You’re right Gouchobob, the government seem to be pursuing a policy of growth at all costs, regardless of inflation. I know I keep bringing up similarities to Weimar but that is what they did in post-WWI Germany. Germany went on an inflationary growth period after the war compared to the other major nations, the victors in the war. They took a deflationary policy. The result was a sharp, yet moderately short depression in Britain, the US etc with almost 20% unemployment in Britain. This was compared to Germany, which had full employment. Of course there were other reasons for Germany’s policy, including the idea that if inflation was high it would be impossible to fix an adequate reparations price etc. But it was a way of mitigating the social effects of high unemployment that low growth would have allowed to fester without inflation. Argentina seems to be doing that. Also the government spending and largesse is of course a good way to pay off and buy supporters for elections such as the upcoming Presidential election. But virtually all growth comes to an end soon and this policy is totally unsustainable.
China is a biggie. There is certainly a boom, which although the Chinese government is trying to prevent going out of control, there does seem to be signs of oversupply. It could all fall apart. One just has to look at Japan. From what I remember from New Years Eve 1989 when the Nikkei hit its highest nearly 40,000 points it dropped and by 1993 a housing bust occurred, saddling Japanese banks with horrific debt that left them almost zombie-like. Japan is still wrestling with the effects of that. Come to think of it, has any property bubble been successfully deflated without major impact on the overall economy? Anywhere? Maybe someone could help me out on that one.
But they are dangerous things and I see the effects of it in my home country of Ireland. While there isn’t the mad speculative frenzy that occurred in Ireland, yet, that could occur soon but it is not necessary for things to get out of hand. There is a real danger in China of things getting out of control. If it happens it wont be pretty for all and it will have an effect in Argentina. China is slowly becoming the biggest consumer in the world. If a bust happened even now it will have consequences for people in Argentina. That’s globalization for you!
The government’s policy of fining anyone who gives inflation figures that differ from the national statistics agency is just proof that they know what is going on and see the danger of it. I suppose people don’t complain about it as much as inflation seems to be something the people of Argentina are used to. Just like the rain at home in Ireland, us Irish might grumble but we take it as part of the environment. Inflation is part of the economic and social environment of Argentina.
