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Why The Argentinean Situation Should Make You Buy Gold

There hasn’t been anything but bad news coming from Argentina lately as the peso continues to drop against the US Dollar. This leads to an unbearable situation for both the main actors on the political scene as well as the monetary policy makers. But even worse off are the common people.
Let’s start with the beginning, Argentina has always had some prejudices against the country after it had to default on almost $100B of debt in December of 2001. Since then, the international community and investors have always been quite reluctant to ever put money in Argentina again. However, as the next chart shows you, Argentina’s economy was really booming after its depression ended in 2002 (which was a horrible year with a GDP contraction of almost 15% caused by a massive inflation rate of 41%).

For the record, the previous chart shows the ‘official’ exchange rate which currently stands at approximately 8.5 Argentinean Peso per US Dollar. However, the black market exchange rate is closer to 15 Peso per Dollar, reflecting the eagerness of Argentina’s citizens to get its hands on a safer currency.

And we can hear you think ‘oh, but if it’s that hard to purchase Dollars, why don’t they buy gold and silver instead?’. That would be the logical thought, but back in 2012 the country has already banned all private buying of gold, and the only legal spot to buy gold was one specific bank in Buenos Aires, which marketed a product with a purity less than 99.99% gold. So by the time the hyper-inflation in Argentina started, the common people had no longer the possibility to either buy Dollars nor gold.

Source Zero Hedge

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