Inflation In L.a.

[thorsten]

There are a lot of successful countries that don't have currency or price controls, where the state is not negotiating the labor market, that improved the tax and wellfare systems. I guess they were just lucky as the should have been in deep recession?!?

 

[RodalfoWalsh]

What novel ideas. Just coincidentally, Argentina already tried all of those out in the 90s and they led to the greatest economic disaster in its history.

Try again.

Yes its time to try it again. It worked in the 90s in Argentina and a bit later in Brazil. The problem was the serious mismanagement of the economy which came AFTER tackling inflation. I also did not mention mass privatizations ignored to subsidize an over valued peso as being part of my recommendation.

 

[Pensador]

I am visiting Montevideo this Easter weekend after a long abscence It is impressive to see the changes that have taken place both in the city and in the people themselves.One of the improvements that stands out is the relatively low inflation rate (about 9%) in comparision with Argentina. Uruguayans tell me that even though they may not earn as much as they would like at least they can do some forward planning. In Argentina for most low and middle income people this is fairly difficult if not down right impossible.The main reason being its high inflation rate Inflation at 2% yearly is necessary to move the economy At 6.5 or 9% it begins to be a problem.At Argentina's 38% it as a definite hinderance to forward planning which is a key imperative for any healthy economy either personal or national.Having lived and had a business in Argentina for 36 years.I have experienced first hand how high inflation especially hyper inflation deteriorates not only people's desire for honest work, but also, hampers their desire to innovate and suggest ,or even believe in,change The energy spent in worrying if you'll be able to cover your expenses month after month,year after year,does not leave one with much optimism or faith in their own future,that of their children or of their country..This,naturally,is why so many Argentines continue to vote"with their feet" as they say.They leave.A great many go to the U.S. and Spain. And now some of them are even going to Chile and also to Uruguay.How could that be? Go figure.Inflation is more than an indicator it is a barometer of a healthy economy and a foward looking economy minister and policy.

URU is very expensive in the first world sense but if you go out of the first world bubles like Pocitos and Punta the prices go down. There are definatly social classes here and you can live in a buble but you will find the crime is going up fast. They seem to want to brush that under rug here especially in the last year or so. But if they do not hammer down on that now it is going to catch them off gaurd for sure and then they are not going to be a position to deal with it. Just the other week a 62 year old man was murdered for not apparent reason taking his garbage out at 10 PM by moto choros. But I have also heard that the criminal element from BA is imigrating and importing some pretty sinister stuff as they are finding the Urugians easier pray. To bad URU got stuck next to trash accross the river.

 

[RodalfoWalsh]

OK is it just a coincidence that the same policies are being implemented now in Europe with the same effects?

Actually no, now they're trying to do work that should have been done years ago to salvage a bad decision that never should have been taken. There are great parallels between Argentina and the failed eurozone states but the real take home one is that you can't run a country off someone else central bank. Or at least not a big country, Ecuador is an interesting case and the exception not the rule.

 

[EdRooney]

the real take home one is that you can't run a country off someone else central bank.

Bingo.

I'm not sure how this jives with your proposal for a dollar peg. It was the dollar peg that eliminated inflation here and destroyed Argentine industry, pushing over half the country (53%) into poverty.

Furthermore I'm not sure if you are serious or are just trolling, because it takes some heavy duty XXXL historical blinders to suggest the same policies that already failed atomically. Actually they didn't fail atomically, they did what just they were supposed to do, benefiting a small sector of the population for whom the 90s were just dandy, while the rest literally starved.

 

[camberiu]

Let's not forget that the Remimbi/Yuan is pegged to the dollar, and it has been for decades.

Not defending currency pegs here, but it is not as clear cut as you make it seems.

 

[EdRooney]

In the case of China, it's the exact opposite: it's an implicit currency policy that deliberately keeps the RMB undervalued compared to the dollar, whereas in Argentina the peg was to keep the Peso overvalued. The net results are the Chinese have a huge trade surplus while Argentina ended up with a huge trade deficit. You're right in that Rodolfo didnt really specify, but given the other measures he was proposing it would almost be guaranteed that his proposed peg would result in the same trade deficit, the same debt cycle, the same poverty.

 

[Noesdeayer]

Pensador is half right.Pocitos and Punta Carretas are beautiful upscale and expensive.I'm staying in the Centro (18 de Julio al 13000).Nevertheless,restaurant & pizzaria prices are at least 40% to 50% more than the same type area in B.A. (Corrientes & Callao).The cheapest "cafecito" costs U$S 2.16 = AR$ 27.It's wall to wall Brazilian tourists who seem to love Uruguay.There are renovations all over the city.The restaurant area in the refurbished Mercado del Puerto is a gold mine and the parks are very well kept.Montevideo as a whole is immaculate compared to Bs.As.If the Uruguayans can do it,the Argies can too. " Porque sera que tardan tanto?"-----What's taking them so long?

 

[RodalfoWalsh]

In the case of China, it's the exact opposite: it's an implicit currency policy that deliberately keeps the RMB undervalued compared to the dollar, whereas in Argentina the peg was to keep the Peso overvalued. The net results are the Chinese have a huge trade surplus while Argentina ended up with a huge trade deficit. You're right in that Rodolfo didnt really specify, but given the other measures he was proposing it would almost be guaranteed that his proposed peg would result in the same trade deficit, the same debt cycle, the same poverty.

The peg is for inflation and has to be temporary, a transitory measure which will be quickly phased out once you break the inflation, otherwise, corralito and everything we already know.

 

[Redbeanz]

We haven't been to Montevideo for about 3 years, but we certainly didn't find it cleaner than Buenos Aires! Everywhere in el Centro, people were handing out leaflets, which were immediately dropped on the sidewalks -- no one even seemed to look around for a trash container. We were completely disgusted at how little pride people took in their city.