Argentina on the cusp of hyperinflation

[gouchobob]

We are all printing to oblivion, trying to inflate our way out of our problems. The only question for the AR Peso is, will there be another flight to safety of the US dollar? I think there will be. Its still the tallest midget in a group of monetary midgets.

I agree I think this is a likely outcome. To see how soon this will end watch China and the degree its economy slows down, certainly signs of this now. If China slows down significantly then commodity prices are going to fall which will have a big impact on South American and Argentina. What will happen in Argentina is that the money coming into the government is going to dry up dramatically. They will be forced to drastically cut spending or crash the economy. Neither option is going to be pretty. But one thing it will do is slow down inflation here dramatically. I would look for this to happen probably within the next 18 months although picking a date by anybody is just a guess.

 

[gouchobob]

thanks for posting the article gauchobob.

unforunately, the policies which the gov't are enacting that are meant to benefit the working man and the lower class may do more harm than good in the long run.

inflation always hits the lower class the hardest, the rich are never all that hurt by inflation as they can make financial transactions to hedge off high inflation...and some will even make money off of it.

oh well, should be interesting this year.

I agree, much better to have sustained growth of 3 or 4% a year than a few years of high growth followed by a crash where all past progress is wiped out. You would think as the article states that a few lessons would have been learned in Argentina from past problems but apparently not.

 

[jago25_98]

I'll say it before and I'll say it again.

You've got to start using a non fiat currency in your everyday life where ever you can. Every time you can do so you protect yourself.
The journey of a thousand miles takes just that first step. Just that first transaction.

One transaction. What could it be.

Aim higher than rolled up dollars because I think that strategy is not going to work forever.

gold, egold, trading, business bartering, bitcoin... inflation can't be that bad yet because if it was people would be scared and forced to take these things seriously.

Can you take an income in another form?
Can you pay for common bills in another form?

I'm not saying to try this with everything, just one little thing.

Argentina amazed me with a resilient economy but it's still very open to inflation. And you are open to that risk. But imagine if you were able to take a regular income in, gold say, and pay for your vegetables in that gold. You and your veg stall owner are going to feel a little sense of hope in that. But it requires preparation now

 

[marksoc]

What I read here is the posts of people that cannot accept that the US is done and gone. China is not going to slow down for a decade, their problem is that they are going too fast! Argentina and Brazil will continue to grow,CFK will be president in 2011, the socialism will make inroads with Sabbatella, Binner and maybe Pino, inflation will depend on demand (but I suspect that it will be always high for our Chicago-Grondona-Friedmanites), and Argentinians will continue living as we always did. And one more: the US Dollar is not all the fiat currencies, it is only one,and another one will take its place.

 

[Hache]

His mother had to go to the supermarket one day and buy a lot of food cause she didn't know if the price would go up the next day......

As I hear it prices in supermarkets would go up in the same day. Wonder how this iphone generation who as adults have only known good times will cope with the fun ahead if it happens.

I was only 12, but I'll never forget the vertigo. It was crazy. Prices went up by the frigging minute. I used to stop by the kiosko on my way back home after school and buy an alfajor, but there was no knowing if the "money" in my pocket would be enough for a single chewing gum, let alone the precious alfajor. For a kid like me, not being able to grasp what was happening was more frustrating than not being able to afford what I wanted to buy (and I just wanted an alfajor, people, not a PS3 or an Atari console at the time). At least I learned that money is a volatile thing with no value but a circumstantial one, and that if I wanted to save it, it should come from a country where people in charge of printing it knew what they were doing. I also learned that no crisis is fatal, and if this little "developing" country could survive 1989 and 2001 (the last the worse IMO), any country can. In fact, we did so well surviving we are starting to like it.

So from that point on I got used to saving green notes with Benjamin Franklin on the front looking at me as if saying "I trust God, you just trust me". So many fellow Argentines are solvent enough to buy their colorful Che Guevara t-shirts thanks to Benji's God-trusting solidity. I don't trust any piece of paper out there, but I reckon some are more reliable, and thanks God I did trust my brother-in-law when he warned me in 2001 about the upcoming corralito six months in advance, saving my savings. Redundancy can be ironic, but irony never redundant.

And to the iphone generation cuddled in the comforts of digital life, all this Commodore 64 Generation Xer can say is CURTANSE!!!

 

[Amargo]

It always amazes me people claiming they can predict when something in the financial World will happen. If they were good at all at that, they would be too busy counting bills for posting here.

 

[perry]

Anyone claiming that the US dollar is a safe currency has rocks in their heads . Since 2003 the US dollar has lost over 70 percent of its buying power in Argentina due to inflation . Most big ticket item in dollar terms has tripled in price since then . The USA is the biggest printer of currencies worldwide and its printing presses have gone haywire of late causing the inflation we are seeing at rampant levels worldwide.

Keeping fiat currencies as savings is a fools game . Keep your money safe in gold, silver , perishable foods and carefully selected property investments.

The US dollar is now deflating at record rates worldwide and inflation has never been higher from China. Russia. Europe and all the planet.

 

[dr__dawggy]

Anyone claiming that the US dollar is a safe currency has rocks in their heads . Since 2003 the US dollar has lost over 70 percent of its buying power in Argentina due to inflation . Most big ticket item in dollar terms has tripled in price since then . The USA is the biggest printer of currencies worldwide and its printing presses have gone haywire of late causing the inflation we are seeing at rampant levels worldwide.

Keeping fiat currencies as savings is a fools game . Keep your money safe in gold, silver , perishable foods and carefully selected property investments.

The US dollar is now deflating at record rates worldwide and inflation has never been higher from China. Russia. Europe and all the planet.

The US is making many of the same mistakes as Argentina prior to the crash of 2001/2....the US cannot continue to ignore its debt problem without suffering similar consequences. The big difference between the two is that the US economy has proven to be amazingly resilient over time. IF (and this is a big IF) the US government adopts the reforms suggested by the bipartisan Commission on Fiscal Responsibility, watch the US economy rebound very quickly....resulting in a stronger dollar (although too strong a dollar would make US goods expensive on the global market, and would be bad for recovery). If this scenario unfolds, watch the Gold bubble burst....

I wish I had a crystal ball. Alas, I do not know what will happen....so I am hedging my bets by keeping some of my money in dollars, some in hard metals and some in real estate....

 

[gouchobob]

The US is making many of the same mistakes as Argentina prior to the crash of 2001/2....the US cannot continue to ignore its debt problem without suffering similar consequences. The big difference between the two is that the US economy has proven to be amazingly resilient over time. IF (and this is a big IF) the US government adopts the reforms suggested by the bipartisan Commission on Fiscal Responsibility, watch the US economy rebound very quickly....resulting in a stronger dollar (although too strong a dollar would make US goods expensive on the global market, and would be bad for recovery). If this scenario unfolds, watch the Gold bubble burst....

I wish I had a crystal ball. Alas, I do not know what will happen....so I am hedging my bets by keeping some of my money in dollars, some in hard metals and some in real estate....

I agree, the U.S. has to get its financial house in order. This needs to start happening now and over the next couple of years. There is going to have to be some big cuts and some tax increases. If nothing has changed in a couple of years then I would start to worry.

I not a big fan of gold or real estate right now. Commodities in general are in a bubble I believe along with real estate in many countries. If I am correct about China slowing down significantly then commodity prices will likely plunge(including gold) and take a lot of the inflated real estate with it. If this happens then the dollar and dollar based investments are likely to be the safe haven and the place to have your money for a least a couple of years.

The near term future for Argentina isn't bright in my opinion due to the gross mismanagement of the economy by the current government. Argentina's long term future is bright if the political problems plaguing the country for the last 60 years can ever be successfully addressed.

 

[Canick]

i have been told that gold is in a bubble by my 'wall street' friends since i started buying it at $250 an ounce. then again as it settled in the $600's, then again when it broke a $1000. now it's at $1400 after a massive 10 year bull market, and yet MOST 'joe average' people in europe and north america still don't own gold (neither ETF's like GLD or physically). They have been "educated" that there is no real upside to gold, other than the rainy day part of your portfolio. I believe until the public jumps on the bandwagon, and your cab driver is advising you to buy gold, its still a solid investment.

The chinese are long term thinkers. They are the largest producers and one of the world's biggest consumers of gold (india #1). The gov't actively encourages its citizens to own it, and there has been much talk out of China to lose the USD as the world reserve currency and have some new combo (euro/china/jap/usd/gold). Why? They own 900 billion of US bonds and are watching their investment lose value daily.
The US (FED/Central banks) are anti gold as they want to continue to keep Federal reserve notes (dollars) as the world reserve currency. In essence they are inflating away their debt.

what does this all mean? I have no crystal ball either, but today these US debts are in simple terms are being "Eased" by the help of more dollars. As Quantitive Easing 2 now approaches its end date, will they continue with QE 3, 4 ETC?
if they do this, it is bullish for gold and I expect gold to go from $1400 as high as $2000 in the next 12-18 months.

For me, what we all seem to see more blatantly here in Argentina, is happening in the US as well. It's just way more subtle.

I was here during hyperinflation in '89. something I will always remember was the cab drivers would get out after each fare and change their pesos into dollars. they couldn't risk going any real length of time without the purchasing power of the peso dropping at a crazy rate. Maybe some day soon, we will be changing our dollars into gold, or another fiat currency backed by gold!
my final two centavos:
The major forces world wide right now are DEFLATIONARY. Too much debt! if the world markets were left alone without intervention, we would have a nasty depression and finally a correction. But no politician, whether Obama or Cristina would get re-elected if this happened. They need to make things appear 'good' on their watch, even if that means pushing the problem to someone else further down the line.
SO the financial powers at be are trying their hardest to 'correct' those deflationary forces by 'dropping dollars from helicopters' as the FED chairman once said.
Thus we have this unstable US/world market that swings daily.
Could hyperinflation hit the US too? Why thats crazy talk! But for now, I'm holding on to my gold and let it ride....it's the only thing I think will maintain its value and purchasing power. For me, the smart play is about who loses the least in these uncertain times, not who makes the most.
n