A severe recession is about to hit Argentina; actually it has started but has not yet gained full steam, whereas inflation is going at full steam, but will come down dramatically, and soon. In the meantime, the question is: how can one benefit from these events?
Why do I anticipate a monster recession? The answer is simple: sky high interest rates. For comparison purposes, the US stock market has dropped dramatically in the last few days, mainly because interest rates have finally started to go up after a prolonged period of super low rates. The US ten year interest rate started the year a bit above 2% and it's now a tad higher than 3%. Inflation is running around 3%, so the real cost of money is zero. That is, inflation minus the interest rate is zero, and yet the stock market is taking a dive. Contrast that with Argentina. Inflation is, lets say 50%, but interest rates are at 70%, therefore the real cost of money is 20%. Such expensive money will demolishes consumer spending, business, and just about everyone else. What a recession is coming along!
Why will inflation drop dramatically? Because the recession will be so hard, that it will scare the daylights of anyone thinking of raising prices. No price rises, no inflation!
As an example, when the last deep recession hit the US, around 2008, I was managing several rental properties. People were losing homes, lines of credit were being cancelled, and financial fear was running very strong. I was fortunate not to lose tenants, but I did drop some rents, and for years did not dare ti raise them. I was too fearful of losing tenants, and too traumatized by the consequences of the 2008 recession. It's easy to assume that my example was generalized around the US economy, and therefore, the result was super low inflation after 2010 until last year, accompanied by sluggish but consistent economic growth.
Let's assume for a moment that I am absolutely right; that is, a monster recession will hit Argentina and inflation will come down drastically, and quickly. Who will get hurt, or more importantly, how does one make money from this? Great question and I invite forum members to give some great money making ideas and suggestions.
Why do I anticipate a monster recession? The answer is simple: sky high interest rates. For comparison purposes, the US stock market has dropped dramatically in the last few days, mainly because interest rates have finally started to go up after a prolonged period of super low rates. The US ten year interest rate started the year a bit above 2% and it's now a tad higher than 3%. Inflation is running around 3%, so the real cost of money is zero. That is, inflation minus the interest rate is zero, and yet the stock market is taking a dive. Contrast that with Argentina. Inflation is, lets say 50%, but interest rates are at 70%, therefore the real cost of money is 20%. Such expensive money will demolishes consumer spending, business, and just about everyone else. What a recession is coming along!
Why will inflation drop dramatically? Because the recession will be so hard, that it will scare the daylights of anyone thinking of raising prices. No price rises, no inflation!
As an example, when the last deep recession hit the US, around 2008, I was managing several rental properties. People were losing homes, lines of credit were being cancelled, and financial fear was running very strong. I was fortunate not to lose tenants, but I did drop some rents, and for years did not dare ti raise them. I was too fearful of losing tenants, and too traumatized by the consequences of the 2008 recession. It's easy to assume that my example was generalized around the US economy, and therefore, the result was super low inflation after 2010 until last year, accompanied by sluggish but consistent economic growth.
Let's assume for a moment that I am absolutely right; that is, a monster recession will hit Argentina and inflation will come down drastically, and quickly. Who will get hurt, or more importantly, how does one make money from this? Great question and I invite forum members to give some great money making ideas and suggestions.
