The 53-year-old, Javier Milei won a runoff presidential election in Argentina on Sunday has announced his entry into politics in 2020 in a bid to ‘blow up’ the system.

Argentina is a country where an entire generation has grown up under an economy in a semi-permanent state of crisis. That has sharpened this year, with inflation heading towards 150%, a sliding currency, and rising poverty.

Milei and his Liberty Advances coalition have attributed these long-term economic crises to the faults in the mechanism of the central bank and the shortage of the presence of dollars in the economy.

He wants to disband the domestic currency and central bank and shift to the US dollar as the official currency. In doing so, Argentina will give up its ability to control its monetary policy - its monetary sovereignty. In other words, there would be no authority in Argentina that can either print money or decide the price of parting with it.

Dollarization appeal is obvious. Argentine factories don’t have enough dollars to buy key imports and have had to slash production and ramp up trade finance. The government owes $6 billion to international bondholders and $36 billion to the IMF.

Why Milei wants dollarization? Firstly, he wants to bring price stability to the economy in a quick manner. Since the US dollar is the default currency of the world, its value is not easily altered. Secondly, it will ensure that the government and the central bank are in no position to influence monetary policy.

Will the dollarization in Argentina fail? Many claim that Milei may not be able to achieve dollarization because of his relative inexperience as a politician and the weakness of his mandate. But even if he is successful in achieving dollarization and shutting down the central bank, some claim the policy won’t work.

It will be because the absence of a central bank doesn’t necessarily mean that the government will not spend beyond its means. The private sector will have access to financial resources which might cost more, leading to high inflation.

Moreover, for a country to shift to dollars, its banks and its government should have dollars to begin with. If they don’t, the economy can’t shift to dollars. By most estimates, Argentina’s government needs $40 billion for this transition. It is also reported that at present Argentina is struggling to pay back the IMF’s debt of $44 billion.

Yet those who identify with Milei’s beliefs point out that dollarisation could actually work. They argue that the monetary sovereignists miss the essential point behind dollarization which is to protect ordinary people’s purchasing power from the wrath of the incompetent central bank.

They gave the example of semi-dollarized Peru and Latin America’s three fully dollarized countries Panama, Ecuador, and El Salvador that have witnessed a slowdown in their inflation after adopting the dollar.

In case of the scarcity of required dollars to make this shift, it has been shown that Argentina’s central bank's total liabilities stand at around 18.8 trillion pesos. These liabilities refer to all the money it prints; its assets are things like gold and hard currencies. If these liabilities are exchanged at the free market rate of 470 pesos to a dollar, Argentina will have the money it needs.