Argentina has seen plenty of economic plans but suffers from the absence of stable rules. Nobel laureates Frederick Hayek, Ronald Coase and Vernon Smith analyzed the effort that it takes to reach consensus.

INFOBAE: The magic of progress lies in getting the contracts for increasingly specialized transactions right.

Each commercial advance opens better deals, which are facilitated by the stability of government regulations and general price levels.

Indeed, there is some correspondence between the best normative specifications, price standardization and GDP. On the contrary, each imposition by the authorities requires recalculating negotiations with multitudes of actors. Exacerbating conflicts, wasting efforts.

The same happens regarding inflation and currency devaluations. The solutions depend on the existing institutions; each normative variation disturbs the agreed compensation. Hence, the continuous regulatory, price and exchange shocks require additional efforts that end up impoverishing our country. They unsettle businesses, reinstating obstacles that had been overcome.

Since individual skills and technologies are scattered among the 8,000 million humans that populate different geographies of the planet, the great gaps between the national average income are born from different cultures, consensing lasting regulations.

Those who have faced the same procedures in different places confirm the existence of these obstacles. There are plenty of requirements in lagging countries, explaining the difference in national GDP rankings, from USD 300 per year per inhabitant in Burundi and South Sudan, to USD 100,000 in Ireland and USD 90,000 in Norway and Switzerland.

To put it black on white, private companies continually compete to agree on the most favorable conditions, persuading clients, employees and other participants.

More than half of the world's population resides in jurisdictions that lacks transparent regulations; That is why they generate barely 10% of the world's GDP, having the lowest income, lacking freedoms and with wide variations between them (a median of USD 300 to USD 6,650, between the extreme national averages of the group). Just 10% of humans, who live in nations with stable and transparent rules, generate 50% of the world's GDP and the highest income.

Leaders change the rules to gain followers, without noticing that each imposed change, favorable for some, impoverishes all. Forced regulations contract assets. Only the voluntary transactions of those affected precisely value the properties, by competing to satisfy individual needs.

ARGENTINE DEVALUATION:

Argentina was one of the most prosperous nations in the world between 1890 and 1920. A century later, in 1980, at the start of the IMF's economic outlook series, GDP per capita was still three times the world average. In a sharp drop, the GDP per inhabitant equals the world average of USD 13,400 per year, in 2022. Terrible decline, typical of a society without lasting rules, where competition cannot work.

EL CRONISTA: Economist Diana Mondino issued a strong warning about the pace of the Argentine economy, noting that "it is imploding" and could even lead to a "worse" scenario, such as in Syria or Lebanon.

“The economy is imploding, we are melting as a country. Restrictions on imports, for example, are paralyzing the production line of companies large and small”, she remarked in dialogue with Radio Rivadavia.

According to Mondino, who according to Ejes de Comunicación ranked eighth as the economist most listened to by Argentines in 2021, the worst "has not happened yet."

In this sense and by focusing on the factors that could "implode", he insisted: "The worst thing would be an increase in inflation and unemployment, which we would easily see."

The world is much better prepared to face financial crises like the one in 2008. But unexpected events continue to raise fears, especially if people lose confidence in the system

INFOBAE: The economic crisis of 1930, the largest on record, impacted all of humanity. It saw world trade contract by 66% and exacerbated mistrust between countries and people and despair, smoothing out the rise of Hitler in Germany which culminated in World War II. In the US, the GDP sank 36%, in nominal values, between 1929 and 1933. A disaster that catapulted the novel proposal of John M. Keynes to world preeminence in economic thought even if for other specialists these theories aggravated the contraction and delay. In Argentina, the upheaval gave rise to the 1930 coup d'état, further state intervention and decline.

My dear professor at the University of Chicago, Milton Friedman, refuted Keynes by explaining that the real cause of the crisis was the errors of the Federal Reserve System. In particular, the Fed's refusal to authorize “banking holidays”, which they habitually used to prevent cash withdrawals from entities. The refusal, in the midst of depositors' panics, and the contraction of 33% in the amount of money led to the suspension and bankruptcy of thousands of banks. The monumental "Monetary History of the United States 1867-1960", written by Friedman with Anna Schwartz, details what happened.

In our environment, influential politicians underestimate the financial aspects, insisting on "looking productive". Without realizing it, they constitute another other side of the same coin. The function of banks is to acquire illiquid assets –of various characteristics– and sell liquid deposits. In this task, bank deposits play a very relevant role, forming a competitive market that stabilizes the costs of varying individual consumption over time. However, they are vulnerable to panic among depositors, even those who would keep their accounts if they were not afraid of being defaulted; Consequently, valuable productive financing would be in danger if not secured. Such conditions vindicate the relevance of transparent regulations. For this purpose, the Federal Deposit Insurance Corporation FDIC, created in 1933, has been providing regulations and data that make the system more transparent. Friedman also proposed expanding the geographic scope of each bank. He cited the advantage of Canadian banks, which operated throughout the country, which allowed them to cushion the variations in business between different regions. US entities, on the other hand, were constrained to very narrow geographic boundaries; most could not extend outside the city, many could not even open branches. These investigations are linked to those of Oliver Williamson, also a Nobel Prize winner, who developed an understanding of the role of economic organizations in making information transparent so that assets are more liquid and attractive.

The Royal Swedish Academy recognized the research of the three 2022 Nobel laureates in economics, Ben Bernanke of the Brookings Institution; Douglas Diamond and Philip Dybvig, professors at the Universities of Chicago and Washington (St Louis), respectively. They theorize that the true cost of banking crises is the closure of entities and lost credits. This highlights the relevance of avoiding bank runs.

The three laureates laid the groundwork for modernizing understanding of the need for banks, why they are vulnerable, and how to respond to them.

Bernanke, who presided over the Fed between 2006 and 2014, faced the financial crisis of 2008 through massive purchases of public bonds and mortgage bonds, reducing interest rates and organizing bailouts of the main US banks. Mechanisms that were later replicated when the quarantines to control the Covid, contracted activities.

The three laureates laid the groundwork for modernizing understanding of the need for banks, why they are vulnerable, and how to respond to them. At the time of its publication, bank failures were considered consequences of economic crises rather than the causes of the crises so this knowledge revolutionized understanding and forms of response. The contributions of the three winners explain the vital role of banks in the economy and how regulations, such as deposit insurance and standardizing data on financed assets, make banks less vulnerable, understandings that modernized banking regulations. A top priority at a time of greatest economic uncertainty.

According to Diamond, the world is much better prepared to face financial crises like the one in 2008. But unexpected events continue to raise fears, especially if people lose confidence in the system. These investigations would lead to the banking sector being perceived as healthy and able to respond in a measured and transparent way to monetary changes. However, decisions like those of Bernanke, at the head of the Fed, are still questioned. He led massive purchases of debt and other assets by the Fed. Actions that some attribute to the sudden price spikes that are plaguing today's economy, tweeted Indian billionaire Sridhar Vudu, CEO of Zoho Technology.