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