Argentina on the cusp of hyperinflation

[MikeB12]

The common, modern definition is still from the Cold War divide:

First World: USA and her allies
Second World: Russia and her allies
Third World: developing countries
(Fourth World: indigenous peoples)

So why are people so ready to classify Argentina as Third World rather than a First World country fallen on hard times like its neighbour in the north?

My guess is because as of now, the US still has biggest economy in the world and it is far more advanced than that of Argentina. Sure, things could change in the future.

I remember hearing somewhere they are using a new classifying system -- "less developed, developing, and developed" something like that. Not that these ranking systems are all that useful or meaningful anyways.

 

[dennisr]

BUENOS AIRES (Dow Jones)--Argentina's Central Bank said Thursday it met one of its key monetary objectives in the first quarter, keeping money supply growth within target range.
In a report on first quarter policy, the bank said its benchmark M2 measure of money supply grew 4.8%, or 0.5 percentage points below its target.
Its so-called M2 private grew 4.5%, also within its set goal, according to the bank.
The bank has set the goal of allowing the money supply to grow 29.2% annually during 2011.
-By Taos Turner, Dow Jones Newswires; 5411-4103-6728; [email protected]

 

[Joe]

Argentina could be heading into the perfect storm:

1) 2011: Hyperinflation rears its ugly head and people seek the traditional safety of the US dollar and move all there assets there. How many people in Argentina have safes stuffed with greenbacks?

2) 2012: A run on the dollar occurs when the Japanese escalate their US Treasury sales with the Chinese and Arabs running to sale their holdings before the door closes.

3) Argentinos run to casas de cambio to try to buy Euros or other currencies - but all the casa de cambios only have dollars and peso Argentinos available. All the agencies have "No Euro" signs posted.

4) Winter of 2012, Argentine families burn pesos to stay warm. The rich families in Recoleta burn dollars...

 

[xibeca]

Argentina could be heading into the perfect storm:

1) 2011: Hyperinflation rears its ugly head and people seek the traditional safety of the US dollar and move all there assets there. How many people in Argentina have safes stuffed with greenbacks?

2) 2012: A run on the dollar occurs when the Japanese escalate their US Treasury sales with the Chinese and Arabs running to sale their holdings before the door closes.

3) Argentinos run to casas de cambio to try to buy Euros or other currencies - but all the casa de cambios only have dollars and peso Argentinos available. All the agencies have "No Euro" signs posted.

4) Winter of 2012, Argentine families burn pesos to stay warm. The rich families in Recoleta burn dollars...

Exactly.

And the smart middle class people who put their money into commodities like gold and silver will be able to buy up everything for scrap.

 

[gouchobob]

Argentina could be heading into the perfect storm:

1) 2011: Hyperinflation rears its ugly head and people seek the traditional safety of the US dollar and move all there assets there. How many people in Argentina have safes stuffed with greenbacks?

2) 2012: A run on the dollar occurs when the Japanese escalate their US Treasury sales with the Chinese and Arabs running to sale their holdings before the door closes.

3) Argentinos run to casas de cambio to try to buy Euros or other currencies - but all the casa de cambios only have dollars and peso Argentinos available. All the agencies have "No Euro" signs posted.

4) Winter of 2012, Argentine families burn pesos to stay warm. The rich families in Recoleta burn dollars...

Don't worry I'm sure the Argentine government version of events will be spun positively here, just listen to this and you can escape reality without any external aids.

 

[barnaby33]

Joe et al, your 4 step process is missing a few steps in the middle. The first one being the collapse of both the Euro and Yen before the dollar, which causes short to medium term flight to safety in dollars. Kinda negates point 3.

 

[dr__dawggy]

Joe et al, your 4 step process is missing a few steps in the middle. The first one being the collapse of both the Euro and Yen before the dollar, which causes short to medium term flight to safety in dollars. Kinda negates point 3.

+1

The future of the dollar depends upon the ability of the Congress and President to agree on a means to reduce the deficit through a combination of budget cuts and taxes. President Obama will deliver his vision this evening. The Republicans have already offered a plan that calls for dramatic cuts in spending and even deeper cuts in taxes for the wealthiest Americans. The subious rationale for the latter is that tax cuts stimulate the economy and generate more revenue,not less. The prez will offer a vision that includes raising taxes on the wealthiest Americans coupled with cutting expenses. The expenses he will propose to cut will include areas the Republican plan ignores, such as military spending.

It will be an interesting and important debate to follow.

 

[Joe]

Joe et al, your 4 step process is missing a few steps in the middle. The first one being the collapse of both the Euro and Yen before the dollar, which causes short to medium term flight to safety in dollars. Kinda negates point 3.

Actually not, because the point of point 3 is that the Argentines are going to get suckered into buying dollars and then have the rug pulled out from under them. Under your scenario people are actually going to hoard even more dollars. Yikes!!

Because of Argentina's economic history, where the dollar was a true safe haven, the Argentines have an unfounded confidence in the current safety of the dollar - which may end up disastrously for them.

I have talked to several Argentines about diversifying into precious metals, commodities, farmland, etc. but most seem intent on buying TVs and cars like crazy to beat inflation or stockpiling dollars.

During the last crisis, some people had money to spend because they had a safe at home stuffed with greenbacks. Next time that might not work. It could be a blood bath here...

 

[clooz]

Overall seeking-alpha is a good site to watch for timely and insightful financial news. The piece linked to isn't news however, it's boiler-plate Austrian-school economics, with selected Argentine data as filler. For informed debate on a topic this complex, the FT is a better source.

 

[Joe]

Argentina’s real problem with inflation is that it is not yet seen as a problem. Only when price rises get into the triple digits do Argentines – who have lived through painful hyperinflation – start to worry. So while many western countries would be thrust into crisis by the prospect of 30 per cent inflation, as Argentina faces this year according to private economists, here people are blasé. “People are anaesthetised and asleep,” is the blunt impression of Graciela Bevacqua, who was fired from her job of head of the official consumer price inflation index in 2007.

http://blogs.ft.com/beyond-brics/2011/04/03/argentine-inflation-not-a-problem/