How Milei Is Flirting With Failure in Argentina

I think it will interest you not because of my moral case against taxes (a case which was new to most attendees)

By Doug Casey, International Man

I think it will interest you not because of my moral case against taxes (a case which was new to most attendees), but because of the reasons Milei is flirting with failure (reasons that I don’t think most of the attendees had considered).

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It’s a strange pleasure to be speaking at a tax conference. It makes me feel as if I’ve been accepted into polite company, perhaps even invited to join the elite.

Since we’re at a tax conference, I think it’s appropriate to lay some philosophical groundwork. To ask some questions, and state some principles to help introduce myself. Like any sensible person, I despise taxes. So consider these propositions and questions:

First, Why taxes are immoral and innately destructive.

Second, Why taxes aren’t necessary.

Third, What is the Milei regime doing wrong?

Fourth, What should Milei do?

Last, some thoughts on what you—and your clients—should do.

FIRST, Let me say some things that you may find shocking and outrageous, but you may not have fully considered. It’s important to call out things that are wrong.

I view taxes as theft. And the State, which feeds on taxes, is the most dangerous criminal organization on the planet. Which is, incidentally, exactly what Milei has said on numerous occasions. Everyone thinks government is necessary. Is it? For whatever Hobbesian benefits it brings, it’s not only the source of taxation, but also of wars, pogroms, confiscations, persecutions and inflation.

Suppose you’re robbed on the street. The thief says he did it because he needs to feed himself. Does that make it right? Suppose it’s to feed his family? Suppose a majority on the block call themselves the government, and democratically approve of the theft? Does that make it right?

I presume everyone in this audience believes in doing what’s legal. Few of us, however, consider that not only is there no necessary overlap between what’s legal and what’s moral, but often they’re opposites.

SECOND—Are taxes necessary? Another moral question arises. Is anything evil necessary? In a free market society– one based on voluntary exchange– theft and coercion are viewed as criminal. That’s true even if done by the State. Later in this talk I’ll refer to a short book that explains how society would work without the State and its taxes.

Isn’t it true that society, not the State, produces all wealth? Are criminal acts ever necessary? Can a sound culture be built on a foundation of officially sanctioned coercion and theft? Just asking for a friend…

THIRD— Well, enough philosophical and economic speculation. Now to some specifics about Javier Milei’s Argentina.

I have spent a considerable amount of time and money here in Argentina. Somebody once asked me why I came to Argentina. I said: “For the kangaroos.” He said: “But there are no kangaroos in Argentina…”. I said, “Yeah, I was misinformed.”

You all know Argentina should be one of the wealthiest nations on Earth. Instead, it’s a global punchline. Notwithstanding its sorry reputation, I decided to invest here because it was cheap, I liked the country, and—famous last words—it seemed like a good idea at the time.

I foolishly founded a development in Cafayate, despite knowing that the only person who makes money on a golf course is the third one that buys it out of bankruptcy. Against all odds, though, we expect to break even. We also bought 50,000HA near Salta. More land near Chapelco at San Martin de los Andes. And a bunch of other liabilities disguised as assets.

So, when Milei, an anarcho-capitalist like myself, won the presidency, I was ecstatic. It was unprecedented, something of world historic importance. A libertarian anarchist who wanted to disband the State—not just trim it back.

I’m reliably informed by my friend Jorge Trucco, who translated it into Spanish, that Milei has read “The Market for Liberty,” a book I had republished which describes precisely how society would work without a government. He not only understands it, but thoroughly agrees with it. Finally, a President who understands that the central bank is a scam, that the State is a parasite, that taxes destroy capital and civilization, that regulation entrenches the wealthy, and that inflation is a tax mainly on the poor.

But optimism is usually misplaced when dealing with politics. I have to say that despite the many good things he’s done, and despite being a vast improvement over the Kircherites, Milei has been a disappointment, and may yet wind up embarrassing AnCaps.

Maybe that’s because the moment you enter politics, you are necessarily morally compromised. That’s because you are forced to deal with the political class— vipers, bureaucrats, and people who enjoy wielding power over others. Perhaps it’s a hopeless task; the political caste may just be too rich and too strong to be beaten.

I hate to be the skeleton at the feast, but let me list a few serious disappointments regarding Milei.

Failure #1: The Central Bank

The most egregious failure, which makes me question Milei’s philosophical commitment, is the continued existence of the Central Bank.

He promised to shut it down, padlock the doors, and dollarize the economy.

The Central Bank is the biggest engine of Argentina’s destruction. Printing worthless pesos makes it foolish for the average guy to save, while financing the corrupt political class. Leaving it intact is like declaring war on a cancer but refusing to cut out the tumor.

Could dollarization work? They say Argentines hold $350 billion offshore. I think most of it would return if the country truly reformed.

Incidentally, dollarization isn’t a solution, it’s only an improvement. The dollar is just another fiat currency. Gold should be reinstituted as day-to-day money.

Failure #2: Gold.

Argentina supposedly owns about 2 million ounces of gold. Half was already stored abroad when Milei took over. But between June and August 2024 Milei moved about 440,000 ounces more, worth about a billion dollars then– but 50% more now—from the vaults of the Central Bank in Buenos Aires to the Bank of England in London.

Why move your gold to a foreign central bank, one that is perfectly capable of seizing it or freezing it?

The official story is that it’s for “security”, “liquidity” and to get yield. That is utter nonsense. He should have tried to repatriate all the gold, and build reserves, with the intent to float a gold peso, redeemable at a fixed price.

FYI, none of that gold is ever returning. It’s gone. Fuhgeddaboudit.

Failure #3: Debt

It’s hard to get exact figures on the Argentine government’s foreign debt. Something like $300 Billion, or roughly $30k per family. It’s never going to be repaid, but it guarantees that future generations of Argentines will be indentured servants. The biggest block of it, $65B, is owed to the IMF, and another $30B to the World Bank and similar outfits. Most of that money was stolen or egregiously wasted. It’s time to say—politely but sincerely—”No hay plata.” As a bonus, perhaps doing will set off a series of similar 3^rd world defaults, and bankrupt the IMF as a huge bonus.

Failure #4—The F-16s

Milei was supposed to cut spending, eliminating the State’s waste. He’s done that in some areas.

However he just spent reportedly between $300 million and $550 million to acquire 24 used F-16s from Denmark. Exactly where is that money coming from? Who is the bankrupt Argentine government going to fight? Uruguay? The Falkland Islands? The planes are inappropriate for border patrol. Perhaps they will impress the bureaucrats at NATO, which Milei inexplicably wants to join. He supports the Ukraine. Does he want to join NATO in a war against Russia? Or get involved in World War 3?

FWIW it costs $5-10mm annually per jet for maintenance and training—perhaps another $150mm a year. Another expense Argentina can’t afford. These expensive toys serve zero useful purpose.

Failure #5: FX controls

He has not fully abolished their Foreign Exchange controls. Nor retenciones on exports.

He should have eliminated them on Day One. Worse the government is trying to control the peso’s value. Currency speculators will make a killing, at the expense of the average Argentine.

What Milei Must Do Now

It’s well known that power corrupts. And Milei is surrounded by members of the political caste. But let’s give him the benefit of the doubt, and assume the man is still philosophically sound, just politically constrained. He achieved a significant victory with the passage of his omnibus bill, giving him crucial legislative power.

He still has momentum. He still has political capital. In addition to rectifying the mis-steps we just discussed he must do the following:

First, Money. He must announce a hard, unilateral dollarization as a first step to a sound money. Not a managed transition. Allow the market to determine the exchange rate and let the chips fall where they may. Inflation, which is still running 25%, should drop to 5%—that of the US dollar.

Second, Taxes. Eliminate the retenciones (duties Argentina imposes on agricultural exports),and dramatically simplify the tax code. It’s said Argentina has about 165 separate Federal taxes. He needs to attract the world’s capital, and capital goes where it is treated best—which is not Argentina. Serious capital won’t come here until taxes, if not negligible, are at least transparent.

Third, the Bureaucracy. He needs to execute the mass firing of State employees that he promised. Not just the political appointees, but the 300,000 career bureaucrats who sabotage every attempt at reform. He needs to be ruthless, not just firing employees, but abolishing departments wholesale. If they still exist, they’ll grow back when the bad guys take over in a future election.

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