Argentina has experienced multiple currency crises and capital controls over the past two decades, from the 2001-2002 default and corralito to the subsequent repeated depreciations and inflation spirals during the Kirchner, Macri, and Fernández administrations. The peso has long lost its store of value function, with residents generally turning to dollar cash and later stablecoins.

The Milei government has attempted to rebuild credibility since the end of 2023 through fiscal tightening, subsidy reductions, and exchange rate adjustments. Inflation has fallen from extremely high levels, but the nominal exchange rate is still on a path of gradual depreciation, motivated by the need to stabilize finances and reserves before gradually easing controls to avoid a repeat of past collapses caused by premature liberalization.

Similar to the long-term overissuance paths of the Venezuelan bolívar or Zimbabwean dollar, or the rapid depreciation of the Turkish lira in recent years; Argentina is currently in a phase of attempting stability after a crisis, transitioning from a currency plagued by hyperinflation to one trying to rebuild trust.

This fundamentally relates to regulatory and monetary system changes: long-term fiscal deficit monetization destroys the credit of the local currency. The mechanism is that when the central bank becomes a tool for fiscal financing, currency depreciation becomes an inevitable result, forcing capital to seek alternative stores of value.

ABAB News · Law of Cognition

The endpoint of currency overissuance is zero credit
When the local currency loses its store of value function, hard currency becomes a necessity
Stability after a crisis often still accompanies nominal depreciation