Thank you for your blog. I cannot tell you how terribly helpful and reassuring it is to hear your take on what a real economic collapse is like first hand. I have all but ignored anyone else, because how would they know? Most are just trying to sell their newsletters or survival supplies.
My questions are
1) What happened to people's bank accounts during the 2001 crisis (checking, savings, credit cards) and thereafter? You mention the bank holiday, restrictions on cash withdrawals, and termination of credit in several of your posts. So, I sort of get the picture. You can't get the majority of your money out and you can't use credit cards anymore, but what about having to pay bills, like the mortgage, electricity, etc. Certainly, you can still write checks and use debit cards; yes?
2) After everyone lost faith in banks, do people who have money to save, just keep it in foreign currencies & metal, or what?
3) How are banks surviving today as opposed to pre-collapse. If there is no credit, how do they make money and survive?
I am in the banking industry and see a need for my bank to have to change our business model. I am just not sure what the new model will become. Anything you can share would be most helpful.
Thank you again!
1) Things are pretty much normal these days in terms of credit cards and debit cards. Checks are a bit more tricky since there’s a check tax, another insane move to steal money form people. Also, checks in dollars are not allowed in Argentina any more.
Most places in the capital district where the most activity takes place and tourist do their shopping readily accept credit cards just like anywhere else in the world, same for regional down town areas. But the smaller you get the less chance of shops accepting credit , debit or anything other than cash.
The time we spend with no money plastic at all lasted most of 2002 but now it’s been getting back to normal.
Still, there are many places that don’t accept credit, debit is more commonly accepted.
It took a long time for people to trust plastic money again.
Most gas station for example, most want cash and some accept debit.
Bill can be assigned to be paid with your credit card, but its not a smart idea since these companies sometimes over charge, or invent extra charges out of thin air and you later have to fight to get your money back. For example now with the insane tax to natural gas and power (about 600% in some cases) they’d just charge you while if you have it set to pay with cash instead, you can fight it a bit more, just pay for the usual service and present a complain for the rest, claiming there’s no way to can pay the outrageous tax (almost ½ of what the minimum wage person earns. Imagine paying 600 USD each month on either gas or power)
2) Depends on how much money you have. Most people don’t have a lot so they keep cash home. If you have more you buy a car or better yet some real estate. We never had the huge bubble USA and Europe used to have (now gone) so prices didn’t vary that much before and after 2001. As we say around here, the land and brick on top of it are going no where.
Gold has a value like anywhere else in the world, but its something older people used to do, every month saving some and putting it into gold coins.
For example right now in Argentina, people are buying dollars like crazy. It’s expected to go up like crazy after the elections for senators next week. Euros and dollars are preferred currencies instead of our much weaker peso.
3)According to the way things are today, a more conservative attitude is in order I believe. They are very careful about how much money they lend (credit is something we’re simply not used to here, at least none that has reasonable interest rate). The local joke is, you need to be right to qualify for the loans banks in our country provide.
How do they survive? Many didn’t. They got sold, closed, etc.
Being honest the financial activity in Argentina is minimal. Few trust banks any more, the richer the person the lest he trusts it, they mostly work with small loans and deals they make with the government, house loans that usually get used to gain political favors.
Then there’s the typical small time client, gets his salary deposit on his account, maybe gets a small loan to buy a TV or help pay a car (which cost a small fortune in Argentina, even used ones, MUCH more expensive than in USA, about 5-10 times as much)
A bank in Argentina isn’t doing money after 2001, at least not in any honest way.
The best bet is to be a bank with a small scale attitude (cut down expenses to a minimum, very conservative spending and lending) , micro loans for clients starting their small business, maybe buying machinery for whatever they do, but always doing so very conservately and following the client up close, a tight bank/client relationship. Stick to safe investments and aovid the medium and high risk ones.
Other financial companies make money with micro -loans, most often lest than 1000-2000 pesos (less than 600 USD). The interest rates in these cases are terrible, but poor people will usually fall for this maybe to buy a cell phone or some other shiny object.