Economic stagnation is not preferable to inflation. It'll take a while to see how CoL responds to this but my fear is that these changes will drive down effective purchasing power.
this post was submitted on 18 Apr 2024
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Um it kinda is.
The central bank will absolutely put the country into a recession to stop inflation. That's usually why central banks aren't controlled by the government in power, because the government in power can impact things to improve their situation at the expense of the country.
Too much inflation is bad. Inflation that Argentina has, that's a whole other level, that's a potential country killer.
In a normal economy, balancing growth versus inflation is certainly an important issue. But when an economy is undergoing hyperinflation, getting that under control has to be priority number one.
Keynes, for example, wrote eloquently about this a century ago. Some of his passages apply quite eerily to the case of Argentina:
The preservation of a spurious value for the currency, by the force of law expressed in the regulation of prices, contains in itself, however, the seeds of final economic decay, and soon dries up the sources of ultimate supply. If a man is compelled to exchange the fruits of his labors for paper which, as experience soon teaches him, he cannot use to purchase what he requires at a price comparable to that which he has received for his own products, he will keep his produce for himself, dispose of it to his friends and neighbors as a favor, or relax his efforts in producing it...
The effect on foreign trade of price-regulation and profiteer-hunting as cures for inflation is even worse. Whatever may be the case at home, the currency must soon reach its real level abroad, with the result that prices inside and outside the country lose their normal adjustment. The price of imported commodities, when converted at the current rate of exchange, is far in excess of the local price, so that many essential goods will not be imported at all by private agency, and must be provided by the government, which, in re-selling the goods below cost price, plunges thereby a little further into insolvency.
Only if inflation is the only metric of concern, but a stalled economy with low inflation and massive unemployment is not a healthy situation. Austerity does not tend to foster economic growth and I worry they've decided to focus solely on one of their problems. Hopefully it's actual improvement.
Austerity does not tend to foster economic growth
I mean, that's precisely the point. Growth isn't really the priority right now, because that also tends to increase inflation. The loose aim of Milei's plan is to return things to an actually accurate economic baseline by cutting extremely distortionary government spending and subsidies and allowing the peso to fall to its true actual value, and only then pivoting to focus on real and sustainable growth that's actually backed by legitimate increases in efficiency and production rather than government money printers and IMF loans that only make the problem worse.
I won't pretend that this approach doesn't have some harsh consequences on people that will be disproportionately born by the poor or that there aren't any other options, but there is a legitimate economic basis for the idea. Whether it's worth it or is fair and just is another question.
Exactly, stop the runaway inflation. Small inflation is good, stops the hoarding of capital, but runaway inflation just destroys capital. Usually an independent central bank aims for 3-6% inflation to bring stability to a country, and stability leads to prosperity
This is like that article published recently about the IMF predicting the Russian economy will grow most out of all developed countries. It's because of war production, which is neither real nor useful economic growth, and only short-term.
Argentina's inflation is down because demand has been decimated i.e. increased poverty, and people who were recently middle class now don't even have a mailing address.
Housing and worker rights are very strong in Argentina. They have an address but no food or electricity.
So basically, inflation was around 10% monthly with previous government. This one took it to 25%, destroyed salaries, increased unemployment and poverty, stopped education, science and health spending, and somehow, it's good news that is still higher than before?
211% anual with last government. That's not even close to 10% monthly. Try almost 18%
150% annual predicted with this one
211>150
Ergo inflation down
You don't get to count last December inflation as last government's. Did you forgot that the idiot cheered the value, saying that he "avoided a hyperinflation of 16.000%"? Last year was between 100% and 150%, this year will be way more than that. I know you may not like it, but that's the truth. Sorry kid.