Austrian economist Philip Bagus joins to discuss Milei's Argentina, the challenges of libertarian politics, the role of IMF and World Bank, advantages of holding Bitcoin, and the potential impact of Bitcoin in Argentina.
Javier Milei, an anarcho-capitalist, won the argentinian election and plans to push for deregulation and reduction in the size of the Argentinian state.
Milei aims to dollarize Argentina's economy by getting rid of the Central Bank, but securing a dollar loan from the IMF is a challenge.
Deregulation in industries such as airlines is a priority for Milei, who believes in moving towards a free market system to stimulate growth and innovation.
Milei faces pressure and restrictions, including from the IMF, but remains committed to reducing the size of the Argentine state and pushing for economic reforms.
Deep dives
Javier Milei's entrance into politics as a libertarian
Javier Milei, an argentinian professor turned politician, has shocked many by winning the argentinian election despite his outspoken libertarian views. Milei, a disciple of economist Jesus Huerta de Soto, is known for his eccentric style and provocative rhetoric. He went into politics in order to fight against statism and socialism and spread the ideas of liberty. While Milei faces challenges as he does not have a parliamentary majority, he aims to push for deregulation and reduction in the size of the Argentinian state.
The potential for de-dollarization and central bank abolition
Milei plans to get rid of the Central Bank of Argentina and dollarize the country's economy. He sees dollarization as a step towards freeing the currency market and preventing hyperinflation. However, achieving this goal comes with challenges. Milei needs to secure a dollar loan, most likely from the IMF, in order to exchange liabilities and ultimately close the Central Bank. While de-dollarization may face political and economic obstacles, it is a key component of Milei's vision for Argentina's future.
The importance of liberalizing industries and balancing the budget
Milei has emphasized the need for deregulation in industries such as airlines to stimulate growth and innovation. He believes in moving towards a free market system to unleash the potential of the private sector. While Milei's plans also involve balancing the budget, it is crucial to note that a balanced budget alone does not guarantee economic liberty. The focus should be on reducing government spending and intervention in the economy, rather than simply achieving fiscal balance.
Concerns and compromises in Milei's political approach
Milei's willingness to compromise, such as raising export taxes, has raised concerns among libertarians. While he faces pressure and restrictions from various groups, including the IMF, Milei is committed to pushing for reforms and reducing the size of the Argentine state. It remains to be seen whether his efforts will succeed, but many libertarians and supporters hope that Milei can bring about significant change and inspire others in the pursuit of economic freedom.
The Real Bills Doctrine and its Critique
In this podcast episode, the Real Bills Doctrine is discussed, which argues that fractional reserve banking based on the discount of real bills is beneficial to the economy. This theory suggests that fractional reserve banking is only problematic when it involves loans for non-productive purposes, such as mortgages. The key idea is that real bills, backed by real goods in the process of being marketed, provide the necessary saving to support fractional reserve banking. However, the critique of Juan Ramon Rallo and Philip Bagas challenges this view and emphasizes the importance of genuine savings for credit expansion to be sustainable.
The Concerns with Monetizing Producer Goods
Monetizing producer goods, as advocated by the Real Bills Doctrine, is debated, with a focus on the potential distortions it creates in the economy. The argument highlights that turning producer goods into money may lead to the overextension of credit and the misallocation of resources. It draws parallels between this approach and other instances of monetizing non-monetary assets, such as the monetization of government debt through quantitative easing. The debaters express skepticism about the sustainability of this approach, particularly in the absence of government privileges or central bank interventions.
The Need for a Free Market Analysis
The podcast also delves into the role of a truly free market in determining the fate of fractional reserve banking. While there are differences in the views presented, there is a consensus that fractional reserve banking could not survive in a genuinely free market. The absence of legal privileges and government interventions would likely result in the collapse of fractional reserve banking, either through bank failures or public discounting of bank liabilities. The discussion also extends to the potential role of Bitcoin as an illustration of the unsustainability of fractional reserve banking in the absence of monopoly control or bailouts.
Against all odds, the new president of Argentina is an anarcho-capitalist who quotes Mises and Rothbard. Austrian economist Philip Bagus knows Milei well and joins us to discuss what his presidency will look like, if he can turn Argentina around, dollarization, and the IMF's continued role in the country.
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