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A one thousand Argentine peso bill sits on top of several one hundred U.S. dollar bills
Argentina on Monday unveiled new emergency measures to fight its 109% inflation rate and support the ailing peso amid rapidly dwindling foreign currency reserves and growing fears of a devaluation.
But the more the government tries to prop up the peso with currency controls and to tame rising prices with massive interest rate hikes, the more it'll bleed Benjamins when it most needs them. A blunt instrument would be to devalue the peso, which in one fell swoop would kill inflation but also wipe out the value of people's savings.
So, why not just ditch the national currency and replace it with the US dollar? This is often referred to as a "zombie" economic idea because it gets revived in times of economic uncertainty. Right now it's being pushed by Javier Milei, a libertarian populist who's leading the polls ahead of the presidential election in October.
The problem is that even if the current government wanted to do this, which it does not, it really can't dollarize the economy because, well, it doesn't have enough dollars. But Milei doesn't seem to care, and if one thing is certain with Argentina, it's that the economy can always get worse.