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Javier Milei in the crosshairs as chainsaw economics come back to bite him
The speed of Milei’s humbling has been astonishing, even by the rollercoaster standards of Argentinian politics. Just months ago he was celebrated as a miracle worker. To admirers on the global populist right he was seen as the 'chainsaw economist' who proved that radical austerity could revive a dying economy.
Before becoming president of Argentina, a clip of Javier Milei went
style="font-weight: 400;">viral for theatrically ripping up government ministries while shouting “Afuera!” (“out” in Argentinian slang). Now, less than two years later, he risks suffering the same fate.
The libertarian firebrand’s promise to hack away at the bloated Latin American state won him global notoriety and political power. But today his government is on life support, kept alive only by a last-minute foreign currency lifeline from Washington propping up the peso.
The speed of Milei’s humbling has been astonishing, even by the rollercoaster standards of Argentinian politics. Just months ago he was celebrated as a miracle worker, a libertarian hero who had somehow tamed Argentina’s rampant and chronic inflation. To admirers on the global populist right he was seen as the “chainsaw economist” who proved that radical austerity could revive a dying economy.
His rise to far-right superstardom brought bizarre spectacles of political devotion. A few weeks after US President Donald Trump’s return to office, Milei
style="font-weight: 400;">gifted a chainsaw to Elon Musk, who went on to
style="font-weight: 400;">brandish it at a rally in a deranged manner. At the time, Milei’s fiscal shock therapy — slashing budgets, firing thousands of civil servants, and ending central bank financing of deficits that had caused the runaway inflation — had cut inflation from over 160% in 2023 to about 30%. In Argentina, where economic collapse has been routine for generations, this seemed miraculous. Musk even adopted Milei’s “Department of Government Efficiency” idea as a blueprint for his own misadventures in Washington.
CPAC (Conservative Political Action Conference), a kind of Mecca for the American far-right, moved its 2024 conference to Buenos Aires, elevating Milei to the same lofty status as Hungarian demagogue Viktor Orban, who had previously played host.
“We must call ourselves a right-wing international!” Milei crowed to the adoring crowd. “In the hands of Trump, Bukele [the crypto-bro autocrat of El Salvador] and us here in Argentina, we have the historic opportunity to breathe new winds of freedom into the world.”
A couple of months later, in an interview with the Economist, he boasted that: “I am today, one of the two most relevant politicians on planet Earth... I find it fascinating that the chainsaw has become an emblem of a new golden era of humanity.”
A crisis of confidence
The economics behind the latest Argentinian collapse are as unforgiving as Milei’s own rhetoric, and just as predictable.
His early strategy – stopping the central bank’s printing of money to fund the deficit, maintaining a strong peso, and using reserves to keep imports cheap — did succeed in sharply lowering inflation. But it also crushed incomes and domestic demand, while failing to spark a pick-up in exports.
As public spending was slashed, poverty — which had already been at alarming levels — became unbearable. While the rich saw their assets appreciate, wage earners — many of whom initially supported the reforms — lost patience as they bore the brunt of the economic effects of austerity.
When Milei’s party performed poorly in local elections last month, investor confidence evaporated. This time the market was wielding the chainsaw. Argentina’s reserves were drained within weeks as Milei vainly tried to defend the currency.
Now, facing midterm elections in just two weeks and with inflation threatening to spike again, he is against the wall. The International Monetary Fund had already extended a R349-billion ($20-billion) “soft loan” earlier this year. This time Milei decided to call his far-right friends in Washington directly. The unconditional $20-billion credit swap line from the Treasury, approved by US Treasury Secretary Scott Bessent, is almost unprecedented in recent US history.
Hubris precedes nemesis, but in Milei’s case, Trump is now the one trying to catch his fall. The irony is clear for everyone; the libertarian nationalist who formerly railed against foreign intervention is now dependent on the goodwill of the US to keep his government solvent.
As economists Brad Setser and Stephen Paduano have wryly noted, evoking Argentina’s former nemesis Margaret Thatcher, “the problem with Milei is that you eventually run out of other people’s money”. If the Peronist opposition performs strongly in the next vote, Milei’s reform programme could collapse, taking the peso — and quite possibly his presidency — down with it.
Bessent’s big gamble
For Trump and Bessent, the move is as much geopolitical as it is economic.
“It’s not a bailout,” Bessent insisted on Fox News. “Milei is trying to break 100 years of bad cycles. We don’t want another failed, China-led state in Latin America.”
Yet to everyone else, if it looks like a bailout and sounds like a bailout, it probably is a bailout. That this lifeline comes from an administration that is meant to “put America first” makes it even more absurd.
Markets are, for now, giving Milei the benefit of the doubt. Argentina has posted its first budget surplus since 2009, inflation has dropped to roughly 30%, and its dollar reserves have temporarily been shored up thanks to Washington’s largesse.
But the fragility of the Argentinian economy remains. Bessent, a seasoned currency trader, knows how fine the margins are. In 1992, working for George Soros’ hedge fund, he helped “break the bank of England”, making R17-billion ($1-billion) betting against the British pound. Now, three decades later he is effectively betting the opposite way; defending a currency in which investors have lost faith.
Bessent insists the peso is “undervalued”. Most economists, as well as the hordes of Argentinians flooding to Chilean shopping malls for bargains on the overvalued peso, would disagree.
Geopolitical realities
As with everything in 2025, economics cannot be differentiated from geopolitics. Washington’s intervention in Buenos Aires is driven by more than faith in Milei’s libertarian experiment. The Trump administration is openly seeking to curb Chinese influence across Latin America, and Argentina — with its resource and agricultural exports — is a key battleground.
In recent months the US has applied a mix of carrots and sticks across the region by threatening military action against Venezuela and slapping tariffs on Brazil. Both are close allies of Beijing. The US is now dangling a generous line of credit to entice Argentina. The aim is clear; to ensure that Latin America’s major economies remain within Washington’s “sphere of influence”.
Argentina is another front in the new Cold War. The pattern is familiar; in Africa, for example, the DRC’s closer ties to Washington have been designed to keep China out of critical-mineral supply chains. Across the Global South battle lines are hardening, not in hot wars but economic ones fought with loans, tariffs and trade deals.
But the spectacle of Milei’s fall from grace will not be lost on liberal centrists. On the wrong end of the populist wind of change blowing through global politics, they are relishing a moment of schadenfreude.
The lesson to other far right populists from Milei is clear, too. If you live by the chainsaw, be prepared to die by one too. DM
As an economics dodo the only comment I can make is that the Trump style swagger and outlandish rhetoric, (seems to fit Milei also) is designed and calculated to fool/deceive the gullible into believing (which requires no rationality) that they 'know' what they are doing, and using/hogging media to extend that effect/notion. All acting ! At least in the US we have a voice like that of Bernie, who sees 'through' it all. As an Ind. rather than a die hard Dem., he is 'whistling in the wind' !
