Tale of Two Countries: Argentina and Zimbabwe Edition

Argentina and Zimbabwe demonstrate two different approaches to hyperinflation: one tightened policy, the other expended their welfare state.

August 1, 2022

By: Bobby Casey, Managing Director GWP

Argentina Zimbabwe I mentioned earlier that while we aren’t all in the same boat, we are on the same ocean in different boats. The turbulence of the waters will affects us all, just differently.

The recession people are facing in the UK is the same recession facing the US and the same recession facing people in China and Argentina alike.

But recessions are not much different from the COVID-19 pandemic. It indeed can spread across the world, but how devastating it is depends more on the policies to mitigate it than the virus or recession itself.

Policies and panic always kill more than whatever it is they are trying to assuage.

Can addiction to substances kill? Absolutely! Can a war on those polices and prohibition kill more? No question about it.

Same goes for the pandemic. Can COVID-19 kill? You bet. Can a lock-down policy kill more? Indeed.

So can a recession be devastating? Yes, indeed it can and is. Can government response to it make it worse? Look no further than the Great Depression in the United States to know that is a total certainty.

You might recall a piece where we compared Ireland and Spain back in 2014. Both bailed out by the EU with comparable sums of money. Ireland decided to get aggressive with its tax code, lowering it and even creating a tremendous loophole. Consequently, they started winning more foreign investments and multinational business. Spain decided to tax more, and continues to struggle.

Ireland would later be vilified for its competitive corporate taxes, and ultimately capitulate to standardizing the rate across Europe.

Now let’s look at two countries who have for the past couple decades both been very troubled economically: Argentina and Zimbabwe.

Zimbabwe (along with countries like Venezuela and the Weimar Republic of Germany) has become a veritable meme of hyperinflation.

It’s not that the lessons don’t exist in human or world history. It’s that policy-makers think they can do a bad thing better and keep duping the public into believing it.


Just before the pandemic hit in 2020, Argentina had double-digit unemployment, inflation in excess of 50%, and over a third of its citizen living below the poverty line. The government was running low on foreign reserves, had already received an IMF bailout of $56 billion, and foreign investment seemed like a non-starter as default was imminent.

Argentina’s problems aren’t just from a single policy. It’s layers of policies that prioritize taxing and spending over austerity and and freeing the market.

Their web of failed policies have been around at least since the early 2000s. While they definitely have a tax regime that is hostile toward investment, they also have price controls, export taxes, and capital controls that throttle economic activity, a bloated public payroll, and unaffordable subsidies for public utilities, including natural gas, electricity, buses, and subways.

Everyone agrees it’s easier to get into trouble than to get out. But few understand that you’re not obligated to keep making the same mistakes long after you know they failed.

Fast-forward to today, and Argentinians are taking to the streets en masse over austerity measures such as means testing for energy subsidies.

  • 22 million Argentinians are dependent on some form of government assistance. That’s almost 50% of the 45.38 million citizens in that country.

  • Argentina currently spends 800 million pesos (or over$6 million USD) per day on its welfare programs

  • As of first quarter 2022, unemployment is at 43%. Not just double digits like in the teens.

  • Recent inflation in Argentina hit 58% in May and jumped above 60% in July. Contrast that with 2015’s inflation at 14%.

When you have a country that either doesn’t want to work, or doesn’t want to pay the taxes for others not to work, you have a problem that isn’t so unfamiliar to the West. This is a pain point many in more developed countries can relate to.

You cannot tinker a solution into an inherently destructive model. That’s the lesson, and no one knows this better than Zimbabwe.


The International Monetary Fund (IMF) reported that Zimbabwe’s inflation hit 837% (year-on-year) in July 2020. The country instituted tighter fiscal policy which helped reduce it to 60.7% by the end of 2021, that’s still unhealthy.

If you’ve ever heard of the show “My 600 Pound Life”, it observes people who are so obese they can barely move around. Many are bed ridden or struggle to get from room to room in their own homes.

While losing 100 pounds if progress, a 500 pound life still is very unhealthy. Losing yet another 100 pounds is also wonderful, but a 400 pound life remains unhealthy.

Hyperinflation is to an economy what morbid obesity is to a human body: untenable and unhealthy.

To combat this, Zimbabwe has looked to institute some element of the gold standard into its economy.

In an article out of the UK’s Sky News:

Zimbabwe has launched new gold coins to be sold to the public in a bid to tackle chronic hyperinflation.

The gold coins – called Mosi-oa-Tunya – will have “liquid asset status”, meaning they can be converted to cash, traded locally and internationally, and used for transactions, the Reserve Bank of Zimbabwe said.

Many saw their savings wiped out by the 5,000,000,000% inflation seen in 2008. I’m deliberately typing that number out rather than spelling out “billion” because the visual aid in looking at such a number will either drive the point home, or leave you confounded.

It’s hard to even imagine that as a percentage of anything much less how devastating it is to be hit with it. Needless to say, this brought on severe if not irreparable distrust among citizens toward the national currency.

Many retailers will not accept Zimbabwean fiat currency, and instead prefer US dollars for savings or daily transactions. Because of this, there is a higher demand for US currency than there is supply.

While I commend any country that turns its act around with tightened fiscal policies, and seeks to look to gold rather than fiat currencies, Zimbabwe missed its target.

The coin costs $1,824USD.

Nearly one third of the population is at risk of food insecurity. They are living hand to mouth with no prospect of building a savings.

No one can really afford this coin, so the hope is that it will help the poor by moderating the fiat currency.

There are large gold deposits in Zimbabwe, and by law all gold mined in the country must be submitted to the central bank. However, how do you convince gold miners to do this with such distrust in the national currency, and with such a high demand for US dollars?

That’s the struggle Zimbabwe faces now.

Nevertheless, Zimbabwe has demonstrated that you can reel in inflation if you are willing to tighten up fiscal policy, unlike Argentina.

All this to further explain how diversification of currency holdings and having offshore banks makes sense. It’s easy to say this about countries already failing, but their patterns can be seen in countries yet to fall. If their failed policies look at all familiar, now is the time to consider an offshore banking strategy.

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