Neilson Nails It...again.

[Rich One]

Looking at the platforms of other non-K candidates (Binner, Massa, Alfonsín, Solanas) there are no proposals to get rid of any of that. Macri's economic team (old menemists like Sturzenegger and Cabrera ) would seem like the only ones who would want to get rid of the spending and head back to 25% unemployment. Fortunately their chances look slim. So alot of what gets labled Kirchnerismo round these parts is hardly unique to them and it would seem rather premature to expect it to disappear after La Reina is dethroned in 2015.

Obvious if Massa ,Binner etc, would proclaim they plan to cut the plans etc, They would never be elected.....would scare away the masses. Political Wisdom101

 

[EdRooney]

Obvious if Massa ,Binner etc, would proclaim they plan to cut the plans etc, They would never be elected.....would scare away the masses. Political Wisdom101

And so you think they'll suddenly find the political will to do it later? Sounds more to me like alot of people who are putting alot of marbles into the 2015 regime change are going to be sorely disappointed when they find out their gripe wasn't with CFK per se. But as the Nielson article shows, it's a heckuva lot more fun to think that politics is about Important Personalities and that removing one bad egg will lead to us to some inflation-free Shangri-La.

 

[Matiasba]

And so you think they'll suddenly find the political will to do it later? Sounds more to me like alot of people who are putting alot of marbles into the 2015 regime change are going to be sorely disappointed when they find out their gripe wasn't with CFK per se. But as the Nielson article shows, it's a heckuva lot more fun to think that politics is about Important Personalities and that removing one bad egg will lead to us to some inflation-free Shangri-La.

Mmmmhhh........

Apart of infation, I do think that it will change in 2015. Almost everything. If is not a devaluation willl be an hyper or cut off subsidios, something important will change. What will remain? not much I think recession have to start sometime, we cannot continue growing indefinetely (since 2003), 10 years is our limit, I ll give you 2 more.

I seriously doubt this change of economic cycle wont be without an important crisis.

 

[sesamosinsal]

The high use of CCs for purchases is misleading I believe. Using a CC for day to day purchases is/was about the only hedge against inflation the average Argentine had. CC interest rates were/are often less than half of what the true inflation rate is, especially in 2010, date of your article. Furthermore, wages generally were keeping up with the true inflation numbers. Salary increases of 25% annually are the norm around here. Know it goes against the grain to take on CC debt, but with inflation like it is (25%) and INDEC cooking the numbers to keep interest rates low (15%) makes the real interest rate on credit card debt about -10%. At least that is how this Gomer sees it which for sure does not make it so.

The fact that CC interest rates are so low -- and even "0% percent" in some cases -- is a part of the problem. I wouldn't raise interest rates on CCs, even though that is a possibility for the government to disincentivize spending. (Maybe the government could require credit lines to be decreased, but can you imagine how that would go over in the media?) The article I cited in 2009 was only to point out consumer spending habits and reliance on credit cards. The numbers from the Central Bank (updated weekly) show that this behavior hasn't changed, and the credit card debt has increased well beyond inflation. From a year ago, it's up nearly 45 percent.

Also, the inflation is built into the price. So, unfortunately, you're paying more for something to make up for the inflation, which only exacerbates the problem.

The government knows that credit card expenditures are driving up inflation:

Cristina Fernandez on July 5, 2012:

"Quienes más confian en los empresarios es el Estado. ¿Por qué los bancos privados — que también son empresarios — parecen que no confian tanto en los empresarios? Porque prestan mucho menos a los empresarios y prestan mucho más al consumo, al gasto. Y luego hablan de que hay inflación."

Any attempts to drive up supply are being far outpaced by demand, in my point of view.

 

[sesamosinsal]

I'm not sure this is really a credit-fuelled aggregate demand boom like you say it is. For example, just look at the study you cite saying that 97% of Argentines cannot make ends meet without their cards. The study comes from 2010 using 2009 data. In Argentine credit terms, that's 50 cuotas ago, meaning that the conclusion must be that their debt is not capitalising, otherwise most of that 97% would be in bankruptcy, since they would have already cycled through debt that they could not pay. In our own case, we make a healthy use of our cards in order to beat inflation. Go to Carrefour when they have the 70% discount and fill the pantry with non-perishables. By the time the bills come due, we have had a pay raise and the goods have a 25% higher price tag. I'm quite sure we're not the only ones who do this.

The article was meant to demonstrate consumer behavior. Based on current data from the Central Bank, this hasn't changed. And again, no one is really beating inflation by using their credit cards:

En el mismo sentido, Carrier afirmó: "Las cuotas sin interés no existen en una economía inflacionaria como esta. Cuando los aumentos son bajos, es imperceptible, pero cuando la inflación es alta, el sobreprecio evidentemente tiene que ser importante también".

-Source

If we compare Argentine inflation to a house fire, it seems that you're trying to find the room where it started. Maybe back in 2005/2006 when inflation started to slowly become an issue, knowing which room of the house where the fire started would have been useful. At this point, the entire economy has been built up around inflation, and almost the entire house is engulfed in flames. Again, any plan to put out the fire will have to be incredibly comprehensive. Extinguishing the fire in one room will not extinguish the fire in the entire house.

The government is not comfortable with stifling demand in any way, and, in fact, does its best to support it. Its strategy has been to invest heavily in the private sector, both consumers and business owners. Obviously, the government wants to increase the supply side of the economy over time in order to compensate for demand. It hasn't really worked... yet?

 

[dennisr]

Bradly:

What is fueling consumption is inflation. Why on God's Earth would anyone in Argentina have any incentive to save for a rainy day in pesos? Their nest egg's value diminishes with inflation. There is not one financial instrument for savers in Argentina that will keep up with the true inflation rates. Put everything on a credit card, make minimum payments, take the spare cash you have and buy some blue dollars and put them under the mattress and wait. It is no brainer: carry trade.

 

[sesamosinsal]

What is fueling consumption is inflation.

And I don't deny that. This is partially true. Again, inflation in Argentina is a multifaceted problem. Going back to my analogy, many rooms in the house are on fire. Anyway, what if the consumer doesn't have the pesos (in cash or on credit) to spend? How can people continue to consume if they don't have the funds to do so? That's a no-brainer, too.

take the spare cash you have and buy some blue dollars and put them under the mattress and wait.

This causes inflation, as well. It was the main source of inflation in 2001/2 here, and consumer spending dove because people didn't have the funds (due to the devaluation) and couldn't afford to consume as people do today (thanks to salary increases, access to credit, etc). Why do you think they are so hellbent on keeping the official dollar where it is? It's not working either, but understanding the past here a bit goes a long way in understanding why they are doing what they do now.

 

[Gringoboy]

Uncle James at it again.
Must be that case of Moet I sent him.

 

[Gringoboy]

Jim Bob paints a bleak picture here:
http://www.buenosairesherald.com/article/152808/time-is-running-out