April 14, 2014
Buenos Aires, Argentina
Two bright white eyes looked at me inquisitively through the small hatch in the nondescript metal door.
I quickly glanced around the dark, empty streets of the Palermo district in Buenos Aires and whispered the password.
The door clanked open, revealing a small antechamber and a phone booth. I picked up the receiver and punched in a 4-digit code, and a second door opened.
Now I could begin to see the interior of “Frank’s”.
It was lit with elaborate chandeliers and accented with ornate leather seats, and Sidney Bechet was in full swing on his saxophone.
It was amazing, it looked just like a New York City speakeasy from the 1920s back in the days of prohibition and bootleg moonshine.
And that’s exactly what the proprietor intended—a nod to a time when an entire population was constantly having to outsmart destructive government policy.
Just to do something as simple as having a beer, people had to come up with elaborate schemes, passwords, and secret locations on nondescript streets.
Coincidentally, Frank’s is the perfect illustration, not only of New York in the 1920s, but of all of Argentina today.
Argentina is one of the places where debilitating capital controls are the rule.
The government has its ‘official’ exchange rate, and they’ve outlawed unofficial transactions with foreign currency.
But like prohibition-era bootleggers, an entire cottage industry has emerged with legions of street dealers trading currency far beyond the law.
Capital controls are only the start. This government has tried just about everything—price controls, credit controls, even people controls.
They’ve nationalized private assets. They’ve thrown dissenting economists in jail.
Now they’re going around collecting everyone’s fingerprints. They’ve just added another 100 products to the list of controlled prices.
And yet, inflation still rages. People’s standards of living are being destroyed.
The pesos that they earn are buying less and less. Despite the controls, prices are still rising much faster than wages.
All of this has led to mass poverty returning in a big way. Beggars once again line the streets in Buenos Aires. There’s been a noticeable increase just since I was here two months ago.
This is a familiar story. Argentina has spent the last several decades stumbling from crisis to crisis.
Like many countries in the West, Argentina has had a long trend of political incompetence. This once-rich nation has been ruled by those who thought that universal economic laws simply did not apply.
They thought that Argentina could live beyond its means forever… that they could borrow money to pay interest on what they’ve already borrowed.
The Argentina of today shows that there are serious consequences for nations that follow this approach… and for people who do not heed the writing on the wall.
It’s easy to pretend like everything is OK. Sometimes we’re surrounded by grandeur and opulence, and it’s easy to mistake this veneer for wealth.
It’s not. Real wealth comes from freedom, production, savings, and technology… not debt, spending, and money printing.
And though even I got lost in all the splendor of Frank’s speakeasy, I was immediately thrust back into reality when they refused to accept my credit card to settle the bill.
The difference between the official rate and black market rate is so vast, in fact, that many establishments are now refusing to accept credit card payments altogether.
The staff apologized to me profusely, embarrassed at what their country had become.
We joked about it as I pulled out a wad of cash I had recently procured from a street broker—
Cocktails: 175 pesos
Appetizers: 210 pesos
Capital controls: Priceless
It turns out there really are some things money can’t buy. Especially in worthless currency.
