Here’s What I Learned From Living Through Massive Inflation In Argentina And The 1970s United States

Here’s What I Learned From Living Through Massive Inflation In Argentina And The 1970s United States

Economists almost universally agree on one thing, which we personally experienced in Argentina. If you indiscriminately print money, you will end up with hyperinflation.
Richard Dean Young
By

The high inflation period the United States experienced under President Jimmy Carter is a time folks with a few years under their belts want to forget. After living overseas for several years, my family returned to the United States at the height of the Carter administration mess.

I needed a job, but there were no jobs available, and for the first time in my life I was told I was too qualified. I figured employers either didn’t want to pay me what I was worth or thought I would be too sassy with all my “knowledge.”

Without close family willing and ready to help, our three small children, born in India and Nepal, could have starved. I also remember, for the first time in my life, buying a compact car (used, of course) because gas prices had gone through the roof, if you could find a station that would pump any.

Imagine our surprise just a few years later when we arrived in Argentina and ran into hyperinflation even worse than the Carter catastrophe. We were somewhat sheltered because we received a moderate monthly salary in U.S. dollars. But even the use of American dollars could turn out to be a disadvantage, because most governments fighting hyperinflation try to use the exchange rate to keep down their own currency. For more than 35 years in South America, we lived under regimes where our U.S. dollars were usually worth about half of their real value because of those policies.

Every now and then, the forces of hyperinflation would become too massive to be defeated by the juggling of economic ministers who didn’t want to deal with real structural problems. The mess would finally explode into a huge devaluation of the local currency, with ministers and even presidents resigning. The country would be left with economic shambles, and people would be left holding currency that yesterday was worth 50 or 100 times more than today.

President Harry Truman purportedly said that if all the economists in the world were lined up, each would be pointing in a different direction. Economics, based on math and numbers, seems like it would be a simple matter to work out. Not so in the real world, where political agendas often carry more weight than reality.

Despite radically different economic theories, economists almost universally agree on one thing, which we personally experienced in Argentina and other South American nations. If you indiscriminately print money, you will end up with hyperinflation.

But back in the 1980s and ’90s in South America, printing money was considered the easy way to resolve economic problems. Even today, the Biden administration — cavalierly proposing extra trillions in spending — has its own set of quasi-economists reassuring each other, “A little inflation will do us good.” Last week, Treasury Secretary Janet Yellen suggested, “If we ended up with a slightly higher interest rate environment it would actually be a plus.”

That’s the same language we heard during Argentina’s launch into inflation whitewater, when it became the first nation to surpass the wild inflationary percentages of Germany’s post-World War I Weimar Republic. I once had to come up with cash to purchase a car, and I literally could have used a wheelbarrow for transporting my payment.

I stood in long lines at the bank trying to figure out what portions of my hourly-devaluating pesos should be put in one-week, two-week, or three-week money market notes. The poor soul who was on a fixed income (or, unlike me, had no dollar backup) would spend those same anguished hours in line trying to figure out how to make her limited income somehow stretch till the end of the month, an impossible task.

If you dallied a few extra hours, your retirement income or monthly salary was going to lose even more. Retirees realized their monthly pension checks would only last about a day.

Exchange rates varied wildly. A friend sold his rotisserie chicken kiosk in Buenos Aires for $400,000 and moved to Hawaii; a month later, his kiosk was back to being worth about $20,000. But not everyone could take advantage of the exchange rates, and the whole country spiraled downhill economically and socially. Violence on the streets was just a symptom of an overall loss of faith in the governing class.

Some have asked us how to survive under an inflation regime like that. Our answers are at best partial and certainly humble, after seeing so many friends go through excruciating financial difficulties. We were mostly at a loss trying to help resolve their problems, which went on for years.

My first observation about inflation survival is that strong family groups best navigated the havoc of hyperinflation in Argentina. Those who truly love you and are interested in your welfare are much better at making sure you don’t starve than any government.

Some people recommend having a hedge in gold or other commodities, but for the majority of working folks such hedges are essentially a wish, not a reality. The best hedge is a close circle of friends and family determined to help.

We often saw what could be called “forced downsizing,” when people lost their cars and homes. Those who moved quickly to reduce their overall expenses were best equipped to adjust in a constantly shifting financial environment. It’s always a much easier experience to sell your home than to have it taken or foreclosed.

Downsizing in any hyperinflation period includes narrowing your daily needs like food, clothing, and utilities. When your income is cut by 50 percent or more, it concentrates your energy on simply making it through the month and keeping your family fed. And when you are already mentally in a survival mode, having to reduce expenses even further is a brutal challenge.

Unfortunately, some people unrealistically try to extend a lifestyle that ends in bankruptcy or worse. Perhaps the hardest realities to face were the mental anguish and actual mental illnesses that grew out of the financial crisis.

My greatest recommendation for preparing for hyperinflation is to invest in your mental health. Counseling (while it can be afforded), pastoral help for those of faith, and the conscious cultivation of healthy relationships will all help cushion the blow of economic disaster.

Worn down by the COVID-19 crisis and extended lockdowns this past year, many have felt like they’re going through a wartime period. Even more closely, the analogy fits the chaos and trauma of hyperinflation, even if it never resurfaces in the United States.

Hyperinflation imposes drastic social and personal turmoil on families. It’s horrifying to see politicians today so blithely plan on expanding the money supply to temporarily float their profligate spending. Today’s rosy predictions of inflation’s supposed benefits fly in the face of all economic history.

Richard Dean Young is a retired minister, seminary professor, and author who served more than 42 years in South Asia and South America. He is the author of the true history book, “The Last of the Apaches.”

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