Argentina: A Case Study in How An Economy Collapses
by Chris Martenson and
Fernando “FerFAL” Aguirre
by Chris Martenson: Death
Welcome to another ChrisMartenson.com podcast. I am Chris Martenson
your host today as usual. Today were speaking with Fernando
FerFAL Aguirre author of Surviving
the Economic Collapse. FerFAL experienced the hyperinflationary
destruction of Argentinas economy in 2001 and has since dedicated
his professional career, like I have, to educating the public about
his experiences and observations of its lingering aftermath. Given
the rising concerns that we all have today about the future of fiat
currencies, our listeners are increasingly asking to hear from voices
that have firsthand experience with extreme currency devaluation,
what it means, how it actually feels, how it plays out. So were
very fortunate FerFAL is able to join us today from his home in
Argentina. Were going to be discussing the signs that preceded
the collapse in his country and what has defined the society since,
including smart moves to take if worried about a similar fate happened
in ones own country and how would you know where you are in
the story as it unfolds. So FerFAL, were so glad to have you
with us today.
Hi Chris. Thanks for having me here.
So take us back to that period leading up to the currency collapse
that you witnessed living in Argentina in 2001. You know: what were
the signs, what were peoples perceptions at the time about
how dire the situation could get, and what was the government saying
Well, the government as always says that nothing is going on and
that everything is fine. As you can come to expect by now, just
a few hours later you see the entire country go down and you will
be seeing high amounts of an unemployment and theres going
to be a good amount of social unrest. Unfortunately, many of these
things are already happening in the United States. So you are seeing
many of these signs right now.
What sort of signs?
Having the people living on the streets where it didnt happen
before. Inflation slowly going up. Theres small details. I
was talking with a friend yesterday of mine from the U.S.A. He was
telling me that something I had mentioned a few years ago about
sizes of items and products shrinking and changing the design. Its
all very well-campaigned with good marketing and such. Its
like were offering this new improved product but that new
improved product happens to be just a bit smaller than it used to
be at a slightly higher price. So all those little things, the way
in which they hide the inflation, they slowly creep it into your
So did the Argentinean government how were they hiding inflation?
through the official statistics claiming it was lower than
what people were experiencing or how did that play out?
Yes, at first hiding inflation as products get smaller but soon
enough thats just not enough either. So it starts going up
as well, noticeably so, and people see that their shopping cart
just isnt filling as much as it used to. Youre just
buying half of what you used to with the same amount of money; but
in the official statistics theyre saying that everything is
fine because they changed the way they measure inflation so as to
fit what they want to show you. So, if for example, take meat it has gone up 20 percent, they will just take into account specific
type of meat that is only found in one particular location so its
not very real, that statistic, but thats what they stick to.
Right, so a beef tongue in the outer reaches seems to be cheaper
today so well go with that something like that. So
it sounds like a pretty common story here which is the governments
obviously dont want to admit that inflation is high because
thats either a fiscal or a monetary failing or most likely
both. So they dont like to admit that plus theres a
lot of reasons why you want to keep inflation low in terms of being
able to say your economic growth is higher and keeping your pension
payments lower. There are a lot of reasons for that. So youre
saying that in the United States if we look around, we can already
see early signs that parallel what you saw in Argentina? We have
rising prices, shrinking packaging for certain things, maybe more
people on food stamps, historical records, maybe more people homeless
More people on social welfare all those things we saw as
well and its happening in U.S.A. as well unfortunately. Its
an already written story. We know what ends up happening. It may
have different variations and it may end up in an economic collapse
or not. Thats something that I personally prefer not to be
the one spreading that kind of you know what happens? Its
fear. Its not productive for people in general when preparing,
so Im not going to be saying that the economy in the U.S.
is going to be collapsed. All Im going to be saying is that
its going to be much worse than it already is right now and
people need to adjust to that different lifestyle.
Absolutely and I want to get to that really important point about
how fear can be demotivating. Lets get to that later. Lets
track this now. So how quickly did the collapse happen? You know,
what is a boiling frog situation and people woke up one day and
said whoa, how did we get here? or did it feel somehow
like the world changed overnight?
Its a bit of both. These things dont happen overnight.
You see them coming for years. As you see it in U.S.A. as well,
we saw it here as well and thats the reason why some of the
richest, most powerful elite manage to leave the country with more
than enough time. Some happen to do it more in a rush but most of
these guys that have the inside information manage to avoid having
their bank accounts frozen as we saw. So there are signs and it
is a bit of a boiling frog situation. The thing is eventually when
it cracks down its does so all of a sudden. All of a sudden, you
know, when the banks close thats when people go absolutely
ballistic because thats when they realize that their money
has been stolen from them or when inflation turns to hyperinflation
one day to the next. Thats when people see that even though
you didnt steal their money directly as it happened here with
the banks, youre stealing it through inflation as well. So
they just bought half of what they used to with the same amount
of money. Its in a way of stealing their labor, their savings.
Absolutely it is but it seems that few people can really diagnose
what it is and so somehow it feels like the easiest course of action.
So thats why we see it again and again historically speaking.
In my mind, I have no idea whats going to happen next or what
the future is going to hold but I do know how to spot risks when
they pile up and know that the more risks you pile up the greater
the chance of something happening. So from my perspective as I look
at the U.S., I see a lot of parallels with Argentina, some significant
differences too but some of the parallels for me are: weve
got basically a fiscal situation at the federal level thats
pretty much out of control. Theres a lot of spending. Nobody
wants to dial spending back. Its never a good time. Its
always an election year or about to be one or just was one. For
some reason its very difficult to do. So we have that going
on. Weve got monetary policy which by every measure is just
in insane territory at this point in time. And, a lot of structural
sort of deficits like we have a trade imbalance, a really big one.
Its 30, 40, 50 billion dollars a month thats constantly eroding
these are all things that I sort of see in parallel to Argentina.
How do you see them and are people who are ignoring those really
potentially ignoring a really big risk?
I think like you mentioned there are many of them.
Id say there are even more than some feel comfortable accepting.
Because some people like to think they are different especially
in the U.S.A.. Americans want to feel that they are different as
well, that they are slightly better than some of the rest of the
people. Why is this going to be happening in my country when this
only happened in South America or in this poor country? Those are
Europeans it happens to them but thats not going to
be allowed in U.S.A.--were not going to be allowing that.
Many people told me that before they got hit with this $300 billion
tax on the hard working American people they said it would never
happen but it did end up happening. My point here is that were
all more similar than we want to admit. These things that you mentioned
happened here exactly the same way out of control spending
especially through corruption, everything that was getting built
or spent or done in Argentina was costing ten times as much than
if you had gone and done it yourself on the private sector. So the
out-of-control spending is a typical thing that happens during these
Yeah and lets draw the parallel there because you know some
people maybe in America will be listening saying, oh well
that doesnt apply, because we dont have that kind
of corruption going on up here in America but whats the difference.
So if a defense contractor comes and puts a few bucks in a lobbyists
hands then gets a billed passed that results in some really, really
overpriced military hardware being bought how is that different
from what we might otherwise call corruption? I cant
its a rhetorical difference at best. In practice it looks
the same to me.
The textbook of what theyre doing is very similar, maybe you
could say exactly the same result within its variations but, as
you said, whats the difference between spending too much money
on a military contract that makes no sense than paying ten dollars
a brick for a school youre making in the south of Argentina?
Very little difference I cant find it. So its
a rhetorical difference. So the same thing though theres an
entrenched system which ends up driving a lot of unproductive spending
possibly by over spending in the case of buying ten dollar bricks
or an unneeded military contract of some kind or by spending way
too much on things that are actually malinvestments. You know the
country doesnt really need these things. They were decided
behind closed doors between a small number of people and so we get
them. Sometimes theyre good investments but often not really
the case. So here we are. Weve got a growing number of people
who fear that the U.S. and other developed countries so lets
expand this a little bit to other developed countries are
at risk of a currency collapse given the unsustainable debt levels
or this profligate money printing that we talked about before. What
are the similarities you see to pre-collapse Argentina that might
lend credence to those arguments?
Well, since you brought in other countries as well just look at
Spain right now. Its just about to go down. The situation
there its very bad. I have my parents and my brothers they
live there and there are so many of similarities especially where
the differences are cultural you know and just different such as
the language you speak. Thats enough to place some people
in a comfort level and think Yeah were not like that.
Were going to be doing better I think. Some people are
more pessimistic and they think its going to be worse but
its so much alike. You know I was watching on the news the
other day what was going on in Spain and they were advertising on
national television a job. There was a place where they were offering
job paying a thousand Euros a month and it was such a big news that
it was on TV. So that reminded me of the times when we had 25 percent
unemployment here and something as weird and as strange as a job
was newsworthy as well. So we have people that escaped from Argentina
during and after the 2001 collapse about 200,000 left to Spain and
theyre seeing that the exact same thing they saw in their
own country. Theyre seeing it happening there as well. In
the U.S.A. I know it changes from state to state. Some do better
than others but the unemployment situation is also just as bad as
it was here in Buenos Aires as well than some places.
Okay, so lets talk about then what it looks like when hyperinflation
sets in. How did that manifest itself in the life of the average
Argentinean, maybe with a timeline? Like how did this really play
out and what were the impacts?
Well, the first thing you see when this happens is that no one wants
to spend a single buck. No one wants to spend nothing at all because
they dont know whats going to be happening tomorrow
so everything just happens to freeze. With places such as supermarkets
and such you see the workers, employees, running around keeping
the price of products updated within the hour. I mentioned one time
I was buying myself one of these Home Depot equivalents in Argentina
and I was buying a few tools, and by the time I reached the cash
register it had gone up in price and I had to have a small argument
with the cash register lady and she ended up talking with the manager
and the manager said, well, he pays the price that he picked
it up at. So, you could actually go buy the product again
and see that they had just placed the sticker on top of the older
price. So there was this little pile of prices from that day and
if you peeled them away you could see how it had gone up in price
through the day.
Well, what about the availability of products as this is happening?
Were products still available? Did they just happen to be moving
in price very quickly or did certain things become unavailable?
Its an extremely complex situation but some of the things
that you might be interested in it happens to go up in price depending
on other currencies. For us it was the dollar, so it would go up
in dollars so thats why they had to change the stickers with
the different prices. Some companies decide not to send their products
to the outlets, to the stores, to supermarkets. They stay waiting
to see what happens with those prices because they dont want
to be selling at a price thats going to be half as much as
its going to be the next day. So they just prefer saying we dont
have any more left and we dont have any more sugar left; we
ran out of it. So they keep their stockpile and see if they can
sell it for a few more bucks the following day. Also, you have to
consider that while this happens the social situation is pretty
bad. You have lots of protesting, lots of rioting, and looting all
across the country. That lasted in Argentina for a couple of weeks.
It extended itself for more time in different locations depending
on what was going on in that particular region but the problem of
the social unrest and looting is also a factor to be considered
So in these events let me guess the poorest people
are probably impacted the most and then this reached into the middle
class and maybe even up a little further. The rich were probably
reasonably well-insulated. Is that right?
Yeah. The breaking point something that you might to keep
in mind the breaking point is when the middle class which
is in general all over the world, the middle class is the one that
makes things work because the more middle class you have the better
in general terms the country is, right? The more middle class you
have the better life standard for everyone, the more chances of
growth, the more fair it is. When you have lots of poor people,
little middle class and the very powerful and very rich elite, thats
the typical schematic of third world nations, right? In a prosperous
first world country you have a strong middle class. When that middle
class is being threatened or is being actually destroyed as we saw
here through the economy situation, through lots of purchasing value,
of their savings, of what they make every month when that
happens is when everything cracks down and thats when the
situation goes from slow boiling frog to sudden instant
collapse of society and everyone taking to the streets and protesting
and trashing the banks and such.
So whats the greatest risk here if you would say another country
youre looking at it and giving it an analysis and this countrys
going to face a currency collapse like what Argentina faced? Whats
the biggest risk for people living there? Is it just loss of investment
wealth? Are you actually concerned about violent crime and how that
might reemerge? Is it unemployment? What really drags people down
When you ask any Argentinean person what concerns them the most,
the first thing theyre going to be telling you is the crime
problem. And the second one is the financial problem. Those are
by far the top concerns the average Argentinean person has and I
think that eventually it will happen in the U.S.A., as well. I think
that five years from now or so youre going to be talking to
people and the thing thats going to be concerning them is
that, you know, Joe down the street he suffered a home invasion
and he got beaten up, maybe even got killed, all that kind of crime
that wasnt used to happen in the U.S.A in the good parts of
town. Its going to be one of the greatest concerns people
will have eventually.
And, of course,
the financial situation as well. If you look into what people are
worried about right now theyre worried about losing their
jobs not being able to put food on the table the next month. They
see that if they lose their jobs its not as easy as it used
to be to find another one as well. Thats terrible because
its very cold when you look at it in numbers but its
Im telling you its so much different when
it happens on a social level and you see that on the street . When
you see the people picking up garbage on the streets to eat. This
guy he sent me an e-mail about visiting Argentina and he
saw how it was here after visiting during the 70s. He said he was
surprised to see normal-looking people, relatively well-dressed
people eating off the junk bags in the street. Thats something
I saw myself and thats one of the things that impacted me
the most: seeing people that looked just like myself with their
kids, an entire family, a couple and two or three kids, eating around
a trash bag as if it were at my dinner table.
So this has reached up into the middle classes at this point in
time. Its been enormously destructive. So the process here
was what? So hyperinflation begins to set in, banks get closed,
the currency really gets devalued, and then unemployment follows.
Why does the unemployment follow in this story?
Unemployment follows because its very hard for people to keep
a business open as well. As you said before theres the government
is not helping. The government is insulating a different kind of
society, right. Theyre looking for a society where social
welfare is going to be the solution. That brings up taxes and government
expense. That means that the small business entrepreneur is getting
punished for his boldness in getting involved in a new business.
Its getting more expensive for him to stay in business. At
the same time with inflation going up supplies and materials and
wages as well, because wages also go up. If you dont do it
yourself the government starts forcing you to do so. So we see that
here as well. Here one of the greatest problems businessmen have
is keeping up with inflation but also with the unions that force
them to raise the wages so as to keep up with inflation. Its
basically a race to keep up with inflation that makes it very hard
for the honest entrepreneur, the business owner to stay afloat.
That causes more unemployment as well and its part of the problem.
And the more unemployment you get the probably the less money there
is to spend and circulate, even as prices are rising. Just it squeezes
The entire society ends up changing where people that used to be
middle class now become poor. Just think for a second what you would
be doing yourself if things went up 30 percent as of tomorrow. Maybe
youd be okay, right? Maybe youd say okay Im going
to be cutting some expenses so as to get by. Now after a month it
goes up 50 percent. What would you be doing then? What if after
a year it went up 100 percent? So you have to cut your expenses
to half. Eventually you reach a point where you cannot cut anything
else where your income just isnt enough to keep you in the
middle class. Youre now poor and youre now fighting
to put food on the table, right? Where people that dont manage
to succeed at that they become poor or they fall below the poverty
line where they dont have anything at all and they have to
basically scrounge around junk and eat out of the trash.
So the great reset here is that too many promises are made on a
number of dimensions and levels at some point and then those promises
have to be taken away and they get taken away through a process
of either outright default or inflation or sometimes both but in
some way or another the key warning sign here is to note: has my
country made promises it cant possibly keep? (in current dollar
terms if thats your currency, in current whatever currency
terms). So the key thing would be to ask, hey, do we have promises
here that we cant possibly meet under current arrangements
as we understand them? Yes, if thats true okay
no, were not going to meet those things. That means we just
have to figure out how those promises are not going to be kept.
Unfortunately, it looks very political, it looks like why are
we talking about politics? People have to understand that the greatest
key is understanding what the countrys going for. Is my country
going for a welfare state where everyone is kind of poor and the
government is the good daddy that gives you a few bucks so as to
stay afloat and survive? Is that going to be happening in my country
or is it looking to another direction? Is it looking for a different
direction where the middle class would be stronger, would be more
capable of fulfilling whatever they strive for? Is that my country
or is my country a socialist welfare state? Understanding that will
give you a great lead as to where youre going to be in ten
years from now.
And your assessment of the United States?
Unfortunately, its copying the exact same role model we follow.
That its a big country, big government that handouts to an
increasingly poor society unfortunately, you know what happens
when that occurs is that you need the poor people because if your
entire politician stance is that youll be the one fighting
for the poor, you need poor people. Because if not, no one elects
you into office, right? Whos going to be electing you if you
are the savior of the poor people if theres no poor people
anymore. So it sounds very drastic but it is exactly what happens.
They feed on its own. They need poor people to keep in power.
Right, so lets be clear. This is understanding the politics
of the situation. This is not partisanship, this is not casting
a dispersion in any one direction left to right, however you want
to look at that.
No, not at all because it all comes back to the same point no matter
where it is youre going left or right, unfortunately, so.
Yeah, so here we are. Your assessment is that the United States
is clearly in a direction of big government. Im a small business
owner up here and I can tell you that the burdens on small businesses
become only larger with every passing year. They never take any
laws off the books. The taxes never go down. These are the sorts
of things that, you know, ultimately the productive class has to
support a larger and larger weight and at some point that starts
to break in a hyper inflation or even a just highly inflationary
environment, is a great place to break more than a few backs in
the productive class. Is that how you see it?
Yep. Thats it.
Okay, so for the people who were there then are they really worried
about crime. And they really worried about their investment wealth.
And then unemployment was a big factor for the people who lost their
jobs. And, at 25 percent unemployment, you know, thats the
levels we experienced at the Great Depression. The U.S., allegedly
we may be close to that now if we count things differently in the
U.S. or how we used to. Its kind of murky but were
one of the key messages I work with here is were really actually
pretty far along in the narrative of this story if we bother to
step back and start to add up all the pieces that we see ranging
from the debt levels, the fiscal situation, the political gridlock,
the rising numbers of the dispossessed which are just staggering
at this point you know from the poor and its reaching up into the
middle classes now. So you would say of all these signposts, youve
seen them before.
Yes. Most of whats going on in the U.S.A. right now happened
in Argentina and unfortunately it makes an extremely clear road
map of whats going to be happening soon. Its going to
be happening different because I honestly doubt that theyre
going to be closing bank doors as they did here and bluntly stealing
your money. We close the doors, we keep your money, and were
not giving it back to you. Thats a bit too third worldly
for the U.S.A. I doubt thats the way theyre going to
be stealing it from you but through inflation. By all means with
inflation rising slowly, little by little, and one day youll
look back and you see how different it was. You know, you find an
old supermarket bag and you find an old ticket, an old receipt and
see the prices and wonder what the heck happened here. This used
to be the prices I was paying a year from now. Why are we like we
are today? Thats the kind of thing people will be experiencing.
So were in the boiling the frog stage you would say and you
would predict that at some point theres some sort of a trigger,
theres an event, theres a something that kind of kicks
this into a different orbit. Is that how you see it?
Yes, eventually theres an event where theres going to
considerable unrest, theres going to be looting, rioting,
and such. It may happen in one city or in a few. These things are
viral in terms of they show it on the news that its happening in
L.A. and then it starts happening in Washington D.C. and the guy
in Texas says, Okay, Im fed as well so Im going
to be taking this as well and making my opinion heard because obviously
no one cares about it. So Im going to make it extremely clear
what it is thats upsetting me. That appears to be extremely
bad and it is to a point, but its more impressive to the eye
than it actually is in social and economic terms. What has happened
in social and economic terms has been happening already for years.
Its not just because there was suddenly looting over in L.A.
or in Washington. It happens because it had been going on for a
good amount of time now. But the scenes of the people protesting
and looting and rioting are a bit staggering for most people. And
Americans, in general, will feel like thats the breaking point
in spite of this having been provoked through a number of years.
These things may last maybe a couple of weeks, something like that,
but in the end when you look at the cold numbers thats not
the worst part. The worst part is not the looting and the rioting
and whatever. The worst part is the loss of quality of life and
the suddenly becoming poor for a lot of middle class people. Thats
the real tragedy.
Okay, so at this point as youre looking at things and youve
been following it for awhile and youre watching these events
unfold is that avoidable for the United States?
I dont think so.
I dont think so because the political stance as of today is
unfortunately so similar to what weve been doing. There are
people that offer solutions but theyre not getting elected,
theyre not getting the elected people are still seeing
this as a republican and democratic thing. Its people that end up
working for the same people, okay? Its politicians working
for the same elite that really manages things and models a country
depending on what they want for themselves. So I dont think
its going to be changing. I hope Im wrong. I really
hope Im extremely wrong.
And even if
it keeps going this way theres much worse places to be in,
right? Its going to be bad but America will eventually recover
from this. Its going to be taking decades for sure but its
not going to be the end of America by any means. Its just
going to be a very hard time to live in but it will get by this.
Yeah, big change is coming and for those who can see it coming and
they have an opportunity to prepare, mitigate some of the risks
and maybe even come up with a better quality of life once they sort
through whats available in the pieces there.
There are always opportunities.
Right, there are always opportunities something I harp on
all the time. This is change. So what used to be is no longer and
now something new is unfolding. Getting to that story early is important
and I know you help people with your book, Surviving the Economic
Collapse how else can people follow you if they want
to hear more and learn more, and I think they should, about the
parallels in the Argentinean experience? How do they follow you?
Well, my book is in Amazon. Its easy to find. Its Surviving
the Economic Collapse. Its rather easy to find on Amazon.
Also, my website is the modernsurvivalist.com.
I blog almost daily and theres a forum where they can find
me if they want to ask questions or see what were up to. Its
all there for people to use.
All right. Excellent. And the name of that website again
one more time
Its the modernsurvivalist.com.
Excellent. Well, thank you so much for talking to us today. This
brings us to the end of the public portion of this podcast. Its
just been a real pleasure talking to you and I hope people get your
book and visit your website because what youre talking about
could easily happen not just in the U.S. but for anybody listening
in many other countries. This is a reality that can hit anybody,
any country at any time. So thank you for the work you do.
Thank you Chris for having me on your show.
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© 2011 Chris