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The US has been running deficits for decades and doesn’t face the same level of persistent inflation as Argentina.

QuarterReptile 5y ago
There is no way to succinctly describe all the myriad differences between the two countries that make this comparison unhelpful for understanding Argentinian inflation.
- wbsss4412 5y ago
  Indeed I am using a shorthand her to summarize the issues as well. My response is meant to highlight the fact that the situation is not nearly as “simple” as a government that runs fiscal deficits. I don’t know every detail about Argentina, but broad strokes, when you have a failing political class that is unable to effectively levy taxes and maintain international credit worthiness, you are going to have financial trouble. People love to blame spending and get moralistic about it but that’s typically not the primary issue.
  - Izikiel43 5y ago
    Ehh, in this case it is, they are spending much more than we earn, and to cover that they used to take debt. Now no one lends to Argentina at a nice rate, so they emit internal debt by printing a ton of ARS to finance themselves, thus generating inflation. If they stop printing, they have to stop spending as well as cutting spending, leading to a raise in interest rates and a quick economic crash instead of the slow burn situation as of now. The current government is just trying to hold on until next elections, so when the economy explodes they can blame the next government for it.
    - wbsss4412 5y ago
      It’s not that what you’ve written here is incorrect, but that this doesn’t say anything about what the remedy should be. Simply letting the economy crash isn’t a good solution as it doesn’t address the fundamental reforms that are needed and doesn’t get you any closer to solving the structural issues. All it does is create unnecessary pain for people. Again, if an entire society is engaging in rampant tax evasion, that is going to need to be addressed in order to turn things around.
      - Izikiel43 5y ago
        The remedy are 10 years of austerity measures and free market reforms in order to start seeing the light at the end of the tunnel. This is also known as a political suicide.
      - ephbit 5y ago
        Those fundamental reforms - which aren't only necessary in Argentina but basically in every major country, apart from maybe China - would be to: Reverse the ever more effective mechanisms big corporations have come up with in almost every jurisdiction to siphon an ever increasing proportion of all revenues from the total of economic activity and bypass taxation, making only maybe the richest ten percent (who are the shareholders) richer. Governments can borrow as much money as they want and central banks can allow banks to create as much money as they want to feed it into the economy to try in a futile way to keep the engine going .. as long as this trickling up of revenue is happening to the extent it is right now, the whole economic/monetary/social system is instable and heading towards either collapse or drastic political reform. Unfortunately apart from some minor patches (plans to actually tax big players in the EU) I don't see much evidence for elected politicians trying to improve the situation.
Izikiel43 5y ago
Because everyone in the world likes and uses USD. In Argentina no one wants Argentinian pesos, people outside argentina like them even less, however you can use USD all over the world, so yeah, it's not comparable.
- wbsss4412 5y ago
  What you’ve written is just a tautology. USD are valuable because USD are valuable. Pesos aren’t valuable because pesos aren’t valuable. It doesn’t demonstrate why that is the case.
  - Izikiel43 5y ago
    > USD are valuable because USD are valuable. > Pesos aren’t valuable because pesos aren’t valuable. Welcome to fiat currencies, where a big incidence on the value of the currency is what people feel about it! Basically, it's offer and demand. The offer of pesos is huge vs the actual demand, so they lose value. That's also the reason for the inflation of the USD last year, the us government likes to print non stop.
    - wbsss4412 5y ago
      The US prints money because it can, Argentina prints money because it has to. (The monetary course taken by the fed in 2020 has proven quite successful, we’re at full employment with only moderate inflation as a price, which will be addressed in coming year) The money printing is a symptom of deeper issues.
berns 5y ago
That's something MMT gets right. Public deficits = net private savings. So as long as there are people willing to save in USD (and not only US residents, people all over the world save in USD, including Argentinians), you can have a persistent deficit. In case the 7% becomes persistent inflation, make sure you have a plan B, you don't want to lose reserve currency status.
- wbsss4412 5y ago
  MMT gets a lot of things right, most of its critics seem to simply have not actually studied it at all, or have been informed primarily by sensationalist contrary takes.
tagoregrtst 5y ago
The dollar is the world reserve currency. The extra printed money is diluted over an economy more than four times as large. France (now the EU) does the same thing by forcing its ex-colonies to use the convertible franc. France’s inflation gets exported to Africa
deleted 5y ago
[deleted]

There is no way to succinctly describe all the myriad differences between the two countries that make this comparison unhelpful for understanding Argentinian inflation.

wbsss4412 5y ago
Indeed I am using a shorthand her to summarize the issues as well. My response is meant to highlight the fact that the situation is not nearly as “simple” as a government that runs fiscal deficits. I don’t know every detail about Argentina, but broad strokes, when you have a failing political class that is unable to effectively levy taxes and maintain international credit worthiness, you are going to have financial trouble. People love to blame spending and get moralistic about it but that’s typically not the primary issue.
- Izikiel43 5y ago
  Ehh, in this case it is, they are spending much more than we earn, and to cover that they used to take debt. Now no one lends to Argentina at a nice rate, so they emit internal debt by printing a ton of ARS to finance themselves, thus generating inflation. If they stop printing, they have to stop spending as well as cutting spending, leading to a raise in interest rates and a quick economic crash instead of the slow burn situation as of now. The current government is just trying to hold on until next elections, so when the economy explodes they can blame the next government for it.
  - wbsss4412 5y ago
    It’s not that what you’ve written here is incorrect, but that this doesn’t say anything about what the remedy should be. Simply letting the economy crash isn’t a good solution as it doesn’t address the fundamental reforms that are needed and doesn’t get you any closer to solving the structural issues. All it does is create unnecessary pain for people. Again, if an entire society is engaging in rampant tax evasion, that is going to need to be addressed in order to turn things around.
    - Izikiel43 5y ago
      The remedy are 10 years of austerity measures and free market reforms in order to start seeing the light at the end of the tunnel. This is also known as a political suicide.
    - ephbit 5y ago
      Those fundamental reforms - which aren't only necessary in Argentina but basically in every major country, apart from maybe China - would be to: Reverse the ever more effective mechanisms big corporations have come up with in almost every jurisdiction to siphon an ever increasing proportion of all revenues from the total of economic activity and bypass taxation, making only maybe the richest ten percent (who are the shareholders) richer. Governments can borrow as much money as they want and central banks can allow banks to create as much money as they want to feed it into the economy to try in a futile way to keep the engine going .. as long as this trickling up of revenue is happening to the extent it is right now, the whole economic/monetary/social system is instable and heading towards either collapse or drastic political reform. Unfortunately apart from some minor patches (plans to actually tax big players in the EU) I don't see much evidence for elected politicians trying to improve the situation.

Izikiel43 5y ago

Because everyone in the world likes and uses USD. In Argentina no one wants Argentinian pesos, people outside argentina like them even less, however you can use USD all over the world, so yeah, it's not comparable.

wbsss4412 5y ago
What you’ve written is just a tautology. USD are valuable because USD are valuable. Pesos aren’t valuable because pesos aren’t valuable. It doesn’t demonstrate why that is the case.
- Izikiel43 5y ago
  > USD are valuable because USD are valuable. > Pesos aren’t valuable because pesos aren’t valuable. Welcome to fiat currencies, where a big incidence on the value of the currency is what people feel about it! Basically, it's offer and demand. The offer of pesos is huge vs the actual demand, so they lose value. That's also the reason for the inflation of the USD last year, the us government likes to print non stop.
  - wbsss4412 5y ago
    The US prints money because it can, Argentina prints money because it has to. (The monetary course taken by the fed in 2020 has proven quite successful, we’re at full employment with only moderate inflation as a price, which will be addressed in coming year) The money printing is a symptom of deeper issues.

berns 5y ago

That's something MMT gets right. Public deficits = net private savings. So as long as there are people willing to save in USD (and not only US residents, people all over the world save in USD, including Argentinians), you can have a persistent deficit. In case the 7% becomes persistent inflation, make sure you have a plan B, you don't want to lose reserve currency status.

wbsss4412 5y ago
MMT gets a lot of things right, most of its critics seem to simply have not actually studied it at all, or have been informed primarily by sensationalist contrary takes.

tagoregrtst 5y ago

The dollar is the world reserve currency. The extra printed money is diluted over an economy more than four times as large. France (now the EU) does the same thing by forcing its ex-colonies to use the convertible franc. France’s inflation gets exported to Africa

deleted 5y ago

[deleted]