Frozen Price List

[EdRooney]

Not to rain too much on the parade (god knows we need some lluvia) but could someone with a bigger brain than me (i.e., anyone) please 'splain how temporary price controls reduce inflation? Don't there need to be less pesos in circulation or more products on offer to change real inflation?

 

[John.St]

Not to rain too much on the parade (god knows we need some lluvia) but could someone with a bigger brain than me(i.e., anyone) please 'splain how temporary price controls reduce inflation? Don't there need to be less pesos in circulation or more products on offer to change real inflation?

It's not so strange, really.

"Inflation" is measured on a limited subset of products ('canasta basica'). Freeze the price of those, and "Inflation" is kept at bay. Even if all other prices gallop ahead at the tune of 60 percent that won't matter.

 

[EdRooney]

It's not so strange, really.

"Inflation" is measured on a limited subset of products ('canasta basica'). Freeze the price of those, and "Inflation" is kept at bay. Even if all other prices gallop ahead at the tune of 60 percent that won't matter.

Ok So inflation doesnt go down, the CPI does. And only temporarily so. Isn't that an argument for "inflation isn't the problem, it's the Argentine obsession with inflation that is"?

 

[ghost]

Argentina has a convoluted, twisted, backhanded solution to anything you can imagine. Industria Argentina has managed to be a failure for almost 45 years.

 

[John.St]

Ok So inflation doesnt go down, the CPI does. And only temporarily so. Isn't that an argument for "inflation isn't the problem, it's the Argentine obsession with inflation that is"?

As the consumer price index (CPI) is used to measure inflation, inflation is a problem, especially when the exchange rate doesn't mirror the inflation - makes it increasingly difficult to export articles for which there aren't a "fixed" world market price, e.g. Argentine industrial products.

 

[EdRooney]

Sorry John I still don't understand. Are you saying all inflation is bad and that central banks in Europe, Japan and the US are wrong to have inflation goals as part of their charters? I don't think that's what you mean, but that's the way I read your post. It sounds more like your talking about price stability, (i.e., is the price of an item going to be predictable in six months, ten years, etc.), or in other words avoiding hyper-inflation or -deflation. In this case two substantially representative items: Argentine cars and Argentine commodities have been superstars over at least the last five years, with a very stable rate of inflation in dollar terms.

Either way, I still don't see how price controls would do any good in this regard, because CPI is only an inflation indicator not inflation itself, and the price controls are short term, while CPI is measured per year. To me the whole idea seems more like a way to placate the masses.