Imagine holding savings in your bank account that lost 55 percent of its value over the past year. Would you feel frustrated? Would you consider moving your assets into another currency?
This was the strategy many citizens in Argentina opted for, facing an official inflation rate of 55 percent. However, a dramatic shift occurred on September 2, when President Mauricio Macri implemented capital controls aimed at safeguarding the central bank’s foreign exchange reserves and stabilizing the peso. What led to this drastic decision?
Just fifteen months prior, Macri secured the largest bailout in the history of the International Monetary Fund. Now, however, Argentina is deferring payments to its creditors and is on the brink of its third sovereign default this century. Additionally, it looks likely that Macri’s Peronist rival, Alberto Fernández, will take over in the upcoming election in October.
For Macri and the people of Argentina, a difficult lesson is being learned: debt issues cannot be resolved by accruing more debt. Ultimately, when a currency fails, you are left with two undesirable options: inflation or default. With the recent capital control measures, Macri is inadvertently embracing both. Continue reading
Every day brings new examples of baffling confusion. Ideas muddied by misguided perspectives emerge like foul sludge from stagnant waters. Regardless of our desire to distance ourselves from this chaos, we are often drawn into the fray.
In today’s world, individuals akin to John Locke—who value truth for its own sake—are increasingly rare. From America’s academic institutions, a generation with muddled understandings is emerging, and unfortunately, many will pass the costs of these misunderstandings onto us.
Consider the case of Andy Vila, a 21-year-old who fled Cuba with his parents to Miami in 2004, receiving asylum and later citizenship. Ironically, the socialism he escaped has become a cornerstone of his political activism.
The belief that a large government can redistribute resources, as Marx famously stated, “from each according to his ability, to each according to his needs,” is gaining traction among America’s youth. Continue reading
The virtues of debt instruments that yield negative returns seem elusive. It’s clear that when bond yields decline, bond prices elevate, offering investors some capital appreciation. Yet when this appreciation arises from negative yields, it raises fundamental concerns about the value of that capital.
Traditionally, capital markets focus on lenders purchasing debt instruments—like bonds—at yields that reflect the risk of default over a specified period. The acceptance of negative yields genuinely undermines the principles upon which capital markets are built. In fact, negative interest rates threaten the very foundation of banking as we know it.
If banks are unable to charge interest to account for the risks of potential loan defaults, how can they extend loans profitably? If lending can only occur at a loss, what incentive remains for banks to engage in this practice? Without a profit motive, the system’s purpose is called into question. Continue reading
One of the striking contradictions of modern American life is the disparity between the economic data provided by Washington and the reality experienced by everyday citizens. Simply put, the numbers just do not add up. Moreover, the prevailing narratives are so far removed from reality that they verge on the absurd.
The Bureau of Labor Statistics (BLS) states that the unemployment rate stands at only 3.7 percent. The BLS also reports a price inflation rate, as determined by the consumer price index (CPI), of 1.8 percent. Yet, in reality, urban streets are filled with tents, and panhandlers often grumble if you only spare them a dollar.
Furthermore, individuals of sound judgment and good intentions are accumulating debt at unprecedented rates. Estimates indicate that mortgage debt in the U.S. has recently ascended to over $9.4 trillion, surpassing the previous 2008 peak of $9.3 trillion—marked just as the credit market began to falter.
Total household debt across America, including mortgages and student loans, stands at around $14 trillion, a staggering $1 trillion more than in 2008. Additionally, credit card debt has also surged past the peak seen in 2008, exceeding $1 trillion. Continue reading
This collection of articles sheds light on the economic challenges and puzzling realities faced in today’s world. Each piece underscores the impact of fiscal policies, societal attitudes toward government roles, and the inconsistencies between reported data and lived experience. In a landscape marked by confusion and distress, critical thought and clear communication remain crucial for understanding these complex issues.
