What’s of value right when the economy goes to hell?

As Greece and Italy go to hell in a hand basket, down here in the Banana Republic of Argentina we’re seeing a déjà vu of the 2001 collapse. The government imposed a “green” corralito by which through one excuse or another the American currency is being unofficially but effectively banned. The US Dollar was the way in which Argentines protected their savings from the even more volatile funny money that is the Argentine peso. With the new restrictions, before buying dollars you have to be authorized by the AFIP, the Argentine version of the IRS. Through a complex system that not even themselves understand, they check how much money you earn, what are your expenses, how much you may have saved based on that, and only then do they somewhat estimate what you should be allowed to buy. There’s people that own big companies that aren’t even allowed 50 USD.

To close the corralito even further the banks themselves came up with their own set of rules for the purchase of dollars, simply making it impossible to buy the American currency. The only way to buy dollars then is the black market where the dollar reaches 5.50 or 6 pesos per dollar, against the official rate of 4.26 pesos per dollar. In the black market caves and “arbolitos” (arbolito=tree, named based on them selling/buying the green USD) there’s been several reports of SIDE agents (our CIA) closing them down, and arresting both customers and owners of the joints. Why the arrests aren’t done by the police, I have no idea. This would be the time to stay put and wait until things settle before trying to buy USD.

So yes, these are interesting times to say the least. Lots of rumors, lots of desperate people out there.  People that were just about to travel and needed dollars but cant buy them, people about to close business deals in dollars but cant get the money either. USD accounts being closed, Pesos accounts being closed as well out of fear and the too vivid ghost of 2001. Interest rates have doubled in banks in the last few days and everyone is just waiting, and I guess that the key word in today’s article. Waiting, staying put to see what happens. What happens when the economy is about to collapse, or just collapsed? Everyone waits. I saw the exact same thing 10 years ago. No one buys anything or sells anything unless they really have to.

What’s on high demand during times like these?? Nothing.  Nothing at all. All the survival BS about this and that “being worth its weight in gold!!” its proven yet again to be false. At least during the peak, the initial days, everyone stays put.

The food you buy at the supermarket, you go to work and school, pay your bills, but other than that you don’t spend a buck unless you have to. The only thing I do notice is that regarding imports, if someone needs something that was imported in USD and they can buy it in pesos, they do so quickly speculating the USD will keep going up in price. Keep that in mind and close deals quickly if you think a devaluation would work against you. A tell tale of what happened was seen a few months ago when imports stopped rolling in.

Other than that what people really want is dollars, the only way in which you can escape the peso. Gold and silver being marketed in USD are also being restricted. I posted about this being a good way to save what you had in an Argentine forum, I hope at least some people took advantage of that loophole during the couple days that it lasted.

The lesson here is simple: For Argentina its USD, that’s what we’ve always gone to during complicated times and that’s what the government always restricted right before everything goes to hell. For US its going to be gold and silver, that your version of what the dollar means for us. When the government starts looking for ways to directly or most likely, indirectly restrict the purchase and sale of precious metals, that’s when you know the S is just about to hit the fan.

The Argentine government just created a new department, specifically to hunt down “financial criminals”, you know, old ladies that try to buy a Benjamin or two.

Little lessons from Argentina boys and girls, please don’t EVER allow this sort of thing to happen in your country.

FerFAL


Comments

What’s of value right when the economy goes to hell? — 20 Comments

  1. With the Corralito, can you buy currency that is not American dollars? I won’t work as well for business, but maybe some Brazilian or Chilean currency might be easier to buy, as a hedge against the Peso.
    I think corralitos can end up being self-fulfilling prophecies and just shows how little economic sense Kirchner must have. Because, if the fear is that Argentinians are buying “too many” dollars from the central and selling the peso. Then this is like pouring gasoline on a fire. Even more people are trying to get rid of their pesos, making the problem worse. It turns into a panic, It’s Macroeconomics 101.

      • When Kirchner goes overseas on her little trips to the UN or the US, no doubt she pays for the penthouse suite at the Waldorf Astoria in Peso’s as they must clearly be so valuable. I wonder how the government employees get their foreign currency for their needed trips abroad.

  2. I’m sorry FerFAL. May God bless you and keep you! Thank you for all your advice and helping us to see what we are also in for. I thought I was prepared for almost anything until I understood the risk of financial collapse. Thanks for educating me. May God grant you peace and strength for these trying times.

    • Ecuador IS a banana republic…it make Argentina look civilized…during Airline training classes, in Miami, one of the students was talking to his wife during break and she was describing to him a highway hijacking two cars ahead of her where the driver was shot during a traffic stop, was dragged out dead by the hijacker who then drove off…LIVE on cell phone!
      Stay away from Ecuador and Venezuela, who is as bad…

      • That was happening in Guayaquil, Ecuador…”No honor amongst thieves”, seem to be these socialist countries’ motto…It got so bad that the sucre value went to zero and they had to use the US $ for ANY trade, even a loaf of bread…

        • I moved to the highlands of Ecuador in January. It cost less to live here than I paid for utilities alone in California. I feel completely safe here. There are places in Guayaquil and Quito that are not safe, just as there are places in Los Angeles, Chicago, Miami, etc. that are not safe. Overall, I feel like I have a Santa Barbara location for a $3 million less price tag. I can grow my own food year around, the people are friendly and helpful and I have more friends here than I ever did in the U.S. because I am not working 15 hours a day just to make ends meet. I’ll take living here any day.

      • That happens here too. During rush hours its especially dangerous becuase they go through all the cars that are unnable to move becuase of traffic and rob everyone, like a flash mob robbery, dozens of cars at a time. This happens pretty often in Panamericana.
        FerFAL

  3. When I was in grade school circa 1964 the US went off the gold standard. What resulted was the price of gold going from sixteen, then to thirty two, then sixty four and finally one hundred twenty eight dollars per ounce in just a few years. It’s cost has continued to climb. We were forbidden to legally own gold prior to and during the dollar collapse of the sixties.

    It has been stated that the value of gold per ounce reflects the value of the currency. Today it is around $1800 per ounce as I write this, or more than one hundred times it’s early sixty’s value thus reflecting the the US dollars decline in value since that time.

  4. Godspeed Ferfal, there are a lot of us across the world watching in horror, since destroying currencies are becoming quite fashionable. Hope you manage to ride through it this time as well.

    Thanks for a much needed blog, maybe even more so for those who haven’t lived through currency collapses (myself included)

  5. Pingback: MANDATORY READING | Dawn of a New Day

  6. These are scary times we live in. People have been reassured by the “plans” coming out regarding the Euro crisis. But the fact is that there is not enough wealth (not money) to back up up the debt created by a decade of spending wealth we don’t have, (debt), either in Europe or the USA. The picture looks increasingly grim as the global financial house of cards only needs a puff of wind for the collapse to begin.

  7. Anyone who trades fiat currency for another fiat currency is missing the point! Trade ALL paper assets for real, physical gold, silver, platinum, palladium, rhodium… and especially productive equipment and supplies that you operate to produce an endless stream of goods.

  8. The financial collapse will be very easy to deal with when considering the ensuing social collapse. The hungry and angry mobs roaming the streets searching for sustenance will be much more difficult to deal with. For those who are not prepared, they will become victims of the unruly gangs looking for anything of value to exchange for food. It’s gonna get damn nasty before it gets better.
    Good luck and may God bless us all.

  9. Pingback: An “End of America” warning you cannot afford to miss « InvestmentWatch

  10. Yes, I do believe the po po is about to hit the fan. I also must say that you should save your pocket change. (1) Cents before 1982 are copper (not copper coated zink)as in the 1982 to present. (2)Nickles 5c,dimes 10c,quarter 25c, half dollars 50c,& dollars 1.00 have nickle and copper in them. Both metals which are going up in value and cost the government more than face value to produce these coins. When the paper dollar crashes&burns at least these coins intrinsic value will be worth some. (3)Dimes,quarters,half dollars,& dollars 1964 and before are 90% silver. Kennedy half dollar 1965-1970 40% silver & Jefferson nickles 1942-1945 are 40% silver…I hope this helps youall…Good luck& God Bless…..Johnny Reb in Tennessee

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>