Dollar versus inflation

[on the brink]

According to Infobae, since Milei took over the dollar has lost 47% of its purchasing power.

Las 4 claves por las que el dólar libre vale menos que $1.000 y perdió la mitad de su valor desde que asumió Milei

El “blue” opera a $980, un mínimo desde el 15 de diciembre. Con una inflación acumulada de 90% en cuatro meses, vale 47% menos en términos reales. Por qué el billete verde es el gran derrotado en el mundo inversor

www.infobae.com

 

[Aztangogirl]

According to Infobae, since Milei took over the dollar has lost 47% of its purchasing power.

Las 4 claves por las que el dólar libre vale menos que $1.000 y perdió la mitad de su valor desde que asumió Milei

El “blue” opera a $980, un mínimo desde el 15 de diciembre. Con una inflación acumulada de 90% en cuatro meses, vale 47% menos en términos reales. Por qué el billete verde es el gran derrotado en el mundo inversor

www.infobae.com

Because every has more than doubled in price in less than three months. My MovieStar plan was 10,000.p two months ago. This month. 25,000.p.

 

[SinPulgas]

And it's a little late now to buy plazos fijos UVA, although if you believe that the dollar will remain flat for the next six months, it could still be worth it. In any case, you'll be protected from any further inflation in pesos.

 

[Quilombo]

This is what happens when you artificially keep the dollar cheap, and inflation remains high. Couple this with businesses that hedged (because Milei sold the lie that we were going to dollarize, so they raised prices in anticipation) and the fact that basic macroeconomic theory broadly doesn't work in Argentina, and you create the situation we have today. If the dollar only appreciates by 2% a month, yet inflation remains in the double digits, this causes a monthly increase in the cost of goods in dollarized terms of between 8% and 23%/month. This is why traffic flows have reversed and now Argentines buy blue/MEP dollars, and go to Chile, Paraguay, and Brazil to buy clothes, food, and basic goods because even stuff made in Argentina is cheaper there.

I was in Jumbo and those small containers of Haagen Daz are $18,000 lol. They were always expensive here, but never more than $6-$8. Businesses would rather throw stock out/eat a loss than reduce prices to recover their original investment, so this is why I don't believe in Milei's idea that the market will regulate itself, that's just not how Argentina works, especially while he maintains heavy import duties. Loaves of bread were $6,000, and 2.25L of Coke Zero were $2,900. While Jumbo is expensive, it's comparable to being Whole Foods, and I was in one in California last month and things were either the same price or more expensive here.

There was an article today about how pan lactal is going to be imported from Brazil, made from Argentine flour, and sold for 35% cheaper than Bimbo here; this is how distorted our economy is, nothing works the way it should (as Simon Kuznets said, there are 4 types of economies: Developed, Developing, Japan, and Argentina).

Pero viva la libertad, carajo!

 

[SinPulgas]

Fortunately or unfortunately, depending on your point of view, the dollar is not artificially cheap right now.

How do we know that? Because if it were, the gap (brecha) between the official dollar and the so-called dolares financieros (blue, CCL, MEP) would be much, much higher. The market, for the moment at least, is telling us that the official dollar is priced nearly correctly.

It doesn't matter what you and I think the price of the dollar ought to be. The price is what the market says it is, And right now, the value of the dollar is somewhere in the range of 880-1050, (or, some may say, in the range of 985-1050, which in any case is very close to the official dollar).

There's no magic about this. It's just the number one law of economics in action, the law that all the rest of economics is built on. Supply and demand.

If any of you want to tell a different story trying to explain what's going on (and I'm sure that a few of you will), tell it to someone else. I and the market don't care.

 

[on the brink]

The new normal is a six-dollar pan lactal loaf. We better get used to it.

 

[AdrianB]

now Argentines buy blue/MEP dollars

I don't agree with this part. The cueva I see the rates from was charging 0% fee to convert USDT to USD cash a few days ago. Also consistently they are paying out more pesos for crypto than usd cash. What this means is they are sitting on too much usd cash and prefer to get rid of it in exchange for crypto.

Only reasonable explanation for this and for the exchange rate being as it is, is that people just aren't buying dollars. That seems to be a fact and probably is caused by huge cost of living increases and people simply not having money left at the end of the month to buy dollars. Combine that with the fact that the average person also doesn't have the need anymore to go rush and convert their salary into dollars as soon as they get it and you get to this situation we have now.

 

[FrankPintor]

I find it amazing that one can disbelieve the evidence of one's own eyes (and shopping bill) and claim that the Dollar is priced correctly relative to the Peso.

So, following this logic: in Chile, with a similar Dollar / Peso exchange rate, where basic produce costs one third of the price in Argentina, the Dollar is incorrectly priced?

The current situation is due to nothing more or less than manipulation. I suspect that a few VLLC and "caste" insiders will profit mightily when the adjustment comes.

 

[Quilombo]

I don't agree with this part.

What I mean is that if you use your debit/credit card a dollar costs $1,400 instead of $1,000 via the Blue or MEP dollars, so you have people using either cash or paying their credit card balance for purchases abroad with dollars instead of pesos.

But I 100% agree that demand has collapsed, but that's part of the liquification of salaries. Milei pats himself on the back for keeping the dollar low, but it's because most people in Argentina have nothing left after the 10th each month. You can't buy dollars to save with when you have obra sociales, gas, electricity, food, etc increasing 300%.

And for the naysayers, the dollar is artificially priced for as long as the cepo and crawling peg remains. If the peso is floated and the cepo is removed then we will learn the true value of a dollar, and there's no way it's only worth $1,000. Milei again this weekend said he can't lift the cepo because he knows everything will go to shit, so I don't see how people can argue that we're currently seeing a market determined exchange rate when the level of intervention that the Ks implemented continues.