Before Jackson was born, it was much easier to travel. While Tiffany and I still make an effort to go out on day trips, it feels like each time, we are packing up the whole house just to get out!

In a previous life, we traveled the complete opposite way. We loved finding last minute cheap flights, packing a small suitcase, and galavanting halfway around the world to explore. We consciously took advantage of this lifestyle, knowing that once we had a baby, travel would look and feel very different.

I’m glad we did, because we made so many fond memories along the way.

One of the trips that I’ll always remember was going to Argentina back in 2015. And while we ate and drank ourselves merry, that isn’t what stuck out. Instead, it was exchanging money on the black market when we first arrived!

Right after landing in Buenos Aires, we checked into our hotel and then made our way to the famous Florida street. Having read a travel guidebook, I knew that there were two different exchange rates – the official one you’d get at the bank / airport (which was good but not great), and the black market rate on Florida Street, where you would get way more bang for your buck.

Of course, being a deal hunter, I wanted to take advantage. And having done a little research, it seemed safe…enough.

To paint a picture of Florida Street, imagine people standing up and down a busy commercial street offering to exchange Argentinian Pesos for USD. Not knowing exactly what to do, we timidly approached a few people to ask the rate, and when we found a guy offering offering the best deal, we agreed to do the swap.

This was the first time I’ve done something like this, so I really had no idea what to expect. All I knew was that I had $1,500 US Dollars stuffed into a secret travel pouch that was strapped to my waist under my pants. And I needed to get that out to exchange it so we had spending money for our week long trip. But I knew I couldn’t just take it out in public. Around this time, I remember second guessing the whole strategy.

Here’s how it all went down.

The guy we agreed to exchange money with asked us to follow him. So we walked behind him down the street, looking back and forth at each other wondering if we should just run off while we still had the chance. After zig zagging through traffic, he pointed at an old dilapidated mall and opened the door for us to go inside. From there, he pointed at a store front which had all the windows taped up so you couldn’t see inside, unlocked the door, and told us to go inside.

As soon as we stepped inside, it was clear that this store was a front. There were a few dusty keychains and post cards for sale, but the real purpose of this location was to exchange money on the black market. Or…a place to get robbed…!

Luckily, nothing bad happened. We handed over US Dollars for Argentinian Pesos based on the black market rate, received back a huge stack of bills, stuffed it into the travel pouch, strapped it to my waist (under my pants again), and made a bee line back to our hotel.

On the walk back, I remember feeling like I was in an action / thriller movie! On one hand, I was trying to be nonchalant about the huge stack of bills I was carrying, but at the same time, repeatedly peering over my shoulder wondering if anyone was following us.

I know you are wondering…

What does this have to do with bitcoin?

I believe understanding why Argentinians desperately wanted USD instead of Pesos will help highlight the problem with fiat money that we all use today. And once you understand the problem, then it leads to an “ah ha” moment how bitcoin is a 10x better solution.

Let me explain!

You see, back in 2015, the official exchange rate (ie. not the black market rate from Florida Street) was 8.68. Now, six short years later, it is at a whopping 110.

It’s easy to gloss over just how terrible it would be to live with this level of rapid inflation, or to believe that it won’t happen to you. But it’s important to feel the pain, so that it becomes clear why inflation is a big problem and what to do if / when it happens to you.

So, let’s feel the pain together for a moment.

What if you lived / worked in Argentina during this time?

Let’s imagine it’s 2015, you are a Dad living / working in Argentina, and you have diligently saved 100,000 Argentinian Pesos to take your family on vacation to New York City. If in 2015, you exchanged Pesos, you’d get back $11,500 US Dollars for the trip. That amount would cover flights for the family, hotel stays, meals out, entertainment expenses, etc. And you would have a great time on vacation with your family!

But now, let’s throw in a wrinkle.

Imagine a family emergency came up and you couldn’t go on the trip. Then, life got busy, and before you know it, six years have passed by. So now, it’s 2021 and you finally plan a new trip to New York City. You take that same 100,000 Pesos (that has been sitting in your savings account for the past six years) to exchange at the bank.

But now, you would ONLY get back $909 US Dollars. I’m not sure this is enough to even buy one round trip flight, let alone flights for the rest of the family…

Ouch.

Inflation is a bitch

I’m not a math genius, but it’s easy to see that $909 is way less than $11,500. Unfortunately, this is inflation in action. And it is terrifying how fast it melts away your wealth.

Simply put, in this example, the fiat money (ie. Argentinian Pesos) that you, as the Argentinian Dad, worked for and saved has rapidly lost value. So even though you still have the same 100,000 number in your savings account, the amount of goods and services you can buy (ie. your purchasing power) has gone down significantly.

With rapid inflation, you are not incentivized to save money in the local currency. And that is why, back in 2015, it was already so popular for locals to get rid of their Pesos and to store their wealth in US Dollars. That’s because the US Dollar did a much better job at holding value and preserving purchasing power year after year.

It did so well actually, that people in Argentina were willing to pay a premium to exchange it on the black market!

However, this exchange from Argentinian Pesos to US Dollars is becoming less worthwhile. And that’s because there are now inflation problems in the US, just like there are inflation problems in Argentina.

What caused inflation issues in the US?

Due to COVID lockdowns, businesses closed and lots of people lost their jobs. In response, the US government printed a LOT of money and gave bailouts / stimulus checks to try and keep the economy afloat. How much money? Well, an astounding 40% of all US Dollars in existence were printed in 2020 alone (source).

As a result of all that new money, there are now significant inflation issues. Officially, in the US, the inflation rate is ~5% (versus the target rate of ~2%). What that really means is that the US Dollars sitting in your bank account is losing purchasing power at ~5% per year.

However, that’s only the official rate. Unofficially, the inflation rate (tracked through sites like Shadow Stats) is much higher, somewhere between 10-20%.

Big ouch.

What can you do to protect your wealth?

With that context in mind about the problem with inflation, let’s put ourselves back into the shoes of that Argentinian Dad who is looking for a way to not lose his purchasing power over time.

Here is what’s likely going through your mind:

• You know that the Argentinian Peso, the money you earn from your job, has lost value rapidly in the recent past
• You suspect / expect the Argentinian Peso will continue to lose value in the future (maybe at an even faster rate than before)
• you consider exchanging Pesos into US Dollars, but see there are inflation issues too (whether it be the 5% official rate, or the 10-20% unofficial rate). This would mean that even though you would be losing purchasing power at a lesser rate compared to keeping your savings in Pesos, you would still face the same core problem. And if inflation issues got worse in the US, you would need to then get rid of US Dollars and find another way to protect your wealth.
• Ideally, you want a reliable way to preserve your wealth where inflation can’t eat away at it

So where do you look? Bitcoin, of course!

Bitcoin adoption is taking off in Argentina (source). And the worse that inflation gets, the more that people will try out bitcoin. Actually, it’s happening so fast that now the President of Argentina is considering to adopt bitcoin to fight off inflation (source).

Why?

Because bitcoin doesn’t suffer from the inflation problems that affects fiat money. Simply put, is not possible to print more bitcoin to add to circulation. So for the Argentinian Dad, what it really means is that when he saves his wealth in bitcoin, he knows with certainty that his wealth cannot be eroded away through inflation.

Sure, there will be short term volatility with the price of bitcoin. But at least with bitcoin, the trend is in the right direction (ie. it becomes more valuable over time at a rate of around +200% per year) versus fiat money consistently trending in the wrong direction (ie. it becomes less valuable over time at a rate of 5%, 10%, 20%, or even more depending on the country).

Here is where it gets more interesting. Zooming out, bitcoin adoption is not only happening in Argentina. Rather, it is really happening around the world wherever inflation is getting out of hand – whether that be Lebanon, Cuba, Nigeria, and of course, now, in the US as well.

It has even become legal tender in El Salvador (source). And there are more countries publicly discussing making it legal tender too – like Argentina, Ukraine, and Paraguay.

Conclusion

Every single fiat money suffers from inflation because more of it can be printed and added into circulation. And that new money is taking away purchasing power from anyone with savings. Bitcoin is the opposite – it protects your purchasing power over time. And it rewards you with more purchasing power the longer you hold it.

Argentinians have already had the “ah ha” moment. And as more people around the world come to the same conclusion, it will drive more demand to hold bitcoin. And as I mentioned on this post, when there is a fixed quantity (21 million coins), and demand goes up, price has nowhere to go but up!

I’ve been slowly converting more of my savings into bitcoin. And I’m going to continue doing so because I don’t want my hard earned money to melt away from inflation.