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Is the Argentinian inflation being "fought" by any government program? I've studied a lot of Brazil's hyper-inflationary period, and boy was it difficult to ove

Is the Argentinian inflation being "fought" by any government program? I've studied a lot of Brazil's hyper-inflationary period, and boy was it difficult to overcome it. Basically, once the industrial growth went below the inflation-rate everything went (slowly) belly up. It happened at two distinct times: one at Kubitschek's presidency, and the other during the military junta. Trouble is that our economy became "indexed" everywhere, so people would mark-up their prices at inflation+x%, then the _actual_ inflation would be the forecast+x%, which is an exponential process. After two decades of failed attempts, the solution was found via a financial reform, done all throughout the 90s, and then a modern copy of Germany's anti-hyper-inflation Rentenmark program, which created the Real. The solution (or so the mainstream history says) was to create a price "anchor" for everyone, which was pegged to the dollar (one of the main culprits were the large devaluations vis-a-vis the USD, a vicious cycle of inflate->devalue->inflate->...), and at the same time attracting foreign investment via a large real interest rate (far above the remaining inflation). What we are going through now in Brazil is a slow reversal of that, inflation is picking up again, and the central bank's actions are seemingly slowing down the economy and not being able to control inflation (so long, Phillips Curve).

Izikiel43 5y ago
> Is the Argentinian inflation being "fought" by any government program? Nope, the government loves inflation, as it reduces its debts and they can print all the money they want to pay for that. Politicians live in a different world than the average person, inflation is not an issue for them.
- dudzik 5y ago
  This is only the case if the bonds get issued in the country‘s currency. Argentina doesn’t have that luxury[0]. In the long run, if a government devalues its currency too much, investors lose trust, and the country cannot borrow money in its currency. Not necessarily a problem for current politicians since they will be out of office by the time the trust is lost. 0: https://www.reuters.com/article/idUSKBN26S07N https://www.reuters.com/article/idUSKBN26S07N
barry-cotter 5y ago
Macroeconomics is very far from perfect but we do know how to stop, or manage inflation. You can stop it by keeping the money supply stable (don’t print any more money than necessary to account for notes and coins wearing out it being lost). You can have constant low inflation by targeting the growth rate of the money supply (like the EU’s near but not at 2% target). That’s it. Plenty of countries don’t do that but it’s a matter of political will/popular support for ending inflation, not a technically difficult problem. At worst you can just adopt another country’s currency like Kosovo has the Euro or Costa Rica has the dollar.
- anikuni 5y ago
  Sure, that's an usual explanation. Quantity Theory of Money, which goes back to Copernicus. One could point out to different ones as well, such as Nitzan and Bichler's "differential accumulation", in which, having technological/growth difficulties, the ones who benefit most from stagnation are the ones who can jack up prices the most (entities who control most of the supply, with most mark-up power). Read: inflation. There are many other views as well, I just pointed out one which I like.
- imtringued 5y ago
  Mainstream economists don't know how to stop inflation. Keeping the money supply stable does not stop inflation. Inflation is ehat happens when you have a currency where a portion of it is not circulating in the economy and then suddenly becomes active and turns into demand for products and services. Even a gold standard will have inflation.
diegof79 5y ago
> Is the Argentinian inflation being "fought" by any government program? Another Argentinian here :) Yes, the current and past governments took different actions to reduce inflation. But, they weren't successful. It's a complex topic. I'm not an economist, but from my limited knowledge: - People don't trust ARS because they fear devaluation (like in 2001) or hyper-inflation (like in 1989). It means that many prices are tied to the ARS/USD exchange rate. When the dollar goes up, merchants that depend on imported goods raise prices to cover their stock in the future. (and it generates a domino effect) - The food production chain is not so dependent on imported goods, but it's one of the main products for export. When international prices go up, domestic prices rise as well. - Printing money is also a way to finance your economy when you have tons of debt (Ray Dalio has some easy-to-understand videos about it): Argentina has tons of debt. The current government did a lot of price control of certain products (mainly food and services). But, it's not working. I guess they cannot avoid printing money without causing other issues.
- anikuni 5y ago
  >The current government did a lot of price control of certain products (mainly food and services). Unfortunately, this seems to me like a populist/demagogic measure. We have tried it (a lot) in Brazil, and whilst it made some people seem better off (such as richer regions, like the SE) whilst others lost a great deal of purchasing power, it also caused massive shortages and the rise of a black market for common goods, with pretty hefty mark-ups and waiting times. > The food production chain is not so dependent on imported goods, but it's one of the main products for export. When international prices go up, domestic prices rise as well. Good point! It was (and still is) a major issue here. For example, today our domestic prices for fuel (gas and ethanol) and all commodities that we export (sugar, soybeans, iron ore, etc) are very correlated to the international prices. > Argentina has tons of debt So did we during our inflationary years, and both private loans as well as loans for public expenditure of all spheres, which were made so as to not raise taxes, and even to pay salaries (not even to make investments). Looking back this sounds absolutely bonkers. Today our debt is rising fast, but it's mostly internal (BRL-denominated bonds). I wonder how much more of it (and combined with what else) would kick off the inflationary process again.
bradleyjg 5y ago
Part of the problem is that the government can’t reasonably borrow money because Argentine bonds are along standing punchline. Argentina has defaulted nine times in just over 200 years. I don’t know how to restore credibility on that. Secure debt doesn’t really work against a sovereign so reputation is a big part of the debt market.
- IG_Semmelweiss 5y ago
  >>>> how to restore credibility... Balance budget? Cut government down to size? Open up the country to investment by rule of law? Its not difficult. Its just the ruling class has captured the levers of govt and the people dont know any better. Sweden was able to do this. Argentina is only special insofar that the people leading it are the wrong ones to be in power
  - bradleyjg 5y ago
    When did Sweden default on its debt? I don’t remember that.
    - IG_Semmelweiss 5y ago
      They didn't default on their debt, precisely because they got their house back in order. But this came at great price, with major suffering by the populace during a 4-year economic crisis. [1] Despite all the suffering and poverty caused, the government took the opportunity to reform healthcare, which was a disaster [2] and bring costs under control. Sweden has had a brighter future since. [1] https://en.wikipedia.org/wiki/Sweden_financial_crisis_1990-1994 https://en.wikipedia.org/wiki/Sweden_financial_crisis_1990-1... [2] p44 https://www.fraserinstitute.org/sites/default/files/SwedishHealthcareSystem.pdf https://www.fraserinstitute.org/sites/default/files/SwedishH...
  - pibechorro 5y ago
    Some ridiculous number of the population, like 90%, depend on gov paychecks. The politicians grow and grow the dependency, make promises to get elected, increase the debt, inflate the money, get caught stealing garbage bags worth of it while in office and it goes on and on until it collapses and the same bs recets. Each time more and more smart honest people flee, brain drain, and the ones left behind become poorer, more entrapped, more dependent. Argentines are seeking refuge in the blackmarket dollar, but that will eventually be a risk as well.

Izikiel43 5y ago

> Is the Argentinian inflation being "fought" by any government program? Nope, the government loves inflation, as it reduces its debts and they can print all the money they want to pay for that. Politicians live in a different world than the average person, inflation is not an issue for them.

dudzik 5y ago
This is only the case if the bonds get issued in the country‘s currency. Argentina doesn’t have that luxury[0]. In the long run, if a government devalues its currency too much, investors lose trust, and the country cannot borrow money in its currency. Not necessarily a problem for current politicians since they will be out of office by the time the trust is lost. 0: https://www.reuters.com/article/idUSKBN26S07N https://www.reuters.com/article/idUSKBN26S07N

barry-cotter 5y ago

Macroeconomics is very far from perfect but we do know how to stop, or manage inflation. You can stop it by keeping the money supply stable (don’t print any more money than necessary to account for notes and coins wearing out it being lost). You can have constant low inflation by targeting the growth rate of the money supply (like the EU’s near but not at 2% target). That’s it. Plenty of countries don’t do that but it’s a matter of political will/popular support for ending inflation, not a technically difficult problem. At worst you can just adopt another country’s currency like Kosovo has the Euro or Costa Rica has the dollar.

anikuni 5y ago
Sure, that's an usual explanation. Quantity Theory of Money, which goes back to Copernicus. One could point out to different ones as well, such as Nitzan and Bichler's "differential accumulation", in which, having technological/growth difficulties, the ones who benefit most from stagnation are the ones who can jack up prices the most (entities who control most of the supply, with most mark-up power). Read: inflation. There are many other views as well, I just pointed out one which I like.
imtringued 5y ago
Mainstream economists don't know how to stop inflation. Keeping the money supply stable does not stop inflation. Inflation is ehat happens when you have a currency where a portion of it is not circulating in the economy and then suddenly becomes active and turns into demand for products and services. Even a gold standard will have inflation.

diegof79 5y ago

> Is the Argentinian inflation being "fought" by any government program? Another Argentinian here :) Yes, the current and past governments took different actions to reduce inflation. But, they weren't successful. It's a complex topic. I'm not an economist, but from my limited knowledge: - People don't trust ARS because they fear devaluation (like in 2001) or hyper-inflation (like in 1989). It means that many prices are tied to the ARS/USD exchange rate. When the dollar goes up, merchants that depend on imported goods raise prices to cover their stock in the future. (and it generates a domino effect) - The food production chain is not so dependent on imported goods, but it's one of the main products for export. When international prices go up, domestic prices rise as well. - Printing money is also a way to finance your economy when you have tons of debt (Ray Dalio has some easy-to-understand videos about it): Argentina has tons of debt. The current government did a lot of price control of certain products (mainly food and services). But, it's not working. I guess they cannot avoid printing money without causing other issues.

anikuni 5y ago
>The current government did a lot of price control of certain products (mainly food and services). Unfortunately, this seems to me like a populist/demagogic measure. We have tried it (a lot) in Brazil, and whilst it made some people seem better off (such as richer regions, like the SE) whilst others lost a great deal of purchasing power, it also caused massive shortages and the rise of a black market for common goods, with pretty hefty mark-ups and waiting times. > The food production chain is not so dependent on imported goods, but it's one of the main products for export. When international prices go up, domestic prices rise as well. Good point! It was (and still is) a major issue here. For example, today our domestic prices for fuel (gas and ethanol) and all commodities that we export (sugar, soybeans, iron ore, etc) are very correlated to the international prices. > Argentina has tons of debt So did we during our inflationary years, and both private loans as well as loans for public expenditure of all spheres, which were made so as to not raise taxes, and even to pay salaries (not even to make investments). Looking back this sounds absolutely bonkers. Today our debt is rising fast, but it's mostly internal (BRL-denominated bonds). I wonder how much more of it (and combined with what else) would kick off the inflationary process again.

bradleyjg 5y ago

Part of the problem is that the government can’t reasonably borrow money because Argentine bonds are along standing punchline. Argentina has defaulted nine times in just over 200 years. I don’t know how to restore credibility on that. Secure debt doesn’t really work against a sovereign so reputation is a big part of the debt market.

IG_Semmelweiss 5y ago
>>>> how to restore credibility... Balance budget? Cut government down to size? Open up the country to investment by rule of law? Its not difficult. Its just the ruling class has captured the levers of govt and the people dont know any better. Sweden was able to do this. Argentina is only special insofar that the people leading it are the wrong ones to be in power
- bradleyjg 5y ago
  When did Sweden default on its debt? I don’t remember that.
  - IG_Semmelweiss 5y ago
    They didn't default on their debt, precisely because they got their house back in order. But this came at great price, with major suffering by the populace during a 4-year economic crisis. [1] Despite all the suffering and poverty caused, the government took the opportunity to reform healthcare, which was a disaster [2] and bring costs under control. Sweden has had a brighter future since. [1] https://en.wikipedia.org/wiki/Sweden_financial_crisis_1990-1994 https://en.wikipedia.org/wiki/Sweden_financial_crisis_1990-1... [2] p44 https://www.fraserinstitute.org/sites/default/files/SwedishHealthcareSystem.pdf https://www.fraserinstitute.org/sites/default/files/SwedishH...
- pibechorro 5y ago
  Some ridiculous number of the population, like 90%, depend on gov paychecks. The politicians grow and grow the dependency, make promises to get elected, increase the debt, inflate the money, get caught stealing garbage bags worth of it while in office and it goes on and on until it collapses and the same bs recets. Each time more and more smart honest people flee, brain drain, and the ones left behind become poorer, more entrapped, more dependent. Argentines are seeking refuge in the blackmarket dollar, but that will eventually be a risk as well.