Hyperinflation?

[camberiu]

fellow expats,

Considering that hyperinflation is primarily a political event (loss of faith in the government and currency), I think it is very likely that we will see this phenomenon hitting Argentinean shores within the next 12 months or so. It will not be the first time either. Argentina lived through periods of severe hyperinfation before. I lived through hyperinflation when growing up in Brazil during the 1980s and I am getting a scary sense of familiarity here in Argentina. This desperation in preventing the outflow of hard currency, people stocking up on dollars, "parallel" currency markets, I have seen it all before when I was a kid. Hyperinflation followed as the Brazilian government started to take those measures. Having been through it, I can tell you guys that it is not fun. This is not fear mongering on my part, just sharing some facts.
No matter how often your peso based salaries get adjusted, it will never match the inflation rate. It is a loosing battle in which EVERYONE who earns pesos will see their buying power shrink. If history repeats itself, people will run to the supermarket the day they receive their paychecks and will spend it all stocking up on food in order to avoid holding pesos.

It will suck. Actually, things might get so bad that, after all is said and done, this guy might become the next leader of Argentina.

 

[LostinBA]

fellow expats,

Considering that hyperinflation is primarily a political event (loss of faith in the government and currency), I think it is very likely that we will see this phenomenon hitting Argentinean shores within the next 12 months or so. It will not be the first time either. Argentina lived through periods of severe hyperinfation before. I lived through hyperinflation when growing up in Brazil during the 1980s and I am getting a scary sense of familiarity here in Argentina. This desperation in preventing the outflow of hard currency, people stocking up on dollars, "parallel" currency markets, I have seen it all before when I was a kid. Hyperinflation followed as the Brazilian government started to take those measures. Having been through it, I can tell you guys that it is not fun. This is not fear mongering on my part, just sharing some facts.
No matter how often your peso based salaries get adjusted, it will never match the inflation rate. It is a loosing battle in which EVERYONE who earns pesos will see their buying power shrink. If history repeats itself, people will run to the supermarket the day they receive their paychecks and will spend it all stocking up on food in order to avoid holding pesos.

It will suck. Actually, things might get so bad that, after all is said and done, this guy might become the next leader of Argentina.

I'd vote for him if I could.

 

[GS_Dirtboy]

Milk and meat for todos (y todas).

 

[el_expatriado]

While I respect this opinion, I think we are more likely to have a one off devaluation than hyperinflation. The government is trying to devalue right now, but in a controlled way. The problem is that Argentina has become uncompetitive vs. Brazil and they need to do something to fix that.

 

[GS_Dirtboy]

While I respect this opinion, I think we are more likely to have a one off devaluation than hyperinflation. The government is trying to devalue right now, but in a controlled way. The problem is that Argentina has become uncompetitive vs. Brazil and they need to do something to fix that.

So, in the event of a one off devaluation what does the government do? Infuse a bunch of cash into the market or do they reset the value in some other way?

 

[mulderfox]

So, in the event of a one off devaluation what does the government do? Infuse a bunch of cash into the market or do they reset the value in some other way?

they just let the peso weaken in the official market.
they have been infusing money for a long time part of the inflation problem is exactly that

 

[el_expatriado]

they just let the peso weaken in the official market.
they have been infusing money for a long time part of the inflation problem is exactly that

Exactly. If the government just let the peso float in the market, we would have a devaluation. The issue is they don't want to be subject to the controls of the market. The market tends to penalize the kind of schizophrenic behavior that Cristina and the Ks are so fond of.

 

[camberiu]

While I respect this opinion, I think we are more likely to have a one off devaluation than hyperinflation. The government is trying to devalue right now, but in a controlled way. The problem is that Argentina has become uncompetitive vs. Brazil and they need to do something to fix that.

Exactly. They are not willing to let the peso "float". Instead, they want to do a "managed" devaluation. Why? Because if they simply let the peso "float" and keep printing they way they are doing, the peso will simply keep loosing value against the dollar. So instead, they want to do a "controlled" devaluation so that they can keep printing currency while preventing the currency from simply crashing.
The problem here is that the market knows this. The market knows that CFK is running the printing presses on full steam while artificially pegging the peso to the dollar. And by doing a "one time devaluation" and keeping all the currency controls and restrictions, the message being sent to the market is that she will keep printing pesos like there is no tomorrow while (trying) to prevent Argentinians from dumping the ever more worthless peso in exchange for dollars. This is where the absolute lack of confidence on the currency comes from . As the Argentinian economy slows down, she will print, just like many Argentinian governments before. I doubt the outcome will be any different this time around.
But as I told you in person before, I truly hope I am wrong and you are right. Nothing would make me happier.

 

[redrum]

buy gold and silver.

argentina does not have a monopoly on printing money, devaluing currency and creating inflation. the same thing will eventually happen to the united states as it is also priniting money out of thin air and has a debt to gdp ratio worse than greece. another round of QE3 is on the way as we speak. countries are already conducting trade in currencies other than the dollar.

eventually the dollar will also be slowly(happening right now) devalued or have a bank holiday for a sudden correction. all fiat currencies eventually go to zero. all we need to do is take observance of the fact that many central banks are drastically increasing their gold reservers in anticipation of what's to come.

 

[camberiu]

buy gold and silver.

argentina does not have a monopoly on printing money, devaluing currency and creating inflation. the same thing will eventually happen to the united states as it is also priniting money out of thin air and has a debt to gdp ratio worse than greece.

Eventually yes. But I do not think it is imminent. Let me explain.

In the case of the US, the authority to control the money supply belongs to the Federal Reserve. The Fed has been flooding the market with money in order to try to re-inflate housing prices and the stock market. The issue is that the Fed cannot give the money directly to the public. The money supply must go thru the banks. Here lays the problem: The US banking system is literally insolvent. The banks are sitting on trillions and trillions of dollars worth of bad loans. So, as the Fed pumps money into the market, the banks hoard the cash instead of lending the funds. The do so because they are capital impaired and need to hoard as much cash as possible. Q1 and Q2 have so far been a drop in the bucket when compared with the size of the financial black hole of uncollectable loans that are sitting on the bank's balance sheets. Therefore, banks will simply not lend. So, unless the Fed increases the money supply by an order of magnitude or two, we will not see hyper-inflation in the US. It will eventually come, of course. But the Fed will need to print MUCH more for that to happen.