Do you fear a crash similar to 2001?

[rickulivi]

Toongeorges: I don’t think your statement that German hyperinflation led to financial responsible is totally accurate. More meaningful, it was one of the reasons that led to the rise of Hitler. And we know the catastrophe that occurred as a result.

 

[Daniel82]

I work with a few senior level executives of several finance multi nationals, namely one entity who has, up until about a week ago, remained optimistic about the situation, but who has now given its portfolio of clients a very diplomatic chat about how it’s going to get extremely rough for the next few months, with the dollar being out of control (if you speak Spanish, check out interviews last week with the Vice President of the nation who seemed totally out of touch with what was going on with the dollar, even admitting in the interview that she was ‘confused’ about it, etc), and while it won’t be the exact same as 2001 with the banks not allowing people to take out money, the prediction is that the dollar will continue to soar but so will the prices— and that it’s going to get extremely rough for many people to afford basic essentials, and you can forget about the little ‘caprichitos’ of treats and splurges.

This isn’t some clairvoyant prediction, but the ‘chat’ that is being given to foreign investors by a highly reputable source at this time.

 

[sergio]

Why can't Argentines be like Germans? Why can't Spaniards be like Germans? Why can't Italians be like Germans? It simply isn't in the genes - culture or whatever you want to call it.

The figures cited above do not surprise me at all. Reduce the number of public employees in the northern provinces and you will have mass starvation. The only way to deal with that would be through welfare spending.

Change labor laws? Good luck. And if they were to be changed, employers would fire indiscriminately leaving employees with no or little severance pay. Older employees would be discriminated against creating another problem. There would be no moderation. It would just be one giant gift to companies. It's a catch 22 because as the law is now it creates inefficiency; take it away and employers would abuse their power.

 

[pizzadreams]

Germany once had hyperinflation. They got rid of it by a government who became financial conservative and is now booking budget surpluses. In Germany, the trauma of inlation led to financial responsibility, why is this not possible in Argentina? Maybe Germans are more honest or integer to do what needs to be done?

You answered your own question

I would call the spending of Argentinians smart behaviour instead of a chronic disease in the context of high inflation. Why would people hold on to their pesos if they are worth more today than tomorrow?

Here´s the thing. Argentines don´t spend like they do because of high inflation (they can rely in another currency like the dollar) but because they´re culturally -or whatever you want to call it- inclined to do so. Nothing good can come of reckless spending. In fact, one thing I´ve noticed is that latinos, ironically, tend to be way less "smart" with their money than people from richer countries. Yes, they earn much less, and the world itself is materialistic, we all crave things, but they are, for a lack of a better word, naive when it comes to managing their finances and shopping around. If an Argentine thinks something´s cheap, he or she will get 2 of said item without thinking twice (the so called "dame dos") Examples like these abound, and no economy can prosper if its people can´t even keep their spending impulses in check, at least in relative terms

 

[pizzadreams]

Why can't Argentines be like Germans? Why can't Spaniards be like Germans? Why can't Italians be like Germans? It simply isn't in the genes - culture or whatever you want to call it.

The figures cited above do not surprise me at all. Reduce the number of public employees in the northern provinces and you will have mass starvation. The only way to deal with that would be through welfare spending.

Change labor laws? Good luck. And if they were to be changed, employers would fire indiscriminately leaving employees with no or little severance pay. Older employees would be discriminated against creating another problem. There would be no moderation. It would just be one giant gift to companies. It's a catch 22 because as the law is now it creates inefficiency; take it away and employers would abuse their power.

The last statement is not necessary true. Employers aren´t necessarily bad. They just -like every one of us- try to maximize their profits and play with the cards they´re dealt. Why wouldn´t there be any moderation? Even in progressive countries like Denmark, it is easy to fire someone. You don´t see major riots there. As a matter of fact, they might have a welfare state, but company taxes are low and their economies are open and dynamic. In many ways, they´re actually ranked more free than the US´s. It doesn´t have to be black and white. There is absolutely no moderation the way it is now.

 

[sergio]

Denmark has another culture. I suspect there is a better work ethic. It's also a very well organized society. Argentines in general do not have a strong work ethic nor are they an especially disciploned people. I imagine too that when someone is fired in Denmark the state steps in with generous unemployment compensation and other social welfare benefits. There isn't much of this in Argentina. As for employers, my experience as an employee has been that the system is authoritarian and often capricious. Given the culture in Argentina, I believe many employers would not play fair.

 

[pizzadreams]

I agree with the first part. But thats the problem. A generous unemployment compensation and social welfare benefits can only work in a society with a strong work discipline ethic. Someone has to pay for all that and it certainly isn´t coming out of politicians pockets. And in order to attain said levels of generous benefits, a country has to grow enough to reach developed status, something that will never happen the way things are now. Chile is in many ways the complete opposite of Argentina, and they went from being one of the poorest countries in South America to surpassing Argentina in virtually everything, especially economic wise. Argentina´s been stuck like this for years while barely attempting to transform itself. It has lower inequality than Chile, thats true, but while the latter has been growing at a fast rate for the last 25 years with an open and flexible economy (inequality has been going down too) the former has experienced rampant corruption, crises and institutions that promote the welfare of very few that benefit from this and protest against changes in the system

It is bad enough for employees, of course it is, but employers that are willing to hire someone legally often find it more convenient to not do so because of the amount of excessive regulations and taxes. Nevermind dealing with the level of corruption in this country. Employees themselves have to work 6 months a year JUST to pay taxes as well. This is nothing short of scandalous

 

[toongeorges]

Toongeorges: I don’t think your statement that German hyperinflation led to financial responsible is totally accurate. More meaningful, it was one of the reasons that led to the rise of Hitler. And we know the catastrophe that occurred as a result.

Yes, first they tried the Hitler solution and that did not work. Nowadays, they are still traumatised by the inflation and that is why they are financially conservative and why to give up the Deutsche mark for the Euro, they required the conditions in the Maastricht treaty that euro countries have to evolve to a debt to GDP of below 60% and an annual budget deficit of below 3%. It is also why they are so tough on Greece and Italy, who do not have that mentality, but like to spend more than they have like Argentina.

 

[toongeorges]

Employees themselves have to work 6 months a year JUST to pay taxes as well. This is nothing short of scandalous

It could be worse. I have to pay 1/3 of my gross salary to social security (which is then redistributed to retired, unemployed and people who cannot work because they are ill.) and then 1/3 to taxes. I only keep 1/3 of my gross salary for myself. As a consumer, I have to pay again 21% VAT on (almost) everything I buy.

Taxes in itself are not necessarily a problem, because Belgium has a stable economy. The work ethic and la viveza criolla are more the problem.

 

[lamarque]

Why can't Argentines be like Germans? Why can't Spaniards be like Germans? Why can't Italians be like Germans? It simply isn't in the genes - culture or whatever you want to call it.

The figures cited above do not surprise me at all. Reduce the number of public employees in the northern provinces and you will have mass starvation. The only way to deal with that would be through welfare spending.

Change labor laws? Good luck. And if they were to be changed, employers would fire indiscriminately leaving employees with no or little severance pay. Older employees would be discriminated against creating another problem. There would be no moderation. It would just be one giant gift to companies. It's a catch 22 because as the law is now it creates inefficiency; take it away and employers would abuse their power.

A couple of things that are wrong in your observation, first of all is not related to genes that is just a stupid comment to make as if the education will come already codified on our genes lol, neither necessarily with culture, a hell lot of Germans will vote for a left socialist wasteful or a populist government without thinking twice about it or a new hittler like party, or will expropriate all the profit of companies to pay for poor people and im talking of germans that are in the university, not of germans that have no education. Is surprising how many of them have no clue of economics or consequences related to populism, and i can assure you that they are terrible with personal finances (I lived there for many many years, my ex girlfriend is from there and I know a lot of people from there and have many many friends so im not talking lightly about something i don’t know), im in the other side Argentinean but I hate populism and i will consider my self smart fiancially speaking (and im quite sure that didnt came codified on my genes or my culture), the thing that really keep them going the way they go is the system they have in place.

Even if all Germans will vote for and extreme and stupid measure they will only manage to change the head of state witch actually have very few real power to change things (they know from their past what can happen if someone get to much power, so they put a system that is so divided in roles and competences that is almost imposible to change anything, many germans hate this do, they feel as if nothing can be changed, you will be surprised of how many are not happy with their system specially among new generations). In other words their biggest advantage is not how smart they are (they average), neither are they financially or economically clever, their advantage is how rigid the sistem is that make their economy super stable and they benefit as well from very specialized institutions that govern important subjects without intervention of the president witch has really few power, in this side of the world we see Merkel as a very strong head of state, while she is only a face in Germany that has not much to do with the important decisions. The lack of suden changes make an ideal field for a stable economy that companies love.