Hyperinflation ante portas

[jblaze5779]

Thanks, 5779. People are so poor now that hyperinflation does not seem likely, in the immediate future. I read that about 75% of apartment owners are not paying expensas.

Private schools dues are not being paid, either.

Those people's sueldo will increase as inflation increases. Most middle class get adjustments throughout the year to account for inflation. Their purchasing power won't increase but the amount of pesos they get will and therefore the prices of stuff will increase also. it's a circular reference that spirals out of control.

 

[Alpinista]

Those people's sueldo will increase as inflation increases. Most middle class get adjustments throughout the year to account for inflation. Their purchasing power won't increase but the amount of pesos they get will and therefore the prices of stuff will increase also. it's a circular reference that spirals out of control.

I think it is not true that the salaries will increase in line with the inflation. Already in the last years with an inflation of +/- 50% people were losing purchase power because the adjustment was not as high as the inflation. Even if it had been, you would lose in real terms as the adjustment is always done retrospectively. (I believe it was done now twice a year)

Now if inflation is going to be much higher, the loss in real terms would even be bigger. And if the inflation is even spiraling total out of control (where you have almost daily changes of the prices), there is no way that your salary is catching up with the inflation. That would logically imply also daily increases in your salary which is obviously neither practical nor possible.

The other day my mother in law told me that at one point - i believe it was in the late 80s - her teacher’s salary was lower than the bus fares to get to the school (of course this is only anecdotal evidence).

 

[Alpinista]

Quite right.... Another reason is that not having large bills make cash transactions cumbersome. The Government wants people to "bancarize", the better to know their income, and the better to tax them.

That is a really scary thought: a cash-free society where the government basically has total control over you (not only tax wise).

It has also been widely discussed over the last years in Europe where government and national banks wanted to lower the negative interest rates (with cash in hand you can obviously avoid this).

 

[jblaze5779]

I think it is not true that the salaries will increase in line with the inflation. Already in the last years with an inflation of +/- 50% people were losing purchase power because the adjustment was not as high as the inflation. Even if it had been, you would lose in real terms as the adjustment is always done retrospectively. (I believe it was done now twice a year)

Now if inflation is going to be much higher, the loss in real terms would even be bigger. And if the inflation is even spiraling total out of control (where you have almost daily changes of the prices), there is no way that your salary is catching up with the inflation. That would logically imply also daily increases in your salary which is obviously neither practical nor possible.

The other day my mother in law told me that at one point - i believe it was in the late 80s - her teacher’s salary was lower than the bus fares to get to the school (of course this is only anecdotal evidence).

I can only speak to my industry. All our locals are part of a CBA and get regular increases for inflation. This may not be for all.

 

[Alpinista]

I can only speak to my industry. All our locals are part of a CBA and get regular increases for inflation. This may not be for all.

Well i believe that you do. But even so, is the employee not losing in real terms?

An example (as I might not fully understand the issue): lets say that with “regular increase” you mean twice a year. And lets say the salary and inflation as of Jan 1 are 100 (index). Now the inflation is gradually going up to 125 until Jun 30. As you do an adjustment at the of Jun, you will increase the salary also to 125 (as of Jul). My point is: from Jan to Jun the employee is losing more and more as time goes by, until he catches up again. Roughly calculated his real loss in this example would be about 12.5% in the first half year. Or do I misunderstand something?

 

[on the brink]

By mutual agreement, for the past two years my three employees have been paid in dollars. Working fine, so far - no more agonizing over raises.

An added benefit is that they have started saving. Can't bring themselves to exchange all their dollars.

 

[jblaze5779]

I see. I think everyone here is losing except for a very small number of Argentines.

The problem is if the government just gives people money then they are just decreasing the value of each peso, therefore the prices go up to maintain the overall value of the item. The value of the item stays the same but the number of pesos required to match that value increases. This is how your prices increase. Then 6 months later everyone gets more pesos as an inflation adjustment and prices once again increases because where did the money come from to give them the pay increase? The brrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr of the printer press... the value of the pesos decreases yet again and the prices go up. 6 months later.... same thing again.

 

[jblaze5779]

By mutual agreement, for the past two years my three employees have been paid in dollars. Working fine, so far.

Your employees will never leave you! Sounds like a good deal for them (and you probably).

 

[on the brink]

It's mutually beneficial. These people have been with my family for over fifteen years, and the feeling is that we are all in the same boat.

 

[Alpinista]

Your employees will never leave you! Sounds like a good deal for them (and you probably).

Thats actually an interesting point: is this legal to agree salaries in USD? And would it be legal to sell goods in USD? I know in real estate it is almost normal, but could also a supermarket sell in USD? Would it not be an option to basically circumvent the whole peso mess and go directly into a full USD economy?