The most exciting thing in the world of money and politics, right now, is the remarkable story of Javier Milei in Argentina. He brandished a chainsaw at campaign events, pledging to use it on the government. Now, against all odds, he is El Presidente…and he’s cutting the deadwood.
As my colleague Joel Bowman points out, within the first 48 hours in office, Milei has cut the number of “undersecretaries” from 182 to 140; cut the number of department chiefs from 106 to 54; cut the number of ministries from 18 to 9; and cut all superfluous ministerial expenses (staff cell phones, drivers, travel accounts, etc).
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Yet more wood chips are flying, according to Bloomberg. He has devalued the peso by 54% and introduced a “crawling peg” that weakens by 2% per month, and slashed subsidies and welfare payments. Milei needs to move fast. Argentina has run out of money.
He’s something else altogether. He’s actually trying to reduce the power of a bankrupt government. Is it possible? With so many powerful special interests against him? We will see.
What went wrong? How come the richest people in the world, in what should have been the richest period in their history – 1980-2020 – made so little progress, and actually slipped backwards by most measures?
The US is $34trn in debt, each dollar a mark of shame.
In our businesses and our private lives, pruning goes on all the time. Businesses go belly up. Investments fail. People are fired. Wives file for divorce. Customers go over to the competitor. People die. The sound of chainsaws is never far away.
In a sense, the whole idea behind Fed policies of the last 20+ years was to keep the chainsaws off the job. The dead wood was propped up by ultra-low interest rates; bad ideas were financed with below-inflation loans; no-hope “investments” drew in billions in EZ money. There was no discipline, no corrections. With phoney prices, often there was no way to tell what was a good use of money and what wasn’t.
The most telling artefact of the period 1980-2020 is the nation’s $34trn in debt. Each dollar is a mark of shame.
Baby boomers wanted “something for nothing”. They got it by leaving their sons and daughters the bill – giving them nothing for something. Younger generations will pay, probably for their entire lives, and probably in the form of financial chaos and higher prices, for goods and services delivered to their elders. Could not the richest people ever in the history of the world pay their own way? Did they think their own plans, goals and Christmas lists were so important that other people and their own children should pay for them?
The US needs a good chainsaw too.
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