Hello Recession, Goodbye Inflation

rickulivi

Registered
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.
 

Daniel82

Registered
I honestly think this is going to have a negative effect on everybody, even on tourism and people who normally wouldn’t be effected, will be effected somehow.

Some tourists don’t like coming somewhere where they can’t walk down the street without seeing someone diving in a garbage can for food or sleeping on a mattress. I know this has always occurred, but now you are seeing it quite literally in front of the Four Seasons and Patio Bullrich. It’s imposible to eat on a terrace in Madero without kids coming up to you and begging for money and not leaving your table till they are given something.

I know that Sotto Voce and Parolachia, which are two pretty sure fire always packed classic porteño places have had to let a lot of staff go in multiple locations because they aren’t seeing as much traffic- locals nor tourists.
 

Phatbuddha

Registered
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.
Auto , Construction & Retail .... Especially AUTO,,,,,, Making money from people with no Money ? Good Question .... Offer Advice Maybe ?
 
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charlewar

Registered
I honestly think this is going to have a negative effect on everybody, even on tourism and people who normally wouldn’t be effected, will be effected somehow.

Some tourists don’t like coming somewhere where they can’t walk down the street without seeing someone diving in a garbage can for food or sleeping on a mattress. I know this has always occurred, but now you are seeing it quite literally in front of the Four Seasons and Patio Bullrich. It’s imposible to eat on a terrace in Madero without kids coming up to you and begging for money and not leaving your table till they are given something.

I know that Sotto Voce and Parolachia, which are two pretty sure fire always packed classic porteño places have had to let a lot of staff go in multiple locations because they aren’t seeing as much traffic- locals nor tourists.
When I return annually to Ft Lauderdale I see EXACTLY what you describe happening in Buenos Aires; beggars/street people/drug addicts sleeping on streets, within ONE block of City Hall, swarming the beach (as there are tourists there to beg money from and showers which are used to wash sand off from beachgoers but bums use for toilets and quick showers). Last year even saw a bum (ok, homeless person) assault a mailman on his delivery. That's in Ft Lauderdale!
 

Phatbuddha

Registered
.....and thats an understatment :)

As I mentioned in another post, .... Life here is much different in the way that Most people don't have a Mortgage payment or pay rent -
Its like if you gave everyone in Ft Lauderdale a bunch money so that they could go buy themselves a property cash.
This is the difference - Argentina will Weather the Storm ( As they always do) because they are not based on Debt System like US/UK/EU
 

Bajo_cero2

Registered
You are confuse, we have recession with inflation. What can fails? The sane combination created the hiperinflation of 1989 and the 2001 crisis.
 

semigoodlookin

Registered
It is just not the Argentine way to maintain or lower prices. Businesses will continue to raise prices even if their customers dwindle away. Inflation has been a fact of life here. You are right about the recession, obviously, but forget about inflation stabalizing.
 
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