Financial History Issue 122 (Summer 2017) | Page 9
CONNEC TING TO COLLEC TIONS
THE TICKER
New Acquisition: Argentinian Inflationary Currency
By Sarah Poole, Collections Manager
This summer the Museum received a
donation of two Argentinian 500 australes
bank notes. Issued from 1985–1991, the
austral was a new currency issued as part
of a plan to stabalize Argentina’s econ-
omy. According to the donor, Andrew
Oh, who collected the notes while living in
Argentina, the color discrepancy between
the two notes (shown here) was caused
by the printers literally running out of
ink as the government rapidly printed
money during a period of high inflation.
While the Museum has not yet been able
to definitively confirm this to be the true
cause of the color misprinting, the aus-
tral nevertheless is an interesting story
from Argentina’s decades-long battle with
inflation.
Raúl Alfonsín was elected president of
Argentina in October 1983 and inherited a
nation with a number of economic issues.
At the end of 1982, Argentina owed $43.5
billion in foreign debt and had narrowly
avoided sovereign default with emergency
loans from the International Monetary
Fund (IMF). That same year, Argenti-
na’s GDP fell 5.6%, manufacturing prof-
its dropped 55%, unemployment climbed
above 10% and inflation reached an esti-
mated 310%. By the time of the election
at the end of 1983, the foreign debt had
grown to $45 billion and the already high
inflation rates doubled.
Alfonsín tasked Economics Minister
Bernardo Grinspun with implementing
a recovery plan. Rather than taking the
traditional approach of spending cuts and
devaluations, Grinspun announced that
Argentina would sponsor wage increases
and increased employment. The govern-
ment would also maintain funding for
social programs and support for provin-
cial governments. These efforts failed to
produce results, and Grinspun refused
to compromise with Argentina’s credi-
tors’ attempts to persuade him to adopt
more customary methods for the nation’s
economic rehabilitation. In May 1985, the
IMF suspended all new loans to the coun-
try and demanded a schedule for the
repayment of existing debts, effectively
forcing Grinspun’s resignation.
Alfonsín appointed Juan Sourrouille to
replace Grinspun, and Argentina adopted
his “Austral Plan” in June 1985. The Austral
Plan consisted of four parts: a new cur-
rency, the austral, would replace the peso;
firm wage and price controls would be set
by the government; a series of budget cuts
and revenue increases would be imple-
mented with the intention of reducing the
federal deficit; and new regulations would
limit the government’s ability to issue cur-
rency for the purpose of meeting expenses.
The plan saw initial success in lower-
ing inflation, but it failed to sustain these
decreases. After a year of the program,
inflation rose to pre-austral levels and
grew to hyperinflation by 1989, topping
out at 5000%. The fixed pricing of goods
and set wages also led to price gouging
and labor conflicts, while cuts in spending
led to public frustration as benefits and
support programs declined. The govern-
ment also started printing money again,
despite the limitations set by the Austral
Plan, as export prices dropped and Argen-
tina’s international debt grew.
Alfonsín did not run for re-election
in 1989 and his party’s candidate, Edu-
ardo Angeloz, was defeated by Carlos
Menem. Rioting over hyperinflation and
food shortages led Alfonsín to resign the
presidency and turn the government over
to Menem in July 1989, five months early.
Under Menem, Argentina returned to the
peso as its currency in 1991 with a new
Convertibility Plan.
Th ese Argentinian 500 australes bank notes were recently donated to the Museum. The note on the left shows the correct color scheme, while the one on the
right is much lighter, possibly due to the printers running out of ink as the government rapidly printed the money during a period of high inflation.
SEP 7
1979
After announcing it would post record-breaking pre-tax losses
for the year, Chrysler asks the federal government for $1 billion
in loan guarantees to avoid bankruptcy.
SEP 20
1873
The stock market crashes. Western Union
falls from 75 to 54½ and the NYSE Board
of Governors closes the exchange.
www.MoAF.org | Summer 2017 | FINANCIAL HISTORY 7