our email address is planet money at npr.org and put summer school in the subject. We might use your idea on our final episode. Summer school is produced by Sophia Polisa Kai and Skylar Swenson, it's edited by Alex Goldmark, in fact checked by CRY's. The show is engineered by Jimmy Killing.
“I'm Robert Smith, also the host of a new podcast called Business History. Guess what it's about?”
Look it up. This is npr. Thanks for listening. Phew, we've been around the world in back. I hope you haven't lost any of your luggage. Next up we're heading over to South Korea on our planet money world tour. Our question of our stop there will be how do countries move up the value chain. Next up on planet money summer school world tour. episodes come out every Wednesday.
The midterms are coming and that means the new cycle which is already in tense is about to get more intense this fall. So this summer is a perfect time to make sure your new diet is calibrated.
I'm Leyla Faldon on up first. We unpack the three biggest stories every morning so you can stay
informed and get on with your day in less than 15 minutes. Follow or subscribe to up first today wherever you get your podcasts. I'm Jesse Farn. After a really good show for a cute one something. On Bullseye, rapper Isaiah Rashad on how we wind down after a night on stage
“now that he's in his 30s. So it's like it's hard not to celebrate will. I think I'm going to”
get a salad. Self-care is important. That's Bullseye. Find us in the NPR app at maximum fund.org or wherever you get podcasts.
