There's a better way to help Argentina

The White House is lining up $40 billion to help Argentina’s president, Javier Milei, stabilise his country’s finances ahead of midterm elections on Oct. 26. There's a plausible case for intervention. Collapsing confidence and a familiar combination of peso crisis and inflation don't just threaten Milei’s fiscal reforms: If the economy crashes, the damage is sure to spread.

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Unfortunately, Washington's approach could prove to be self-defeating.

Milei entered office in 2023 promising to restore fiscal discipline and free up the economy. To almost everybody's surprise, he delivered —mostly. He slashed out-of-control public spending and stopped printing money to finance deficits. As a result, inflation fell sharply, according to the Tribune News Service.

Yet he failed to confront Argentina's chronic peso problem. During his campaign, Milei said he'd scrap the currency altogether and fully dollarise Argentina’s already semi-dollarised economy.

When that proved too difficult, he pegged the currency to the dollar instead of letting it float. The result of this well-intended compromise is the current mess.

The difficulty of defending a currency peg in the face of collapsing confidence is well known. Given his background, US Treasury Secretary Scott Bessent should need no instruction on the matter.