In Argentina, inflation is a way of life | Hacker News Reader

In Argentina, inflation is a way of life

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Argentinian here, 30 years old, middle-class. Yes, we have a big inflation problem and what the article says is correct, except I don't know anyone who buy tuna or pasta or whatever to store because of inflation. In fact, anyone who would do that wouldn't be smart at all, would be pretty stupid. A few ways to fight inflation is buying dollars and selling them later: our inflation index goes hand to hand with our USD:ARS, even even below that (intuitevly it may be a problem). So it makes no sense to buy things to store later. What we do is buy stuff such as electronics in isntallments payments, even if the interest rate is high. Quick example: If I buy a computer in cash, its price is 100. If I have to pay 12 installments, each installment is 20 (240 in total). However, in one year, due to inflation, 20 may be nothing compared to what i earn (salaries are also raised to try to keep up with inflation), so big payments we usually do that. But almost no one get groceries in installments, etc (also: your credit card / bank imposes you a limit on installments payment, so it doesn't make sense to waste them in daily things and you try to save it for when you need it, such as electronics or emergencies)

I’m trying to understand how would it work for mortgages. I guess that you have no fixed interest mortgages and they are all tied to the inflation rate + some spread, otherwise I don’t see how the banks would want to lend you money for a house.

Everything is linked to the inflation rate. Fixed interest lending does not exist at all.

Even then long term lending can easily go both ways, and become too cheap or too expensive very quickly.

(I lived my childhood with hyperinflation, not in Argentina, but that doesn't actually change from one place to another.)

Variable rate loans make a lot of sense. It’s still strange to me that in the USA I can get a 30 year FIXED mortgage at 2.75% when inflation was 7%.

Makes “inflated” housing look cheap. Doesn’t really make sense that it’s even offered.

> It’s still strange to me that in the USA I can get a 30 year FIXED mortgage at 2.75% when inflation was 7%.

A variable 2.75% with inflation at an unusually high 7% would be weirder than a fixed; a variable rate loan has a rate based on current conditions, a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.)

Now, it may seem weird that you can get a 30-year fixed loan at all, but once you accept that, having the rate below current inflation when inflation has been at a unusually high level for a shirt period of time isn't particularly odd.

I think you can usually refinance a fixed rate mortgage to an adjustable rate one at any point. Or refinance to a different fixed rate one with lower rates if the opportunity arises.

> ... a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.)

Is that accurate to say? Because I don't think so.

It seems more accurate to say mortgage rates for fixed loans are set by the cost of money at purchase / loan-initiation time.

Which makes sense, as that's when funds are actually changing hands (from purchaser's lender to seller).

And ultimately, that's banks' cost of money, which means then-current Fed rate + spread, no?

> Doesn’t really make sense that it’s even offered.

Nobody serious is betting inflation will remain at 7%. That was an annualised rate from a single reading.

You can get these low interest rates because the government subsidises them. If it were a "free market" so to speak you would not be able to get such a rate, and possibly would not be able to get a fixed-rate mortgage at all.

Argentinian here.

Personal credit lines are almost nonexistent or have rates which supercede inflation, (inflation+10% is not out of the ordinary). Credit card yearly interest rate for 2 years ago was >= 70%

There are preeexisting credit lines for property, but they are government subsidied mortgages with very a specific target audience. ie: salaried mid income families looking to buy their first property.

> how would it work for mortgages

That's Argentina's secret, there are no mortgages, properties are bought in cash.

Argentinian here, I built my house about 10 years ago with a fixed rate mortgage subsidized by the government. It was subsidized only for people that didn't own a house already. It was a 16 years mortgage. First year I paid about the same as someone renting a house. Past year I was paying about only 10 dollars per month, so I cancelled it :)

But yeah, as far as I know, at the moment there are no fixed rate mortgages.

mostly they don't

Most properties are bought cash. That's dollar bills, no bank transfer, no pesos.

Before civil war in my old country a quarter a century ago, people were doing the same thing: buy something big and expensive in installments. First couple would suck. Last few were negligible.

Another story that seems surreal to me now (having lived in Canada 25 years): My grandma and virtually everyone her age was habitually 3 order of magnitude off when it came to money. She'd give me a 2 million dinar note and say "here's 2 thousand".

Every now and then there was a reset - basically you'd print new money and lop of some digits.

I was <12 years old through this so only have vague memories but man, what a crazy way to live -- and yet it was fairly... "normal". Is what it is. Human brain adjusts to anything (including to a certain degree the civil war that followed).

Mexico did a 1000-1 reverse split in the 90s. You still see the old bills sometimes. You just treat a 20,000 pesos bill as a 20.

That was during a pretty inflationary time - and even after the Nuevo Peso stabilized people still preferred dollars.

Wow it’s down to 20 nuevos per dollar, I remember when it was 3.

Russia did as well, in the early 90s.

Since Argentina started having its own currency, it had to reset it 5 times, dropping a total of 13 zeroes. I have memories of two of those resets and, similar to what you say about your grandma, I remember older people translating to the older currency for a while, until they fully adapted to the new one.

Have been in Argentina for the past year and honestly the amount of paper cash I need to carry with me for most basic of use is ridiculous, so they're soon going to have to create bigger bills or reset again.

Lol those bills you carry are the new ones. I left in 2017 and we only had up to 100. Which had been the same since the 90s.

Damn, yeah, biggest is 1000 now I think, and even that is worth only around 4 USD (unofficial rate). That'll buy you milk, bread and butter or ~4 beers.

My first purchase as a kid with my own money was for bubble gum. The bill I handed them had 3 zeros on it..

I don't get it. As a pibe chorro, you should have just taken it and ran away.

When the civil war started (presuming this is ex-YU) did rate of inflation really go up that much compared to before? My understanding is it was bad in the late 80s, very bad 89, stabilized in 90 thanks to Markovic, and then resumed going up once the war kicked off.

Inflation stabilized very briefly, but the situation was unsustainable and it quickly resumed. I was pretty young at the time, but I remember that many people went for weeks/months without getting paid. Some government positions fared better than others, but overall the economy struggled.

Then the war kicked off in 1991 and everything fell apart.

Someone commented elsewhere on the thread with a video clip of Markovic talking to the Federal Assembly.

Unfortunately there were plenty individuals/businesses that exploited inflation (among other things) during the war (and leading up to it) for massive gain. They'd borrow heavily, buy up as much staple as possible then quickly sell at a discount. By the time original debt was paid back, high inflation ate away at the original value of debt. So despite originally selling at a loss, it was still a profitable business.

That of course is assuming they even bothered to pay anything back. Often enough it was a game of survival (business/personal). Nothing to pay back if the person is dead or business gone.

But why buy staples with the money to sell at a discount? Would you mind explaining this a little more, I'm curious and don't understand how that would be profitable. Buying staples and selling them later for inflation adjusted prices then using that to pay back the loan would make sense but not quickly selling at a discount.

Debt inflates away.

Presumably they'd buy with an installment plan or debt financed over time.

I.e., you buy $3000 worth of goods, but pay $200/mo for 30 months ($6k total). You sell for $2000 cash (not on installment). So far, you've paid $200 and gotten $2000, up $1800.

If you paid back $200/mo in real terms, this would be a terrible deal! But every month your payment real value drops 10%, so you only really are only paying 200 + 180 + 162 + ... and over 30 months you only pay $1915 in original-value terms.

But the $2000 you got from the sale also devalues...

Not necessarily true. It devalues if you hold onto the money in local currency. It does not devalue if you exchange (usually gray/black market) to another currency. In ex-Yu, this would have usually meant Deutschmark.

It also does not devalue (in the same manner) if you use it to purchase real estate which you hold onto for a long time. Much of this money was used to purchase apartments, houses, buildings, businesses, etc.

Or you don’t care and are just looking for an increase in cash flow.

No, because you get it up front, you can convert it into something that doesn't devalue. A rapidly inflating currency is a medium of exchange, not a store of value.

> you can convert it into something that doesn't devalue

Such as staples? But then, why sell them quickly at a discount? That was the question. Or, if something else, why not convert the loaned money into something that doesn't devalue directly?

Do you have a crystal ball that you can predict what the inflation is going to be in two weeks? Can you protect all these goods in meantime if there is a war going on?

Right, maybe you buy some car batteries like https://articulo.mercadolibre.com.ar/MLA-695014148-bateria-d... on installments. Those cost AR$11890.99, about US$58, if you pay up front or 12 installments of AR$990.92 "without interest", but I think https://articulo.mercadolibre.com.ar/MLA-911991344-bateria-p... is the same battery for AR$9100 with no installment option. But car batteries, though they can start cars, have certain disadvantages: they take up a lot of space, they're too heavy to take on vacation with you, if mistreated they may leak sulfuric acid all over your boss's desk downstairs (this got Thomas Edison fired once), it's difficult to sell half of one, and even just left quietly in a corner they may become worthless in a few years.

So you might sell them immediately and convert the results into dollars or something. Dollars are actually less divisible than car batteries, since the US$20 bill trades at a heavy discount, but more so than, say, motorcycles.

This is not a strategy I've ever used, but it does kind of make sense.

So if I'm understanding correctly in this case the buying and selling of the staple goods is totally incidental and the only goal is to take a loan and purchase a non-inflating currency to hold. Is that correct?

I can understand that logic, but feel like surely this would be priced in somehow. I think most likely, nobody would ever give you a loan that wasn't pegged to another currency or to the inflation rate. In general I find that businesses don't like to make incredibly stupid loans that they know full well won't be paid back or will be paid back in worthless currency as the OP states. Maybe I'm wrong though and should move to Argentina

Yup, that's right.

We're not in hyperinflation. The currency isn't worthless. It's just not worth as much as it was a year ago. Or two weeks ago: I found out today that AR$11890.99 is no longer about US$58 as it was two weeks ago, but more like US$55 now. The annual inflation rate is about 50%, which is about 3.4% per month. If it's 50% per year over the next 12 months, the total value of those 12 monthly installments will be about US$46, which you'll notice is still more than the US$42 offered by the other seller without an installment option. So unless inflation goes higher in the next year, or the buyer defaults on the loan, the installment vendor is still making a pretty decent profit on the battery. They may not be "charging interest" but offering "interest-free" installments enables them to charge a sufficiently higher price that it's a profitable thing to do.

They are taking the risk that inflation suddenly explodes three months from now and 9 of their 12 installments are much smaller than they had planned on. And the buyer is taking the risk that inflation suddenly stops six months from now, which would make their final installments are just as onerous as the first few.

There have been a lot of loans pegged to the inflation rate in the past, as well as things like pensions. Unfortunately, since the government was the creditor for most of these, and also the government publishes the official inflation rate, they solved the problem in the early 02000s by faking the inflation rate statistics. Some economic consultancies published statistics showing the real inflation rate so the government prosecuted them for "commercial disloyalty". Retirees rioted in the streets and got tear-gassed by the police until the government agreed to raise their pensions faster than the fake inflation rate. Bondholders weren't so fortunate.

Thank you very much, I appreciate this detailed explanation and thats very informative. It would seem more or less that this is "priced in". That makes total sense

Maybe not always! Rapid inflation offers innumerable opportunities for ruinous errors.

They didn’t sell them later, they sold them immediately.

Roughly: - borrow $1mln - buy $1mln of coffee, regular price $10/kg - sell immediately at $8/kg (lower price helps move the goods quickly) - pay back $1mln loan

By the time you paid the loan back, $1mln no longer has the same value. And so the $1mln you paid back is really only worth way $500k.

Add to this lack of stability due to war and you may not even pay it back … perhaps you refused to pay, company went out of business, you borrowed from someone who is no longer around (alive, fled the country, etc), or any other number of related reasons. In that case it ends up being pure profit for you. Not so easy to enforce or later track down.

Where are these people that make these types of loans? This is so far out of my experience, I truly just cannot imagine these situations actually occurring. From a business perspective you would just be setting money on fire every time you made a loan, and you would know it.

That's roughly how governments work too. Reduce spending, raise taxes, or devalue the currency to make debts less costly.

Oh the war was a whole another story I'm not getting into. Suffice to say we have seen unfathomable depths to which some people will sink, and unbelievable heights to which others will rise. We got hugely helped and massively hurt by the least likely of sources at times.

I'm in Canada now :)

Yeah, it’s a depressing/upsetting series of thoughts.

Also in Canada now :)

Turkey did a 1,000,000:1 conversion a while back. Before that you could almost say that the local currency was millions.

- "How much is this book?"

- "9 million"

- "Here's 10 million"

- "And one million in change, sir"

OK, so that only worked up to a certain value. No one would say their rent was "1,000 million". In that case, the currency was billions!

In Vietnam, the largest bill is 500,000 vnd, about $20 USD.

Everything there is in the millions as well.

I've got a 100 trillion dollar bill from Zimbabwe, I think it was worth about 30c at the time of issue

Argentinian here, 37 years old, middle-class. I known a lot of people who bought all the non-perishable food they can like tuna, and others good because the rampant inflation. Myself included.

Is the Argentinian inflation being "fought" by any government program? I've studied a lot of Brazil's hyper-inflationary period, and boy was it difficult to overcome it. Basically, once the industrial growth went below the inflation-rate everything went (slowly) belly up. It happened at two distinct times: one at Kubitschek's presidency, and the other during the military junta. Trouble is that our economy became "indexed" everywhere, so people would mark-up their prices at inflation+x%, then the _actual_ inflation would be the forecast+x%, which is an exponential process. After two decades of failed attempts, the solution was found via a financial reform, done all throughout the 90s, and then a modern copy of Germany's anti-hyper-inflation Rentenmark program, which created the Real. The solution (or so the mainstream history says) was to create a price "anchor" for everyone, which was pegged to the dollar (one of the main culprits were the large devaluations vis-a-vis the USD, a vicious cycle of inflate->devalue->inflate->...), and at the same time attracting foreign investment via a large real interest rate (far above the remaining inflation). What we are going through now in Brazil is a slow reversal of that, inflation is picking up again, and the central bank's actions are seemingly slowing down the economy and not being able to control inflation (so long, Phillips Curve).

> Is the Argentinian inflation being "fought" by any government program?

Nope, the government loves inflation, as it reduces its debts and they can print all the money they want to pay for that. Politicians live in a different world than the average person, inflation is not an issue for them.

This is only the case if the bonds get issued in the country‘s currency. Argentina doesn’t have that luxury[0].

In the long run, if a government devalues its currency too much, investors lose trust, and the country cannot borrow money in its currency. Not necessarily a problem for current politicians since they will be out of office by the time the trust is lost.

0: https://www.reuters.com/article/idUSKBN26S07N

Macroeconomics is very far from perfect but we do know how to stop, or manage inflation. You can stop it by keeping the money supply stable (don’t print any more money than necessary to account for notes and coins wearing out it being lost). You can have constant low inflation by targeting the growth rate of the money supply (like the EU’s near but not at 2% target).

That’s it. Plenty of countries don’t do that but it’s a matter of political will/popular support for ending inflation, not a technically difficult problem. At worst you can just adopt another country’s currency like Kosovo has the Euro or Costa Rica has the dollar.

Sure, that's an usual explanation. Quantity Theory of Money, which goes back to Copernicus.

One could point out to different ones as well, such as Nitzan and Bichler's "differential accumulation", in which, having technological/growth difficulties, the ones who benefit most from stagnation are the ones who can jack up prices the most (entities who control most of the supply, with most mark-up power). Read: inflation.

There are many other views as well, I just pointed out one which I like.

Mainstream economists don't know how to stop inflation.

Keeping the money supply stable does not stop inflation. Inflation is ehat happens when you have a currency where a portion of it is not circulating in the economy and then suddenly becomes active and turns into demand for products and services. Even a gold standard will have inflation.

> Is the Argentinian inflation being "fought" by any government program?

Another Argentinian here :)

Yes, the current and past governments took different actions to reduce inflation. But, they weren't successful.

It's a complex topic. I'm not an economist, but from my limited knowledge:

- People don't trust ARS because they fear devaluation (like in 2001) or hyper-inflation (like in 1989). It means that many prices are tied to the ARS/USD exchange rate. When the dollar goes up, merchants that depend on imported goods raise prices to cover their stock in the future. (and it generates a domino effect)

- The food production chain is not so dependent on imported goods, but it's one of the main products for export. When international prices go up, domestic prices rise as well.

- Printing money is also a way to finance your economy when you have tons of debt (Ray Dalio has some easy-to-understand videos about it): Argentina has tons of debt.

The current government did a lot of price control of certain products (mainly food and services). But, it's not working. I guess they cannot avoid printing money without causing other issues.

>The current government did a lot of price control of certain products (mainly food and services).

Unfortunately, this seems to me like a populist/demagogic measure. We have tried it (a lot) in Brazil, and whilst it made some people seem better off (such as richer regions, like the SE) whilst others lost a great deal of purchasing power, it also caused massive shortages and the rise of a black market for common goods, with pretty hefty mark-ups and waiting times.

> The food production chain is not so dependent on imported goods, but it's one of the main products for export. When international prices go up, domestic prices rise as well.

Good point! It was (and still is) a major issue here. For example, today our domestic prices for fuel (gas and ethanol) and all commodities that we export (sugar, soybeans, iron ore, etc) are very correlated to the international prices.

> Argentina has tons of debt

So did we during our inflationary years, and both private loans as well as loans for public expenditure of all spheres, which were made so as to not raise taxes, and even to pay salaries (not even to make investments). Looking back this sounds absolutely bonkers.

Today our debt is rising fast, but it's mostly internal (BRL-denominated bonds). I wonder how much more of it (and combined with what else) would kick off the inflationary process again.

Part of the problem is that the government can’t reasonably borrow money because Argentine bonds are along standing punchline. Argentina has defaulted nine times in just over 200 years.

I don’t know how to restore credibility on that. Secure debt doesn’t really work against a sovereign so reputation is a big part of the debt market.

>>>> how to restore credibility...

Balance budget? Cut government down to size? Open up the country to investment by rule of law?

Its not difficult. Its just the ruling class has captured the levers of govt and the people dont know any better.

Sweden was able to do this. Argentina is only special insofar that the people leading it are the wrong ones to be in power

When did Sweden default on its debt? I don’t remember that.

They didn't default on their debt, precisely because they got their house back in order. But this came at great price, with major suffering by the populace during a 4-year economic crisis. [1] Despite all the suffering and poverty caused, the government took the opportunity to reform healthcare, which was a disaster [2] and bring costs under control.

Sweden has had a brighter future since.

[1] https://en.wikipedia.org/wiki/Sweden_financial_crisis_1990-1...

[2] p44 https://www.fraserinstitute.org/sites/default/files/SwedishH...

Some ridiculous number of the population, like 90%, depend on gov paychecks. The politicians grow and grow the dependency, make promises to get elected, increase the debt, inflate the money, get caught stealing garbage bags worth of it while in office and it goes on and on until it collapses and the same bs recets. Each time more and more smart honest people flee, brain drain, and the ones left behind become poorer, more entrapped, more dependent.

Argentines are seeking refuge in the blackmarket dollar, but that will eventually be a risk as well.

Let's hope for you guys that some government genius doesn't come up with the system Chile has: Inflation adjusted loan and contract payments, obviously excluding salaries.

https://en.wikipedia.org/wiki/Unidad_de_Fomento

There has been such thing[0] and it unlocked affordable mortgages in a country where in the past years (decades?) it was basically impossible to get (and thus, climb the housing ladder).

[0] https://www.marval.com/publicacion/creditos-en-uva-como-alte...

Inflation adjusted salaries would have had the same effect in terms of enabling the housing ladder climb. If you only lock interest rates to inflation what you get is a population of insolvents, and richer banks.

Not really, in Argentina salaries get adjusted by inflation all the time, however house prices are in USD (because the peso is worthless), and we are talking over 60K usd for an old 1bed in a not really nice part of buenos aires city, and buying property for locals is impossible. You have to also consider that, last time I checked was late 2019, now it's probably worst, ~90% of argentinians earn less than 300 usd a month, and since there is no credit, buying something is almost impossible without the aid of your parents.

A lot of people my age (31) +/- 10 years, middle class, professionals, are leaving the country in droves to Europe, Canada, USA and other LATAM countries as we realize there is no hope things will get better, as it's the same story our parents and grandparents went through.

I was referring to Chile, as mentioned 2 comments up, not Argentina

This system doesn't exist to make consumers "climb the housing ladder", it exists to give foreign investors a higher guarantee in a high or highly variable inflation environment.

> In fact, anyone who would do that wouldn't be smart at all, would be pretty stupid

Can you expound on why this would be "stupid"?

Holding dollars to exchange for later incurs a 7% (current dollar purchasing power loss rate) loss on top of exchange fees. The can of tuna retains its food value exactly as-is for years, with no currency exchange costs. Seems to me that the tuna beats holding dollars handily.

Currencies don't have inflation rates. Countries do.

Do two countries that share the same currency have different inflation rates? Are El Salvador and Ecuador experiencing different inflation rates than the United States?

Yes they have different inflation rates.

Inflation rates even vary among different regions within the same country.

nice graphs for eurozone countries https://www.euro-area-statistics.org/inflation-rates?cr=eur&...

When you need some pesos to go to the dermatologist, pay someone to fix the air conditioner, or take an Uber across town, tuna is harder to resell than dollars. But the optimal level of tuna in your portfolio is nonzero, in part because sometimes the supermarket runs out, or goes on vacation, or gets shut down by the police for a week, or closes because of the rioting, and having some food in the house is a good idea.

Hi! I'm really curious about the wages. What are the average wages now with inflation? In USD terms per hour.

I had some people trying to hire they're, but most people request 15usd/hour for basic va skills. I'm impressed how high.

So I'm not sure what's the problem and I'm wondering if you could provide some insight.

Venezuelan here: I have personally bought tuna and flour by the case as a way of hedging against inflation and scarcity. Of course, this last factor was the most important.

Don't forget salt. You can survive a week or more without food but try to do the same without salt and you will be throwing out your (inedible) food in no time.

Argentinian here. I buy coffee, canned tuna, cleaning products, etc in installments without interest whenever I can.

Zero interest is a lie. The interest is already on the price

The problem is you pay the same price if you pay in cash

Argentinian here, 34 years old middle-class with a family of 3 children. I buy lots of pasta and canned food among others goods in wholesalers.

> […] our inflation index goes hand to hand with our USD:ARS, even even below that (intuitevly it may be a problem).

The solution seems so simple to me: drop the ARS and use USD as the national currency. Your inflation is just trying to pay for goods and services using an eternally depreciating asset (the Argentinian peso).

The reason this doesn’t happen is because it would mean that the Central Bank of Argentina (CBA) would no longer be able to, at will, monetize the debt of the Argentinian government and favored corporations. Ie. the CBA would lose its ability to purchase a government bond in exchange for crediting the government’s account with the face value of the bond — convert debt into money.

At the end of the day it’s a conflict of interest: the people want a stable medium of exchange and the government wants to finance its activities without balancing its budget.

The economist Melchior Palyi explained this phenomenon in his 1962 book “An Inflation Primer” following the high US inflation of the 1940s: https://cdn.mises.org/An%20Inflation%20Primer_2.pdf

> The solution seems so simple to me: drop the ARS and use USD as the national currency

Actually, once the US hits hyperinflation, the US may want to consider using ARS as its national currency

The US is at no serious risk of hyperinflation in the foreseeable future, barring unknowable events / disasters.

You can see the future, impressive

Because doubling the amount of dollars in the past year or so is not at all worrying for "transitory" inflation. Dont be naive, it's coming. The politicians have kicked the can down the road for decades and had they not bailed out the bigs in 2008 and during this past 2 years we would be bankrupt. Its a house of cards. They are going to push us into a war to escape the inevitable.

No no no! You see velocity of money has decreased and productive output has increased. People don't like to spend the new money. Therefore inflation is low, do not be fooled by the Austrian tricksters suggesting otherwise.

You mean the monetarist tricksters. They assume the velocity is constant.

Governments go to war to stop deflation, not inflation.

As you lower the interest rate below liquidity preference people will simply hold onto their money because they are speculating on higher interest rates.

If hyperinflation is a knowable event, you'll already be in it. People would instantly spend their money if they knew hyperinflation was coming, making it a self fulfilling prophecy. It's really meaningless to make such statement about any currency that isn't already in hyperinflation.

Isn't that kind of what Brazil did in 1994 with URV?

From Wikipedia: "URVs were quoted in cruzeiros reais and its intrinsic value was pegged to three price indices and had a fixed parity of 1-to-1 to the daily U.S. dollar exchange rate."

You would like to listen to / read this planet money episode: https://www.npr.org/sections/money/2010/10/04/130329523/how-...

It was the 1991 Cavallo Plan in Argentina that tied the local currency to the U.S. dollar:

https://en.wikipedia.org/wiki/Convertibility_plan

The Real Plan in Brazil created a three month period with a combination of the old currency (Cruzeiros Novos) and a new virtual one (URV - Unidade Real de Valor) with an official daily exchange rate between them. This rate was selected to keep the URV at almost exactly 1 U.S. dollar but when both were replaced by a new actual currency (the Real), that was officially allowed to float relative to the dollar.

The real did initially get slightly valued relative to the dollar (an exchange rate of 1 R$ = 0.85 US$, for example) but floated slightly up and down until the end of 1998 when it suddenly jumped to 2 R$ = 1 US$ in order to block a huge wave of speculative money that was destroying economies around the world (having previously hit Russia, then the Asian Tigers).

>t the end of the day it’s a conflict of interest: the people want a stable medium of exchange and the government wants to finance its activities without balancing its budget.

This still holds for USD

If you're willing to put it in basically "god's hands" (hope America keeps it stable), why not pick something like a commodity money (metals or basket of commodities for instance) that at least somewhat mitigates this conflict of interest. Using _someone else's fiat_ seem like you're keeping all the downsides of fiat but only some of the upsides.

This is not a solution. What you need is a negative interest rate on cash to abolish inflation and currency speculation. Once that is done the central bank can control the money supply directly and the government can pay off its debts.

The issue is relying on a foreign currency, one which the official exchange rate is like 50% marked up from its real black market value, which is how the economy reaaaally works there. I worry for Argentines (I am one), because the usd is having the same problems the peso has every 7 years, its being printed into inflation oblivion.

I would be buying that canned tuna, and also using bitcoin, etc like the surging numbers of people are, because escaping one fiat submarine for another fiat sinking ship is not something I could sleep well with. Besides, the politicians down there are nuts and could easily make holding dollars totally illegal, infact they already do with strict capital controls, withdrawal limits, etc. Its a cash economy.

I have a friend living in Argentina. His father-in-law is a businessman with a factory. Like many successful people in Argentina, he is a master at exploiting chaos for personal benefit. The father-in-law praised inflation, explaining it was a useful tool for people like him, and offered the following story:

I was walking down the street and found my wares being sold in a shop that doesn't retail for me. Doing some digging, I found incontrovertible proof that my foreman of ten years---ten years!!!---had been stealing from me.

Did I fire him? No. It is impossible to fire your employees, even for provable malfeasance.

Did I sue him? No. You lose 95% of these kinds of cases.

Did I tell the police? No. You can't get the police involved with anything important, like my business, they are too corrupt.

So what did I do? I simply told him I would never give him a raise again. And he understood that---due to radical inflation---his salaried buying power would keep dropping and dropping, until it was chiseled away to nothing. So he quit.

[edit: I am in no way suggesting that FIL was the moral actor in this story, I don't know if he was or wasn't screwing his foreman into poverty before the theft. What I found fascinating about this story was how things were systematically fucked in across so many possible dimensions, that individual instances of corruption and inefficiency and lack of faith are intertwined. i.e. there's a whole rat's nest of problems to untangle and a point intervention is unlikely to prompt broader change. Also see interesting discussion below about root causes of the inflation, which connect to some of the anecdote above: https://news.ycombinator.com/item?id=30101931]

> Doing some digging, I found incontrovertible proof that my foreman of ten years---ten years!!!---had been stealing from me.

> I simply told him I would never give him a raise again. And he understood that---due to radical inflation---his salaried buying power would keep dropping and dropping, until it was chiseled away to nothing. So he quit.

Just to play devil's advocate here, and I'm not saying that stealing is wrong by any means, but this just makes me feel like the reason he was stealing to begin with was that his income was too low to live off of.

Difficult to say without having background for such situations. As a latin american myself I think it's not far fetched to say that in LA there is an ominous sensation that there is always someone taking advantage of you: your boss, your employer, your government, your politicians, the police, etc., so taking advantage yourself, although immoral, is "par for the course". Theory of broken windows and a way to carry on.

My family ate beef/chicken leftovers (from butchers and such) when they moved to my city.

They never stole.

Stealing is never OK.

You can't imagine any circumstance where it's okay?

We should all be clamoring that stealing is never OK. But NOT with examples of poor people scraping for food.

Stealing is a deep problem in our society, and poor people have nothing to do with that.

I would argue that the real issue is being in a position where you would need to steal food during a time of relative prosperity. I know no one should be forced to be a charity but there should be a line somewhere that as a society we do not cross.

Stealing is okay in all sorts of situations. Many things in life are more important than the rule of property.

Scale up this mentality, you have South America

But I didn't say all stealing was okay, I said some stealing definitely is okay. I still think that's true. Some things in life are more important than property.

Out of curiosity, what are some things that are not more important than property rights in your opinion?

Intellectual property rights?

Good one, I agree.

Like what? Having a nice watch? Some Nike shoes?

> Some things in life are more important than property.

If the property isn't important, why are you stealing it?

Personally I don't really care whether you think it's moral or not to steal, as long as you acknowledge that a victim of theft has an equally moral right to "steal" back what was taken, and to use a similar justification to steal a proportional (additional) amount from perpetrator. "Turnabout is fair play" and all that.

> If the property isn't important, why are you stealing it?

Because I'm starving so I'm stealing a sandwich ?

Because I don't have the money to buy something that would save my life (Medical treatment for instance) ?

If these things are important to you, they could be equally important to whoever you're stealing them from. It doesn't justify the theft. In the end, though, the morality of it is something you'll have to decide for yourself. It's your conscience. Just understand that if you do make that choice you are in no position to object if someone else does the same to you, and it's rather hard to survive—much less improve your circumstances—in a world where anyone can take whatever you've managed to save up at any time without recourse.

Please specify some of these important things that you clearly feel would be okay having stolen from you personally.

Or did you mean it's okay to steal as long it's from other people?

Stealing food to survive and not die of hunger while there's abundant waste all around is not "ok"?

I'd imagine that strong allcaps viewpoint would change in certain circumstances.

Dumpster diving or getting "waste" to survive is not stealing, is being resourceful. It is like "hacking" vs. "cheating" the system, subtle difference.

Nobody "owned" it since it was thrown away - unless you think racoons have rights...

It's still owned by the person while it's in their trash can, til the trash is collected.

It's stealing; just not stealing the owner is likely to care about. Sometimes they do, and put locks in their dumpsters though

Maybe they lock dumpsters because of liability https://www.avvo.com/legal-answers/if-i-give-a-homeless-pers...

Around here, dumpsters are often locked to prevent dumping. The apartments across the street are plagued by dumpers who come at all hours and fill the dumpsters, mostly with construction debris it seems. Residents end up just piling shit on the ground around them.

No most countries consider trash abandoned property and free for anyone to grab.

Yeah stealing food so that you can sell it on the black market lol.

Most poor people are not thieves, they are decent hardworking people and don't want to be associated with crime thank you very much. Stop glamourising theft

Lets say that the manager's incontrovertible proof proves to be incorrect and neither party has committed a moral fault. The system the manager has leveraged for enforcement is protected from any sort of rebuke (I assume you can't sue someone for failing to make CoL adjustments in Argentina) so freezing someone's salary essentially just comes down to a form of wage theft.

Bear in mind that in America, I'm not certain about Argentina, wage theft is the most expensive crime (summed across all instances) worse than burglary, stealing office supplies, or even robbing your employer.

I agree that stealing is generally not OK - but maybe lets start by addressing the most prevalent form of stealing - by the powerful against the powerless.

With that logic the one doing the wage theft is the goverment for causing the inflation in the first place and not allowing other currencies to be used.

No, if CoL adjustments were not built into an employment agreement, then it's not wage theft in any sense.

Stealing is sometimes okay, but usually the kinds of people who try to justify it do so because they infantilize criminals, which is maddening.

Being tolerant is not always a virtue. I visited countries before with very agreeable people living absolute disparity. Had they been less agreeable, they may have overthrow their inept and corrupt governments decades ago. For their own good. People in Cuba still have to line up for hours to get pitiful food rations from the government stores. Blows my mind that nonsense is still going on, decades after near everywhere else Communism has been abolished.

You wouldn't steal a sandwich if you were literally starving to death on the streets?

My family nor me ever did when so.

Never advocated that stealing was okay. I'm just making an observation...

There's plenty of well off people that steal because they want more. The fact someone is stealing doesn't lead to the conclusion that they don't have enough income to live off of. And if things in Argentina are really as bad as the business owner claims where you can't fire employees and you can't go to the police, theft is probably seen as an extremely low risk activity. For many people, increasing your income by a significant amount through actions that are highly unlikely to have a negative outcome wouldn't require much consideration.

> things in Argentina are really as bad as the business owner claims where you can't fire employees and you can't go to the police, theft is probably seen as an extremely low risk activity

This we call Monday in Argentina

> There's plenty of well off people that steal because they want more.

Fair counter-point. I suppose as a foreman he was probably getting paid better than most of the workers he managed.

This is a Hispanic country, so the traditional morals and ideologies of regular people are not the same. I come from a hispanic country and lived in Miami almost my whole life. (take a guess where I'm from lol).. Basically what I'm trying to convey is that hispanics are hustlers, almost by nature. Due to living in relatively poor countries and forced to figure out new ways to survive. Not saying that Argentina is so terrible that you need to be hustling this hard, but sometimes people want a bit more. For example, my friend which was born in Argentina recently went to visit and explained to me how prices for goods that come from the U.S. are extremely expensive but rent+food is extremely affordable. Just from that little bit of detail alone, I'm guessing anyone who is hustling for more money. Is doing it because they want to live a more 'luxurious' life style. Less humble maybe?

I think your comment is shamelessly racist and ignorant, to be honest, have you been to every hispanic country to treat hispanics like that? you'll see hustlers everywhere and in every culture and country, also Argentina is not the only Hispanic country so please try to make more educated comments, and if you feel the way you describe it as for Hispanic people, please talk about yourself and don't generalise.

I am from Spain. May I introduce you to the old "picaresca" from The Lazarillo of Tormes?

We Hispanics gave the world great people, but we got lot of hustlery and bribery since the Roman Empire. Italy is like that too.

A lot of great Spaniard writers said that they were fed up of Spain and the Hispanic culture as a whole, from Pio Baroja to Estaislao Figueras.

https://wikiless.org/wiki/P%C3%ADo_Baroja?lang=en

And Pio Baroja should be the ultimate Hispanic figure, the one who put all the Christian bullshit away and fully embraced Humanism and scientific Enlightenment from the 16th Century as the students in Salamanca did, but, you know, we might have been cursed, because even if Spain was the proto-embracer of Humanism and Enlightenment, (even before Lutherans, y'all HN readers please look up "school of Salamanca"), we burned our crap down three centuries later.

I'm Chilean and I read Lazarillo de Tormes when I was 12 at school, do you know that the Roman Empire also influenced the British isles and every place they conquered? What's your point? Christianity also isn't particular to hispanics countries, robbery was a way of life in northern tribes too. The statements here I've read are really ignorant, you can't generalize hustlers and bribery 'cause in every part of the world you'll see people doing that, educated and uneducated, the lack of values is not a cultural thing, saying that is racist, you can vote me down all you want, that won't change the level of ignorance I'm seen here in HN.

>the lack of values is not a cultural thing

More than the lack of values, the "getting away with that". I am not saying we are all thiefs, but little rascals/rogues doing "alegal" stuff.

It happened in every side of politics, no matter left or right, rich or poor, smart or fool.

OFC there's corruption in Middle Europe, I could say a lot of the French and the Germans, along Icelanders and the Danes. But at least they keep the ethics and resign. Here the Spanish verb for resign "dimitir" it's a Russian name, right? Because no politician would do their shit when they are caught.

Here in Spain by mouth everyone hates the cheating politics, but IRL, in the back, everyone agrees with them and they admit they would do the same in they had their place.

If Spain fixed it shit together, it would be a torch of Enlightenment for the whole Americans. But we need a slight change of mentality.

No, I don't mean we should became Nordics, as we are great in many terms, we are the 1st country doing organ donations. We should be like that on corruption, denouncing every crap, no matter left of right.

People gets politics in Spain as if they were a soccer match. And that's ridiculous.

And yet Spain (and Italy) are relatively stable first world countries. Damn, I live in the US, and I would say there is way more hustlery here than back in Spain.

I'm Hispanic and born in Cuba. So I know a lot about other Hispanics.. also wasn't trying to be "racist". Never mentioned Blacks, whites or mixed. Another important note, I lived in Miami basically my whole life. The diversity in Miami is like no other place. So calm down before you jump to conclusions about "shamelessly being racist" or whatever.. you can't be racist against your own culture lol.. at most you're being prejudice against yourself/your culture.

This perspective of blaming the motive of the perpetrator instead of the perpetrator itself leads to blurred lines of judgement that makes establishing common rules impossible. If you have ever caught someone doing something evil, you would know just about any crime can be morally justified for a cause of some sort.

Is your friend's FIL ceo of my company? This is my employers current strategy to increase profits.

Is this likely to result in employees leaving the company?

i put in my 3 week notice last week. I don't understand ceo's logic here, just counting on inertia?

Ha! Well there you go.

I worked for a large company that was perpetually being (and being prepared to be) sold. Three acquisitions in three years, each preceded by a company-wide dictate to increase the company's cash value by lowering costs.

My director told me their most powerful cost-cutting lever by far was to lower headcount. So that's what they did. Then after the sale they'd be desperate to hire and train new engineers. The churn killed productivity for years afterward, due to the technical nature of the work. After a year there I still wasn't up to speed.

Sometimes the folks in charge are just shortsighted and incompetent.

You've stumbled upon the perceived-lowest-risk way to fire tech people.

It looks better on the books when people churn "organically" over the course of a year.

Is it better or worse for morale than a lay-off? Hard to say. Depends on how transparent with salaries your company is.

One "advantage" is that it's somewhat-reversible. If 2 quarters into this plan, the board finds that they don't need to cut back on spending as much as they originally believed, they can hand out raises to whatever fraction of employees remain, and give themselves a pat on the back.

Bottom line, it's a symptom of a poorly-planned hiring system, IMO, and a painful situation with no painless way out. Employee X may prefer to be told directly that the company wants them gone next month, Employee Y prefers to save face. Your CEO is, in all likelihood, very upset about the situation, too, for what it's worth.

That seems unlikely. That foreman most probably belongs to a union. Unions in Argentina are very powerful and they negotiate at the National level. Whatever increase they negotiate, your friend's father-in-law will have to pay.

Time to sell the business and move to a better country.

Easier said than done though.

> So what did I do? I simply told him I would never give him a raise again.

It is true that salary have been always losing purchasing power but don't forget also that employees have compulsory raises. This comes from two sources: 1. minimum wage raises 2. believe it or not, unions negotiate with the gov the raises, those are called here "paritarias".

Everything is broken here, laws favor the employees always and that's why no one wants to start a business. When you talk with small businesses this is their number one fear.

Half of the population is convinced that business and owners are the devil, and that they need to die in fire.

And as for inflation, there is nothing to praise.

I moved from a broken society to a first-world one. I’m supremely lucky in this.

There are many interlinked systems that have to work for a society to progress. It’s nearly impossible to line up all the required factors at the same time. Makes it rather frustrating when first-worlders shit on their own cultures.

I think self destruction is human nature. more so when you don't have things to constantly worry about. like dictators or a horrible economy.

> Half of the population is convinced that business and owners are the devil, and that they need to die in fire.

That sounds like more than half of Venezuela's population.

This is obviously false. First, employers can't just stop giving raises. Raises are governed by law and by collective agreements (although they are often below inflation). Second, no one just quits, especially a crook. Why? Because you can always force the employer to fire you. How? In general, nothing too obvious, you just stop working too hard. Until your employer offers you to leave and is forced to make an arrangement and pay you compensation.

> Did I fire him? No. It is impossible to fire your employees, even for proven misconduct.

> Did I sue him? No. You lose 95% of these types of cases.

>This is obviously false. First, employers can't just stop giving raises. Raises are governed by law and by collective agreements (although they are often below inflation).

You mean minimal wage?

I don't know about Argentina specifically, but in many countries unions negotiate salary raise percentages for the whole sector. If the country follows universal collective bargaining, this may also be a binding minimum raise for non-unionized employees in the same sector, even in companies that aren't members of the trade union that bargained the deal.

Argentinian here, I confirm that it works exactly was you described, even the non-unionized part.

No, for example in IT they are connected to the "commerce union" but it doesn't include an agreement to adjust by inflation. Obviously IT has strong market forces in favor of the employee but this is an example.

Also many unions lost against inflation.

> No, for example in IT they are connected to the "commerce union" but it doesn't include an agreement to adjust by inflation.

Most factory jobs do have those agreements though.

This article paints a pretty picture of how Argentine people manage persistent inflation, but reality in the interior of the country (ie not Buenos Aires) is much less clever and functional than what is depicted. Not everyone can buy peanut butter on credit. Rather than seeking arbitrage opportunities and investing in nonperishable goods, many people are fatigued by inflation. Some live hand to mouth. Shopkeepers don't always move their prices when the currency moves. The national bank publishes currency bid/offer numbers that falsify the offer side of the market for pesos. Surrounding nations have seen an influx of projects from Argentine investors who seek to take money into more functional economies.

Meanwhile, people in Argentina have cultural characteristics that I found surprising. The more bohemian people have an anti-work culture yet they blamed Macri and other capitalists for not having promptly repaired the damage done by leftist predecessors. Some indigenous groups enjoy receiving free seeds and ignore other factors that may affect their prosperity. When the country brought Kirchner back, the foreign investment community recoiled as evidenced by the overnight devaluation of the currency. Many strategic subsidies exist, and some people don't realize that subsidies and handouts in a nation that can't afford its debt service are not a sharing of wealth, but rather a cause of inflation. Past lockdowns of foreign exchange under Kirchner spooked outside investors, so in some industries such as mining, foreign companies tapered off their projects in mid-2019 when it became clear that Alberto/Cristina would take power.

Resigning yourself to weird survival tactics in a place where the economy doesn't function is not "a way of life." Argentina sustains itself because of its substantial domestic production (which insulates certain markets from exchange rates) and the fact that people depend on government handouts. Hoarding toothpaste may save a few bucks, but it's not paying the bills. The only other countries in the Americas with such a problematic currency situation are the ones facing economic sanctions.

> The only other countries in the Americas with such a problematic currency situation are the ones facing economic sanctions.

Argentina is not receiving economic sanctions but it's pretty much cut out from international credit. Last time the country had access to good credit mostly from other Latin American countries it was not doing that bad. That stopped when Venezuela and Brazil crashed.

Maybe the huge interest rates and being cut out makes sense because "we don't pay", maybe it doesn't because some of that credit was taken by a dictatorship or by wildly unpopular and corrupt governments, but it does work pretty much as an economic sanction.

Honestly I used to think this was unfair in the later 90s early 2000 when most of that debt came from lending by a US backed dictatorship or from a corrupt government that was basically in the pocket of big corporations. But it's true that as Argentinians there was not much we did against the former dictators, who most got pardoned or only saw consequences in the last years of their lives. Oh and the president from the corrupt government died a senator and only saw some years of house arrest from selling weapons to Ecuador when they were sanctioned. It's not clear for me if "the Argentinian people" are really ok with that or not anymore.

Being cut from international credit isn't something that creates inflation anyway. The situation is actually that Argentina is cut because of the same bad administration that got you the inflation.

Getting access to international credit also will not stop the inflation. It can help a competent administration to survive the change into low inflation, but credit by itself is not something good (it's actually a bit bad), it's only helpful when invested competently.

Without access to credit, the only way to run a budget deficit is to print money. It is false to assert that having access to reasonably priced credit would have no effect on inflation.

Corruption is one major problem with foreign loans to Latin American nations.

In theory, money that is borrowed gets put to use for programs that generate revenue. That revenue may result in taxes or may support the treasury directly in some cases, but either way the notion is that the loan generates a return that pays the debt service (or bridges the borrower over to a future cashflow that can pay the debt service of the new loan).

That return can't be generated if the money is not put to good use. As a result, loans that come due are often either refunded further out, or forgiven/restructured with certain concessions. By "concessions" I mean the country makes domestic and foreign policy changes that benefit the lender in some way.

Argentina tapped IMF funds during Macri's presidency despite the 2014 default. I see the 2020 default as a negotiation tactic. It's a little unreasonable to assert that a country that owes hundreds of billions of dollars lacks access to credit -- and if indeed we describe them as lacking access to credit, it's only because they have over-accessed credit in the recent past.

Lending a country more money under such circumstances often compromises their ability to support self-beneficial foreign policy, and kicks the debt can further down the road. It trades a big problem today for a bigger problem tomorrow.

By no means did I mean to imply that Argentina is credit worthy. Only that inflation is tied in with other financial problems, including the inability to access international credit.

I don't personally think Argentina should have access to credit. I was politically active while down there, never at the federal level but I think most of my mates agreed that renegotiation of Argentina's debt under the premise that it was not legitimate was a good thing, and also that the federal government to stop relying on international credit was also a good thing.

What I'm saying is that the effect of not giving access to credit to a government that is already massively indebted internationally has a similar macro effect to economic sanctions. It's basically reducing the profit you can make from international trade.

Have you considered the possibility that running budget deficits is the problem?

Absolutely, it’s the primary issue.

But when you can’t get access to international capital, can’t effectively tax, and are unable to cut spending, you’re left with an inability to address that issue.

> can’t effectively tax, and are unable to cut spending

By cutting out the leechers, enforcing taxation properly, and some austerity measures short term, this can be rescued. there would be pain of course - esp. if leechers are large in number and powerful.

The political leadership who does this will not be thanked, and is basically political suicide as the people would not enjoy these measures. This is why nobody does it - thankless job at best, and derided or punished at worst!

>The only other countries in the Americas with such a problematic currency situation are the ones facing economic sanctions.

Chile has economic sanctions? Colombia? Mexico?

Inflation is just a fact of life here to the point that in Colombia there's an inflation adjustment applied to prices on a lot of things as the new year ticks over.

If you look at the USD / Latin American currency pair you'll find none of them are stable but each is at a different stage in the 0-Bolivaries journey.

If you want an anecdote, friends bought a car last year. They can now sell it for a higher price used than what they bought it for. Isn't that great!? They think so.

None of those countries are anywhere close to the inflation of Argentina. And the car story isn’t just about inflation but a global shortage on cars.

>you'll find none of them are stable but each is at a different stage in the 0-Bolivaries journey.

2 years ago Argentina had similar inflation to what other South American countries are now. They had just had an election and change of govt and that's when currency controls kicked back in, the blue rate started again etc.

Colombia has an election this year and one of the favourites often gets compared to that guy in the neighbouring country.

I would also expect locally produced and sold cars to be somewhat less impacted by this. Literally can't sell these cars in first world markets due to them being stripped out of saftey features, etc.

How would you define “stable” so that no Latin American currency matches? MXN has been 3-7% inflation for 20 years. CLP had a big swing with the global financial crises and more recently but is otherwise around 5%. COP has been under 10% for 20 years, mostly around 5%. I think what you’re saying just doesn’t fit the facts.

The claim that they’re all at different stages on a 0-Bolívares journey is unfalsifiable. You can always say it’s going to happen later.

The car market is global. Colombia imports about half of its cars. A rise in import prices is going to increase domestic demand and prices as well. And the cause of the shortage is the global computer chip shortage, and Colombia imports those.

None of your anecdotes about inflation are unique to Latan America or Colombia. Everywhere has seen car prices spike and everywhere people update prices every year. And just look at the charts if you want some data. The point you dismissed about only sanctioned countries have worse inflation seems correct.

>The car market is global. Colombia imports about half of its cars. A rise in import prices is going to increase domestic domains and prices as well. And the cause of the shortage is the global computer chip shortage, and Colombia imports those.

This is becoming very arm chair critic. Cars that are produced locally are shitty Renaults, Nissans Chevolets etc. These cars as I mentioned, can't be sold into markets with normal safety standards, so aren't competing for export sales.

Colombia imports things like Mercedes / BMWs and other brands that a different class of people buy. It's very common here to have a market split between cheap local and expensive, highly taxed imports. Cheese would be another thing example of this. Perhaps that wasn't well represented on your chart.

As for the other points, inflation over 20 years. If you have 12 'good' years and then the most recent 8 have been spiraling out of control does that make the 20 year figure a good representation? You can smooth the recent high inflation out over 20 years just like icing on the cake?

If you want, I'd like to take a long bet with you. You win, I'll pay you in COP, I win you pay me in USD.

You seem to not be engaging with my criticisms of your claims. Someone said that the only countries with worse inflation than Argentina in the Americas are under sanction. This is just a fact. You can look at a chart.

You named a bunch of other countries implying they have inflation as bad as Argentina. They don’t.

You said their currencies aren’t stable. They are.

You told a story of an appreciating used car as an example of unstable currency. It’s not.

You told a story of annual prices changes as an example of unstable currency. It’s not.

Colombia, Chile and Mexico are not currently and have not recently experienced hyperinflation. Argentina is, Venezuela is. Pretty straightforward.

I mean if you want to make the case that Latam historically has had hyperinflation in different places and time, sure. That’s true.

If I'm guilty of giving anecdotes, (which I am, and you call tell this when I prefixed my statement: If you want an anecdote,...), you're guilty of reading the news but not knowing what you're talking about.

Please, tell me about all these electronic shortages that are affecting car production in the country I live where the cars... don't have these electronics. You want the high spec model with a 4 inch color screen?

Once again, I'm at a major advantage in this situation, having been in all of these countries and experienced it first hand. Using these currencies, buying products in these countries, experiencing inflation.

Unfortunately, you wouldn't know how accurate your chart is. I was in Argentina, currency charts were showing 49 pesos to USD, blue rate went from 60 to 90 in a month. The offical chart hardly moved. Go and find a chart of the blue rate in Argentina (tip: it doesn't exist, well it does, but then take that to one of the guys in the street yelling cambio cambio and see if he will honor it)

To satisfy your previous question, what is an unstable currency, I would argue that over any period of time, if a currency devalues continuously in relation to other major currencies then it is unstable. That is, if you look at a chart over 1 year, 5 years 10 years, there's only ever an upward trend vs the USD, that currency is unstable. Welcome to South America.

Since, you've said these countries have stable currencies, I would love for you to explain to me your definition of a stable currency, that isn't "falsafiable" by the first chart that I will pull up on my phone.

Another point, hyperinflation, 50% devaluation per month, technically hasn't occurred in Argentina.

If you're willing to take a bet, just let me know, otherwise thanks for telling me about what's going on in the country I live, using info from the charts you haven't provided but I already read, all whilst having never been here or experienced it yourself.

> Another point, hyperinflation, 50% devaluation per month, technically hasn't occurred in Argentina.

Man oh man, the fact that you had to throw in the word "technically" speaks volumes.

Brother oh brother, if I could downvote you for a substanceless comment that adds nothing to the discussion I would.

Technically, practically, literally, hyperinflation has never been reached by Argentina. Their economy is in bad shape. But it won't go down in the record books like countries that have experienced hyperinflation.

So gp adding in keywords to look like he knows what he's talking about but being a scale of magnitude off doesn't help his point.

Edit: Let me spell it out like this as I know sometimes my comments can be abrasive but I enjoy that style... so ok.

My partner walked across a land border and stayed illegally in this country because of hyperinflation. No body from Argentina is walking to Uruguay or Chile because they have to pay more and their employers are paying them more.

A scale of magnitude affects people where they leave their lives, families, pets, houses, jobs and _walk_ to find a better situation.

I don’t think providing anecdotes is something to be “guilty” of. I just think your anecdotes don’t support your claims. I would be very interested in them if they did.

Every car made today uses computer chips, not just ones with screens. https://m.motor.com.co/revista-motor/actualidad/industria/es...

I don’t know why you think I haven’t been to any of these countries. I recently spent two years living in Colombia, Mexico and Peru.

That’s an odd definition of unstable and none of these currencies meet it. All of them have periods where they go up against USD.

I’d say ten years with less than 10% inflation is stable.

I don’t care if hyperinflation hasn’t “technically” happened. I have a source that told me how much worse it is than what’s reported.

I don’t seem to be able to convince you about anything, but at least anyone who reads this thread will be inclined to doubt what you’re saying.

It does seem like we’re at loggerheads. Thank you for the conversation though.

> I recently spent two years living in Colombia, Mexico and Peru.

And thank you for this, it actually reminded me that tomorrow, 29th Jan, will be 2 years since I flew out of BsAs and into Colombia.

Brindare por ti mañana con un aguila. Salud

IMF handouts. I suppose the rest of the world can't let Argentina turn into a failed state so they'll be bailed out.

I wonder if Argentinians feel shame or humility?

Just a scorching hate for our politicians.

...and yet you voted for those politicians?

a majority of people voted for this govt in particular, yes. Thats how democracy works. Its the same system that voted for bolsonaro, trump, etc...

So clearly some people didn't hate them? In fact, maybe the majority?

Ah well, in our modern democracies I would say, it is very much possible, that the majority of people hates the elected politicians.

How is that possible?

Well, first of, not everyone has voting rights.

Second, many do not vote because they hate all politicians.

Third, even people who do vote, can hate the person they vote, but they see them as the smaller evil to the OTHER guy they even hate more.

Forth, during the vote the voter believed the promises and was disappointed to have them broken again, after election, which is when the hate returns.

So all in all, plenty of possibilities to have hated leaders voted in.

Having said that - hating is easy.

But transforming a corrupt, but nationalist society is hard.

Possiy not, in a system where voting is non-compulsory! It's compulsory where I live and one of those idiots simply couldn't win as a consequence. Democracy is something you do, not something you have.

I mean, if the politician is the one feeding you through food and cash handouts, since there are no private sector jobs, only public ones, and your education is shit, would you vote against them?

Basically, the majority is poor, can't get out of poverty (we are talking 2/3 generations of being poor at least), so they don't bite the hand that feeds them.

Hate has nothing to do with it, just raw pragmatism.

I spent 9 months in South America in 2012-2013, 5 of which I lived in Palermo Hollywood, Buenos Aires, aka the hipster ex-pat neighborhood. I loved it -- for the most part. I recall a few salient aspects of everyday life related to money:

- sometimes when I'd buy something at the chino (corner store run by Chinese immigrants), I'd get candy instead of my change back, due to the coin shortage. No arguing with them about that.

- I would get empanadas down the street at a bakery almost every day, and the woman who owned it would complain and almost start crying if I brought a bill that was too big (like a 100-peso note). I would occasionally buy fewer items than I wanted because I had smaller bills. I think she was happier that way.

- the best exchange rate for American dollars was the downtown grey market on Avenida Florida, where tourists would frequent. I would just walk down and guys would notice me as a tourist, and say "cambio allá" and point me around a corner, where I could trade American dollars for whatever the rate in pesos was that week. There was an official unofficial exchange rate, better than the official exchange rate.

- across the river, Uruguay just straight up abandoned their own peso and used American dollars instead. Same with Ecuador as I later found.

- when I got tired of wine, I'd get beer at this brewery in Palermo -- Orion, I think it was called. I can't remember. But I do remember in October 2012, beers cost about 24 pesos and were about 36 pesos by spring 2013. Cheaper for me since my wallet was backed by USD, but that just meant I drank more beer. :)

I really miss BA sometimes.

I'm in Palermo right now. As FAANG engineer I'm making so much more money than average Argentine. Life is good! Beer in a bar is $200 peso now. Still less than $1!

Are you doing remote work and just happen to be in Argentina(maybe getting an American salary in USD), or are you working for whatever FAANG and working 'locally' in Argentina, getting paid in pesos?

just visiting for a bit

> - across the river, Uruguay just straight up abandoned their own peso and used American dollars instead. Same with Ecuador as I later found.

Uruguay is actually extremely clever in that it long ago realized that Argentina just isn't capable of handling a sovereign currency. Having a monetarily unstable neighbour means that millions of Argentines are underserved by national banks, so Uruguay has an entire industry tailored towards financial services for Argentines.

You may have also noticed that almost all Argentinians of a certain economy class, have a USD account in Uruguay.

The downside is that occasionally, Argentinians do something unexpected, and it can blow up the Uruguayan banking sector: happened in 2002 (https://en.wikipedia.org/wiki/2002_Uruguay_banking_crisis).

Buenos Aires is the best place in the world to miss when you want to feel nostalgic. (Argentinian, moved to Valencia 1 year ago)

This is not accurate. Uruguay has not abandoned its Peso.

You can use dollars and expensive things (cars, houses) usually are priced in dollars, but salaries are in pesos and so are everyday goods.

Inflation in Uruguay is less than 10% yearly.

Correct; 1 USD is worth about 44 Uruguayan pesos.

Brazil hyperinflation case is a great read, both on the instruments that appeared to take advantage of it (and ultimately put more gas on the fire) and also on how Brazil managed to tackle it (it was more a behavior science thing than economics).

https://www.npr.org/sections/money/2010/10/04/130329523/how-...

Interesting things that I remember from that time:

- Hypermarkets made a boom, because people would make big monthly groceries purchases right when they got their salaries, and avoid small frequent purchases (as the money would lose value with time, very quickly)

- Price freezes were very frequent and very ineffective as companies would simply stop producing/selling, generating product shortages everywhere.

- A financial device called Overnight, were you would convert your brazilian currency (had many names) into USD at night and then convert it back to BR on the next day

- Government would try to control USD exchange rates and this simply created a black market that got so widespread that the black market (called "parallel market") had its rates published at newspaper and TV like a normal thing.

> A financial device called Overnight, were you would convert your brazilian currency (had many names) into USD at night and then convert it back to BR on the next day

Who eats the loss from the fluctuations in this case? Any idea how the providers used to hedge against the risk.

The overnight he is talking about is basically an overnight loan banks took in order to balance their books at the end of the day.

This reminds me of the repo load system used in the USA but in the overnight system regular people could loan to banks.

The value of the old currency approached zero, so we created a new one. This is a pretty standard solution really. This is the fate of all inflationary currencies. What's impressive is how they managed to manipulate the population into believing this time everything would be different. Inflation was not controlled, it continues to this day, only slower.

At least we don't have presidents stealing everyone's money anymore. That's the sort of insanity that cryptocurrency was invented to stop.

How does a cryptocurrency prevent a president from stealing money from the population? Public records of all currency transactions?

They depend on the banks to enforce policy. If you get rid of the banks, there's very little they can do. That's what cryptocurrency was supposed to be all about. In practice we ended up with pseudobanks called exchanges running this space.

There were people who saw it coming and withdrew their funds before the president ordered accounts frozen. Everyone thought they were insane because interest rates were sky high. They became richer overnight.

Sorry, how are banks connected to this and what policy? They are stealing out of a pool of money (taxation), you would still have that pool with cryptocurrency somehow. How do you prevent this from happening?

In the 90s, they tried a lot of things in order to control hyperinflation. One of their ideas was to freeze of everyone's bank accounts. They just took away people's money.

https://en.wikipedia.org/wiki/Plano_Collor

If your money is in the bank, it's not really your money.

Brazilian inflation was something different, because it was administered.

Prices had regular revisions and salaries had "triggers" and would automatically go up when inflation hit a certain value.

So it was guaranteed to just keep going.

I've hired a lot of contract developers in Argentina over the years and most now ask to be paid in Bitcoin. If I wire them USD, between fees, loss from the "official" exchange rate, and inflation, they lose 15-30%.

I currently live in Argentina, the loss rate is much higher, between fees and the official exchange rate you lose about 65% of any income you perceive. Aside from crypto, Payoneer is also popular (you go outside the country regularly to get cash).

It's actually much more than 15-30% if you go with the official/legal way: I would say you likely lose ~70% at the moment. Most people doing contract jobs in Argentina have a bank account in Uruguay, the US or Europe, and use cryptocurrencies or travel to bring cash.

That's pretty astounding. Would you be willing to breakdown how 70% gets lost on a transfer?

You will be compelled to exchange your dollars at the "official" exchange rate (which is about 1/2 of the real market value), so you lose ~50% there. On top of that, you have to pay taxes.

When a company sends USD to a bank account in Argentina, the bank must to convert that amount to "pesos argentinos" (ARS), using the "official rate". You can't get USD transferred to your account from other people than yourself (or a company owned by you).

Right now the "official rate" is 110,5 ARS for each USD, but if you sell your USD (using crypto or in the "dark market") and get ARS, you'll get 222,5 ARS for each USD.

And that's before the taxes.

And you can't bought more than 200 USD per month at the official rate, so the need to bought the USD through an exchange or in a "cueva".

> 15-30%

What a weird way to write 60-70% (you are forgetting taxes)

Do taxes only exist in Argentina? Are you advocating tax evasion here?

In Argentina, tax evasion is a way of living, everyone there, young or old, rich or poor, looks for a way to avoid taxes, since taxes coupled with inflation make life very expensive, no matter your income ¯\_(ツ)_/¯ .

The best way to live in Argentina is to be a ghost. No bank accounts, nothing declared, everything you own should be on someone else's name, earning usd in a foreign account and you should live on cash (converting usd to pesos as needed).

Tax evasion is likely what’s causing the inflation.

Not saying I don’t get why an individual does it, but without the ability to reliably collect taxes, there’s no way to stop rampant fiscal deficits.

Not really. Tax collection from the Argentine goverment grows higher than the inflation rate year by year.

The problem is over spending.

Tax revenue as a percentage of GDP has been stable or falling since roughly 2004 [0]

[0] https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?locat...

That source does not show all the accounts (says in the details popup).

If you use the information from the argentine tax collection agency statistics page [0] and divide that result by the GDP you get a wildly different result (e.g. 23% vs 10% for 2019 using the official data vs your source)

[0] https://www.afip.gob.ar/institucional/estudios/

And either way, the data you show does not support your claim, they are not very correlated. You have a mostly flat tax collection rate on an economy with a yearly rising inflation rate since 2002.

It excludes fines and social security payments.

Perhaps it’s the pension system in Argentina that is causing the whole deficit? I’m on mobile so it’s currently a big more challenging to do proper research.

Looks like it is. This site from the economic ministry says the "Servicios Sociales" (social services), is around 72% of all expenses (with social security as the highest spender) [0]

[0] https://www.economia.gob.ar/onp/presupuesto_ciudadano/seccio...

But don't forget that no matter the amount of taxes collected, politicians will find a way to spend more, so there will always be a deficit and more money will always have to be printed and whoever wants to reduce the deficit will be accused of "tightening" (ajustar) the Argentine people.

Argentina leads a ranking of world tax pressure:

https://www.ambito.com/economia/impuestos/la-argentina-lider...

> But don't forget that no matter the amount of taxes collected, politicians will find a way to spend more

That’s just not true, there are plenty of states that run surpluses.

> Argentina leads a ranking of world tax pressure

I didn’t say their tax policy was good, only that it’s difficult to address deficits when you can’t reliably collect taxes.

It’s all related. The government doesn’t collect sufficient tax revenue => they raise taxes => people evade taxes => the government raises taxes more.

Such backwards tax policy is a sign that those who can evade taxes are (usually mostly the elites, but to an extent everyone does it), and those who can’t are footing the whole bill.

No, spending more than you earn like there is no tomorrow for 20 years has caused inflation

The US has been running deficits for decades and doesn’t face the same level of persistent inflation as Argentina.

There is no way to succinctly describe all the myriad differences between the two countries that make this comparison unhelpful for understanding Argentinian inflation.

Indeed I am using a shorthand her to summarize the issues as well.

My response is meant to highlight the fact that the situation is not nearly as “simple” as a government that runs fiscal deficits.

I don’t know every detail about Argentina, but broad strokes, when you have a failing political class that is unable to effectively levy taxes and maintain international credit worthiness, you are going to have financial trouble. People love to blame spending and get moralistic about it but that’s typically not the primary issue.

Ehh, in this case it is, they are spending much more than we earn, and to cover that they used to take debt. Now no one lends to Argentina at a nice rate, so they emit internal debt by printing a ton of ARS to finance themselves, thus generating inflation.

If they stop printing, they have to stop spending as well as cutting spending, leading to a raise in interest rates and a quick economic crash instead of the slow burn situation as of now.

The current government is just trying to hold on until next elections, so when the economy explodes they can blame the next government for it.

It’s not that what you’ve written here is incorrect, but that this doesn’t say anything about what the remedy should be.

Simply letting the economy crash isn’t a good solution as it doesn’t address the fundamental reforms that are needed and doesn’t get you any closer to solving the structural issues. All it does is create unnecessary pain for people.

Again, if an entire society is engaging in rampant tax evasion, that is going to need to be addressed in order to turn things around.

The remedy are 10 years of austerity measures and free market reforms in order to start seeing the light at the end of the tunnel.

This is also known as a political suicide.

Those fundamental reforms - which aren't only necessary in Argentina but basically in every major country, apart from maybe China - would be to: Reverse the ever more effective mechanisms big corporations have come up with in almost every jurisdiction to siphon an ever increasing proportion of all revenues from the total of economic activity and bypass taxation, making only maybe the richest ten percent (who are the shareholders) richer.

Governments can borrow as much money as they want and central banks can allow banks to create as much money as they want to feed it into the economy to try in a futile way to keep the engine going .. as long as this trickling up of revenue is happening to the extent it is right now, the whole economic/monetary/social system is instable and heading towards either collapse or drastic political reform.

Unfortunately apart from some minor patches (plans to actually tax big players in the EU) I don't see much evidence for elected politicians trying to improve the situation.

Because everyone in the world likes and uses USD. In Argentina no one wants Argentinian pesos, people outside argentina like them even less, however you can use USD all over the world, so yeah, it's not comparable.

What you’ve written is just a tautology.

USD are valuable because USD are valuable.

Pesos aren’t valuable because pesos aren’t valuable.

It doesn’t demonstrate why that is the case.

> USD are valuable because USD are valuable.

> Pesos aren’t valuable because pesos aren’t valuable.

Welcome to fiat currencies, where a big incidence on the value of the currency is what people feel about it!

Basically, it's offer and demand. The offer of pesos is huge vs the actual demand, so they lose value. That's also the reason for the inflation of the USD last year, the us government likes to print non stop.

The US prints money because it can, Argentina prints money because it has to. (The monetary course taken by the fed in 2020 has proven quite successful, we’re at full employment with only moderate inflation as a price, which will be addressed in coming year)

The money printing is a symptom of deeper issues.

That's something MMT gets right. Public deficits = net private savings. So as long as there are people willing to save in USD (and not only US residents, people all over the world save in USD, including Argentinians), you can have a persistent deficit. In case the 7% becomes persistent inflation, make sure you have a plan B, you don't want to lose reserve currency status.

MMT gets a lot of things right, most of its critics seem to simply have not actually studied it at all, or have been informed primarily by sensationalist contrary takes.

The dollar is the world reserve currency. The extra printed money is diluted over an economy more than four times as large.

France (now the EU) does the same thing by forcing its ex-colonies to use the convertible franc. France’s inflation gets exported to Africa

Can you pay for everyday items or rent in USD?

No, cash in pesos, you exchange usd from time to time.

Is tax evasion worst than trading on unofficial channels? I guess it depends on the jurisdiction doesn't it?

I mean none of it is good, but at the end of the day there’s no alternative when trust in government has totally broken down.

It's a failed state. The taxes don't go to schoolteachers or whatever, they go into the offshore account of the local boss.

I am in agreement there.

I took my American girlfriend to my hometown this winter (summer there) and we both realized that what Argentina needs is a Nelson Mandela of sorts.

There is SO MUCH to do. But everyone has just given up.

It’s a psychological and social problem more than an economical problem now.

I tried to generate business for people paying for things in dollars and the mistrust is so high that no one wants to do anything because they think you’re about to scam them. And they have reason to. But no one is starting a business there, why would you?

The entrepreneurial vibe of HN is absolutely nonexistent in Argentina. So much that when someone young opens a business that is mildly successful the news dedicate an article to them. “Look, Argentinians generating jobs!”

It’s sad and I bang my head everyday at how I can go back home while creating jobs and fighting the stupidity of the government

What would you want Argentinian Nelson Mandela do to try to turn things around?

People need to believe that they can change the situation they are in. They need to think of what they are capable of working on and feel like other people will join them to do good, not to fuck with them.

Things as simple as not dumping trash outside of where you live. Or getting together with your neighbors to clean up your block to make it look nice.

Helping each other is no longer a thing in Argentina from what I can see. Everyone is so used to having to protect everything they have that they have isolated themselves in their pockets and everyone else can go fuck themselves. You can’t get up and go work like that.

I think Argentina needs a social leader that will make them think this way.

Is there any hope? That is, are there any people currently in Argentinian politics who might be credible agents of change?

Not really. There are new libertarian congressmen making waves (Javier Milei and Jose Luis Espert), by demanding taxes be lowered and public spending reduced as people can't afford to live anymore (Argentina spends waaaay more than it makes, hence inflation and debt), but they are still small parties in the national scale.

The big ones (Peronismo, which is a national socialist fascist leftist communist party (yes, it's weird, but it's that), and Cambiemos, which is Peronismo light mostly) are more or less in accordance to keep the status quo as politicians and public employees like how life is.

>socialist fascist leftist communist

It's not that weird. "Socialist", " communist", and "leftist" all describe political affiliation, while "fascist" is variously pejorative or a scare word deriving from "fasces", Latin for, roughly, " bundle of sticks", a political motif that was widespread and long-lasting (see the US mercury dime).

All that to say that "fascist" mostly lacks descriptive power except in its association with totalitarianism, which in turn is consistent with communism.

Peron was a big fan of Mussolini and Hitler, and a lot of his party actions (Peronism) are based on what they did, so yeah, fascist is pretty accurate here.

Doesn't sound weird at all. They all share a collectivist ideology, which requires some degree of authoritarianism to operate. It's the elevation of the state or the collective over the individual and they differ only in their degree and implementation.

Hayek's dedication in The Road to Serfdom is to "socialists of all parties". He does this purposely to demonstrate that centralized control comes in many forms, no matter what it may be called.

This describe much of the western world at this snapshot in time, if to differing degrees.

In Canada for example, it seems many people are treating real estate like the lady in the story treats cans of tuna: buy as much as you can afford. And, our government seems similarly disinterested in the problem.

It's very tempting to conclude that this is all by design (this sentiment is picking up a lot of steam in Canada, and I wouldn't be surprised if it is partially true), but I think what's more realistic is that this is simply emergence in action: a system such as the one we live in (Earth, humanity, etc) combined with particular forms of governance (representative democracy) eventually produces the phenomenon we are now seeing more or less globally: concentration of wealth and power, at a constantly increasing rate.

I think it's possible for leadership to change this, but I do not personally believe that representative democracy is necessarily capable of discovering such a leader and allowing them to advance through the ranks. Perhaps in anomalous situations someone could slip through, but my intuition is that anyone with righteous populist goals (maximizing well being for all people) would make it through the many sophisticated filters that exist, one of the main ones being the media.

The actual reason why this happens is that when someone controls the money supply, they will eventually start creating more money for their own benefit, or the benefit of those who vote for them. It's almost as whole societies get high on 'free money', while stripping capital away from productive activities. This has always happened in human history, and it's the actual reason for almost all societal collapses and wars. Centralized monetary systems have this inherent flaw, and it can't be fixed. The only solution for this is Bitcoin, which is incorruptible and can't be inflated by anyone.

Agreed, but if we had a more sophisticated form of democracy, we could do things like enforce transparency and documentation (and therefore honesty)....as it is, I think it is safe to assume that the various people in positions of power are happy to coordinate their talking points and documentation to minimize personal harm when something goes wrong.

It's bizarre how carefully we design relatively minor systems on this planet, but arguably the most important system of them all is a giant mess of bugs...and hardly anyone seems to notice or care.

Well, the issue is that there can't be real democracy when money is cheap. Whoever promises the most stimmies will always win. There are no hard limits on bad decisions. Real politics and real democracy starts when there is no cheap money and people have to make actual decisions and compromises. After that, maybe all the governance structures and methods will face pressure to innovate.

I believe a system could be designed that would be resilient to these and other problems. If we don't even try, we will never know what is possible.

I think this is just late stage capitalism. The ideology will have to die off for this momentum to stop.

South Africa is on my watch list for a failing state. Not sure if Argentinians situation could be improved by emulating it. This is what happens 'when money dies'. I worry that there is now a false nostalgia,a simulacrum, for communism without an understanding of the damage it does. In Eastern Europe I unexpectedly bore witness to the scars left on the human psyche from those who lived it. Even long removed from it they are still very damaged by it. There is no analog in the west so it is hard to explain, it's like chunks of their soul were removed. Their specter has haunted me ever since. What's happening in Argentina was entirely predictable and unfortunate.

You seem to have a pretty idealist notion of societal development. Did you ever think that maybe your business did not inspire confidence?

What you see in your country is true of any nation in distress and has nothing to do with the individuals moral or mental capacity. It has more to do with the economic policies and conditions of the nation. Industry lackey politicians from every side and the IMF have more to do with this than the people's lack of entrepreneurial spirit, I'm surprised the article didn't even mention them.

"Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past."

"...the final causes of all social changes and political revolutions are to be sought, not in men's brains, not in men's better insights into eternal truth and justice, but in changes in the modes of production and exchange."

It sounds like what Argentina needs is Paul Volcker, not Nelson Mandela. What would Nelson Mandela do?

Just a leader that changes the current situation, not the guy himself.

It sounds like what the USA needs is Paul Volcker, not Jerome Powell.

> the mistrust is so high that no one wants to do anything because they think you’re about to scam them

I had no trouble paying street vendors in USD. Some of them were slightly hesitant but everyone knew the exchange rate and I got pesos back as change. It was fine.

In Russia, a period of high inflation in 1990s and early to mid 2000s made people simply think in dollars. Whatever price or income you get, you just convert into dollars in your head and now you know what it's worth. Saving were only USD cash. Although inflation is long gone, people over 35-40 still think this way to this day

In Belarus, where there is no high inflation, but just periodic (once in 3-7 years) sudden devaluations of the local currency, people always think in dollars, and many employers set salaries in dollars too. Even government sets rent on government property and some taxes in dollars or euros just to avoid the hassle of recalculating it too often. After a while, people got used to it and it's not a problem at all - no one but government employees who get salaries in local currency, is even worried about the exchange rate (and those employees can't survive on salaries anyway - they are dependent on bribes as salaries are laughable - and bribes are in USD).

Venezuela sounds exactly like Belarus, bribes are expected for common state procedures, even with those that the government already set in dollars like getting a passport.

Venezuala ranks 177th out of 180 in the latest Corruption Perceptions Index (CPI) : https://www.transparency.org/en/cpi/2021

In ex-Yugoslavia, due to large numbers of people guest-working in Germany, we ended up de-facto pinned to Deutschmarks.

One of my favorite memories is watching the news where Ante Marković announced the denomination of the dinar, where they basically ran out of room on the bills for all the zeros and so just declared that henceforth they would print "new dinars" which are same as "old dinars" but without the trailing 4 zeros. Marković waved one of those bills in front of the parliament, started laughing with joy, and there was applause. [1]

[1] https://youtu.be/G3dSOfoQiaY

Of course what I didn't understand at the time is that they also officially pegged the exchange rate to the German Mark, which made the currency convertible and stabilized the inflation rate. Now I see that deleting the zeros was mostly showmanship (though it helped lessen the confusion).

Bosnia still has the mark. It’s an interesting link to the past.

Initially the mark was pegged to the German mark at par. Since the replacement of the German mark by the euro in 2002, the Bosnian convertible mark uses the same fixed exchange rate to euro that the German mark had (that is, 1 EUR = 1.95583 BAM).

https://en.m.wikipedia.org/wiki/Bosnia_and_Herzegovina_conve...

That is amazing. Straight out of an episode of Top Lista Nadrealista.

Don't think I ever expected to see that reference here!!

Oh it's all about Hrkljuš :)

Well, that clears things up.

This is known as currency substitution or dollarization and can be done officially or unofficially. But what happens when the world's currency also inflates?

https://en.m.wikipedia.org/wiki/Currency_substitution

> But what happens when the world's currency also inflates?

It's a relative premise of course. The USD Index [1][2] (currently over 97 and rising) indicates the USD isn't being debased at a faster rate than the other major currencies. The EU, China and Japan have debt & spending problems every bit as bad as the US (with the EU and Japan having far worse growth problems), choking at their economic and political systems persistently and requiring forever interest rate games. So if, this decade, Argentina's currency debases at 20% per year and the USD debases at 5% per year, and there are no superior alternatives in the currency realm (eg the other major currencies are doing something similar), you'll largely mentally disregard the USD inflation, as all the major boats are getting the same tide, and your USD choice is still the right one vs the local currency. And if you can, you may properly choose to diversify whenever possible into inflation hedging assets with surplus cash, trying to balance holding enough transactional USD vs inflation hedges to limit some of the USD damage.

[1] https://finviz.com/futures_charts.ashx?p=d1&t=DX

[2] https://www.investopedia.com/terms/u/usdx.asp

> Although inflation is long gone

Well, you say this, but then there was that time in 2014 when the ruble went from about 40 RUB/USD to 60-70RUB/USD...

That's true, but there wasn't any super major inflation spike. Everything just became cheaper in dollars.

We had what we called "hiper-inflação" (hyper-inflation) in Brazil during the late 80's and early 90's. My father calculated the prices in gasoline liters.

> There’s a long tradition here of purchasing U.S. dollars as a hedge.

There's a 200 usd quota per month shared between products, services and currency exchange. If you buy something that exceeds your monthly quota it means that your quota for the next months will be affected.

It's a system designed so that no one who can save money can buy dollars. When poor people started selling their quotas the practice got quickly stopped with taxes that got its price above illegaly traded dollars.

So basically if you need to buy dollars here you are a criminal.

This is crazy, no wonder a lot of people in there are turning to cryptocurrencies, particularly stablecoins.

Crime begets crime

Buying stablecoins is not illegal though.

It probably is in countries with capital controls, if you use it as a means to circumvent those capital controls.

as if capital controls are not a crime in of themselves...

"crime" here means that crypto incentivizes crime itself, not that it is "illegal" in the country: pump and dump, scams, cybercrime, tax evasion, etc.

"Criminal" is strong word here, there is no "rule of law" in Argentina, it is not one of the country's values.

Crime is the norm, not the exception, starting with the government and trickling down to the people.

It is the wrong culture: "If higher ups cheat to get ahead and get away with it, why shouldn't I?".

Result: scaled up crime - corruption, tax evasion, robbing, slacking, etc.

The same in Brazil, mi hermano...

It's incredible how similar Latin American corruption is across countries, I feel that every time I met another Latin American here in Europe/Sweden there's this instantaneous bond on how fucked up our governments (and everyday corruption) are.

I decided to leave and believe it's been the best thing I've ever done for my life, I miss the people I love but I don't miss life back there.

>It's incredible how similar Latin American corruption is across countries, I feel that every time I met another Latin American here in Europe/Sweden there's this instantaneous bond on how fucked up our governments (and everyday corruption) are.

Catholic vs. protestant culture.

Exactly: https://trendguardian.medium.com/in-data-we-trust-2978dacc8c...

“Culture is religion externalized.” - Douglas Phillips

The main thing to understand about protestant culture is that it can afford a beter PR machine. Think 1984 vs Brave New World.

Yep, same reasons Orthodox Christian countries are way behind. It's an uncomfortable topic, but Protestant dominant cultures are generally more equitable and less corrupt.

Why is that? Your assertion looks shockingly true when I eyeball the map of percentage Catholic by country, but I can’t find anything in Catholicism itself that would cause this.

For protestants work is the way to heaven. For catholics work is a punishment.

There is that and other factors.

Ex: "do not steal" is a tenet on both, but it is irrelevant if not obeyed from a personal to an institutional level. Scaled up and in aggregate, you have a country's culture. Not working is a way of "stealing your neighbor's labor"

But now we may have an emerging problem in the US, the breakdown of Protestant values:

https://news.ycombinator.com/item?id=29903457

That must be why Ireland is so hopelessly corrupt. Oh, wait.

Uruguay is said to be better -- true? Not true?

Yes, corruption in Uruguay is way lower and the country is more stable. But also it's a very small country, so not many opportunities around for most people.

Yes. Low corruption, low taxes (zero corporate tax for income received from outside the country), and you can even open bank accounts in foreign currencies.

> Crime is the norm, not the exception, starting with the government and trickling down to the people.

I agree with the starting with the government but I am lost when you blame the people (except for obvious crimes): literally there is not law in Argentina, tax evasion is not a crime because it is impossible to have a business without evading taxes (a friend told me) because the system is a trap where everyone could be attacked by the force of law based on ambiguous arguments.

And in Argentina is easy to bribe judges and move the "law" to the direction you want, more if you are powerful.

When I was in Argentina a few years ago there were money changers peddling dollars on every corner in downtown Buenos Aires, at a time this was illegal (Cristina was president).

Funnily enough they are called "arbolitos" (small trees). Because they are stationary and have green leaves (dollars)

I can still hear them chanting "Cambio, cambio, cambio" and it's been a few years. ATMs give hardly anything and charge a large fee per transaction as well, so it's no surprise people go to arbolitos.

You'd also get a better exchange rate from the arbolitos vs the ATMs.

If I remember correctly, it was referred to as the "black rate". If you paid a vendor in USD directly, you got the "blue rate". Both of which were much better rates than the ATM.

In reality most people don't use "arbolitos" because their rate has a big spread.

Instead people who need to exchange regularly go to "cuevas" (caves) which are just hidden and illegal currency exchanges that have much more volume.

Oh, really? TIL. I will have to ask about next time I'm there! Thank you.

Ah but I heard if you worked for the government during Cristina's presidency when the official price of pesos was artificially kept low, you could get paid 20% of your salary in USD at the government rate!

Odd how the author doesn't even touch on the causes of Argentina's persistent inflation. Rather, it's presented as though it came from nowhere, and the only real story is how people deal with it.

It's pretty bizarre.

That is curious. What are the causes?

gov’t insiders printing money

IANAE, but I'll say it's mostly seigniorage to fill up for the fiscal deficit.

And if you try to cut the money printer (without taking some.huge debt), you have to squash the deficit, which is mostly subsidies to electricity, gas and public transport, and non-contributive retirements. You can't, politically speaking (and maybe legally too), cut the retirements, so you have to cut the subsidies, which will increase the measured inflation, at least for a few months.

> You can't, politically speaking (and maybe legally too), cut the retirements

Funny enough, that's what the current government did. They removed a law from the previous government which ensured that pensioners would be paid inflation + x% so that their real income won't decrease, and now the government decides on a whim what the pension raise would be (the pensions have been increased by very little very sparsely), effectively cutting retirements, as inflation eats through them.

They can't cut subsidies because most of their voters are poor, and if they touch that, shit hits the fan, whereas they don't give a shit about old people, since they lose them money and don't vote for them.

I'm so happy to have moved to the us and have a 401k and ira accounts the government can't touch.

Well, I meant cut them in a "LOL, no more pensions for you, starve to death or something".

But you're right, the use-the-LELIQs-to-increase-retirements plan is marching as intended.

> "LOL, no more pensions for you, starve to death or something".

Yeah, they won't say they are doing that, but they are doing that.

> ... if you try to cut the money printer (without taking some.huge debt), you have to squash the deficit ...

Right. Governments would have to do sound budgeting.

But people who advocate for a balanced budget typically get laughed out of the room.

The way I see it, the real reason why governments most often need ever increasing debt-based budgets is: a growing proportion of the circulating money gets continuously redirected into (and by) the financial sector which puts most of the money in the hands of say the richest 10 %. Because these rich people know best how to avoid/minimize taxation this leads to a lack of tax revenue for the government.

Which in turn compels governments to seek other ways to remain capable of acting (deciding how much money for what is one of the key ways of acting out political decisions for every government). So in order to still be able to act, there's only two possibilities left: A) taking on more debt. B) raising taxes. The latter is spectacularly unpopular with most voters (even though additional taxation ought to hit the most wealthy anyway) so it's hardly surprising that most governments prefer taking on more debt. Usually it works "well" because with today's mainstream opinion it's seen as almost natural to take on more debt, whenever big expenses need to be taken care of. Hardly anyone questions the principle, except for Austrian economics proponents, who aren't really taken seriously.

They have a history of defaults, but mainly gov. corruption

Crypto fans like to compare to the US, but there is a key diff: the work ethic.

Money printing + no production = stealing + inflation + defaults

The US has the production and work ethic to compensate so far

It's a combination of factors but, basically: Populism and its mania with expending more money than what it generates in stupid ways.

An obsession from a big part of the society to sustain obsolete and uncompetitive industries with state money just to avoid "losing jobs".

Draconian taxation for productive and competitive industries (Ag mostly, IT affected too). Slow, confusing and corrupt bureaucracy requiered for starting a new bussines.

A hecktonne of social assistance that barely keeps the persons from starving but don't provide real social ascension.

Obscene subsidies to electricity and natural gas (think about rich people warming their pools during winter).

Sorry that I don't provide raw numbers, I'm in my lunch break and really don't want to sour it.

We print money like there's no tomorrow lol.

Examining your statement literally is also very illuminating. They literally treat the money like tomorrow does not exist.

They are printing so much money that they had to outsource to foreign printing presses -- their domestic facilities are already running 24/7 at full capacity.

http://mriguide.com/argentina-plans-to-outsource-currency-pr...

Why wouldn’t you just print larger denominations

Because that would be admitting there is a problem. Do you want to be the politician that authorizes change in denomination while simultaneously explaining why you haven't addressed why that is required. I'm guessing the politicians don't want to touch inflation with a 10 foot pole, because solving inflation is painful in the beginning so it tends to be very bad for anyone elected on any timespan less than a decade.

Milton Friedman called inflation like alcoholism, great at the start but quitting is long and painful and most of the rewards of stopping are delayed with only pain up front.

I would add to your excellent answer an anecdote about the tricks of a previous government (with mostly the same people as the current one) to hide inflation: the Secretary of Interior Commerce (a complete thug) forced McDonalds to freeze the price of the BigMac, so that Argentina would look good on the BigMac Index. The prices of all other burgers were more or less free to increase.

So can you actually go in and buy the BigMac? Wouldn't price controls cause inventory of BigMac to disappear? Or does McDonalds happily sell them at a loss?

This was more than 10 years ago. If I recall correctly, they sold the BigMac but did not advertise it (not sure if they even displayed it on the menu).

Fiscal deficit. The public sector grows and grows by hiring friends, family, and party members. In addition to that, every government contract is overpriced for kickbacks, and the government meddles in everything seeking opportunities for corrupt personal profit. All of this spending and corruption is financed by very high taxes that oppress the private sector, and by debt. When you cannot increase taxes anymore (in some cases, Argentina taxes are over 100%) and when nobody lends you money anymore, the only solution is to print money. But everybody knows that money is not worth anything, thus creating very high inflation.

I don't know the answer, I never invest in south america so I haven't really checked. So let's look together.

Inflation seems to have been a problem since around 2002. From 2006 to 2015 it was kind of stable but bad. The currency then dropped out.

GDP across that entire period seems collapsed. They constantly are dipping into recessions. Their manufacturing industry seems to be in decline since ~2012. Agriculture is suspiciously flat. Mining is in decline for that entire period. Seems to be whole economy collapse to me.

Labour participation rate is steady around 45% suggesting not much tinkering with employment numbers. Which looks also steady about 42%. Unemployment is pretty steady from about 2006 to present around 6-8%. So their productivity is poor. They'll very likely always be a second world country. What a sad outlook.

Central bank balance sheets are all the rave, they only go back to 2012. It looks as bad as any other country as of late.

Money supply is sky high. They probably have ~300-600% inflation locked in here. Holy.

Interest rates are in the 40-80% ranges? But real yields are negative for sure. You cant save a dime in this environment.

Balance of trade is good since 2019 or so, but that probably lines up well with collapse of their economy. Probably means poverty on the rise bigtime? Otherwise has been bad for years and has been in decline in scope.

Tourism died long before covid. Roughly in 2016 something happened to kill their tourism industry.

Government credit rating is trash. Yet government debt is rising.

Argentina's military spending had been bad since the 1990s.

No surprise to see their economic competitiveness is nearly lowest ranked in the world.

household debt to gdp? Argentina has no household debt? You cant get a mortgage at 40%+ interest rates. Therefore you cant have debt. Their people have no debt and they are sitll in collapse?

Corporate tax rate is recently down from an outrageous 35% to a slightly less outrageous 25%. Personal tax is 35%, Sales tax at 21%. So a total tax burden of easily well over 80%. Argentinian people work for the government at least 80% of the year. Does the government provide 80% back in services and goods? I highly doubt that very much.

Since the problem has been ongoing so long. Politically it can't be solved. I must admit I know nothing about their politicians but if I were to shoot from the hip, their current leadership is not ideologically aligned with fixing it.

So easy prediction without crystal ball? They have at least 3 more years of absolute collapse. We're talking probably 20% of people will enter poverty before this ends. It's going to be very bad for the argentinian folks.

As an argentine this is a spot on summary. We are in a shitty situation and things are just gonna wet worse

Given that large businesses are taxed and impeded to hell and employees are taxed to the bone, is there any leg up for those running a single man sole proprietorship running business informally? As a total outsider I feel like there's a special niche area left for 1 man run-his-own-business opportunities to make a living here by exploiting the structural problems that weaken the marketability of larger business.

>As an argentine this is a spot on summary. We are in a shitty situation and things are just gonna wet worse

Do you feel the elections are fair? Mandatory voting is a thing eh? Yet still just a 2 party system?

https://en.wikipedia.org/wiki/Republican_Proposal#Economic_i...

Like they are obviously proposing some good options, but they didnt do anything near necessary between 2015 and 2019 and then lost the next election?

Is there any talks of revolution? Probably would have the be violent. Frankly a worse situation than the seemingly ineffective government you have.

If I were to make a suggestion, the world is large. You can move to a country that isn't going to be so broken for the foreseeable future. The move will be painful, but its an investment in yourself and your family.

https://www.canada.ca/en/immigration-refugees-citizenship/ca...

I'm Canadian, but we have a large economic immigration system. You're obviously a tech and know english. You're likely going to be approved quickly.

Because of our relationship with World War 2, we have a worker shortage of 2030 going to hurt us badly. We need people to fill that hole.

> From 2006 to 2015 it was kind of stable but bad.

Just an FYI, the government at that time (which is the current government) fudged the official inflation numbers to pay less interest and to say there was no inflation, so if your inflation numbers are from official sources for that period, they are not true, inflation increased every year since 2002.

>Just an FYI, the government at that time (which is the current government) fudged the official inflation numbers to pay less interest and to say there was no inflation, so if your inflation numbers are from official sources for that period, they are not true, inflation increased every year since 2002.

From the numbers it doesn't suggest Greece levels of fudging. There was a few cases where it looke suspicious to be sure. Given the constant dipping into recession. They probably couldn't fudge it as muchas they please.

Poverty in Argentina is already at 40% and extreme poverty at 10%. But I agree with you, it's only going to get worse.

"Inflation is always and everywhere are monetary phenomenon."

The Washington Post is no longer concerned with giving readers interesting and useful information. Instead, the entire newspaper is devoted to fearmongering, spin, and propaganda. A quick Google search for "Argentina Inflation Cause" yields the following result: "the price increase in Argentina was fueled by rapid expansion of the money supply". The WaPo very explicitly wants to rapidly expand the money supply in order to redistribute wealth and achieve "equity" or whatever the buzzword is today. I'd guess that this is likely the reason why they don't touch on this in the article - they want to distract you from what's currently happening, and instead are conditioning you to accept the outcome.

>The WaPo very explicitly wants to rapidly expand the money supply in order to redistribute wealth and achieve "equity" or whatever the buzzword is today.

Considering that they're owned by jeff bezos, why would bezos want this?

Because he has real wealth (Amazon stock) that isn't affected by inflation (stocks rise as money loses value).

So who is wealth being redistributed from?

The middle class.

Its not a distribution. Its a dilution. The rich gets richer as they have most of their savings and capital in form that is not taxable and also set to rise with markets and real estate. The poor and middle class have much smaller percentage of income working for them and not usually have access to high growth opportunities.

It's always the middle class that gets screwed, dude. Happened with the income tax, happening now with inflation, and will happen again once well-intentioned but naïve people pass a wealth tax.

Whoever has the most USD cash. (In proportion to their total wealth) most certainly not the "rich".

People with cash savings.

Employees with salary.

Owners of fixed income securities (government & corporate bonds, mortgages).

Even owners of capital that sell stock (inflation causes imaginary "capital gains" and the corresponding taxes).

You

Unless I happen to have a mortgage, or other dollar denominated debt..

It's not the middleclass.

It's _everyone that isn't rich enough_.

Yeah, right. The economy will be crumbling, hardly anyone will have enough money to put food on the table but somehow they will manage to buy useless stuff on Amazon. Please, stop spreading bullshit, I know that you don’t believe it but you are actively harming people with your disinformation.

> why would bezos want this?

Easy answer: The Cantillon Effect [ https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the... ]

Whenever Central Banks print money, they don't load up helicopters and distribute the funds evenly among the populace. They work through close relationships with Primary Dealers. The money enters the system through asset purchases. But when banks' assets are replaced on their books with cash, they have to do something with that cash. What do they usually do? Buy other assets. Like corporate debt. Like stocks. Money is fungible, and unless there are specific regulations preventing it, the first place freshly printed money goes is to the banks. The second place it goes is whatever those banks buy. Think index funds. Think AMZN.

Even in open-market operations, the money still finds its way to AMZN. Example: The Fed pins the 2y-7y maturities down by buying in OMO. SOMEONE is selling. Usually, it's some sort of institutional fund with variable capital controls. With the TSY prices too high for their desk, they look for somewhere else to park their cash, like AMZN, or the SPY.

The first at the trough always wins. The second at the trough wins really big as well. Hacker News readers with their FAANG incomes, RSUs, and 401ks, are pretty big beneficiaries, too. The guy that raises your pastured free-range eggs, though? By the time he's buying coop materials and fencing, most of the purchasing power has already been sucked dry from Bezos and you.

Seems like it could be the bread and butter for Amazon's new fintech startup - BNPL loans which is perfect for hyperinflation based economies! Coming soon to a country near you!

> fearmongering, spin, and propaganda

You're missing the biggest one, the first commandment of 21st century journalism:

Thou shalt not criticize the culture of another people, howsomever much all evidence of a trouble's causes may point in that direction.

That's a lot of big claims about a very specific agenda. What are you basing this on?

I'm Venezuelan and today argentina's inflations look like the venezuela's one in 2014~2016 and as you may already know that only got worse and worse, hopefully, that is not going to happen this time but looking at this trend I believe the best course of action would be to be prepared to leave the country before all collapse

It's interesting that Argentina is in the same decline Venezuela was in (and still is), just with some years of latency. Both countries are in the same economic region, one would think someone would learn from having a hyperinflation near them.

A lot of Venezuelans immigrated to Argentina years ago, and are now leaving Argentina and immigrating to other countries. Some are even going back to Venezuela now that everything there is in dollars and the situation seems to be stabilizing. A somewhat popular opinion is that the country is very corrupt but you can live with it if you earn in dollars.

Well what is there to be done about it really? You stop printing money and servicing debt and you wind up in default, now unable to import goods, which you rely heavily on because you wouldn't be in this situation in the first place is your domestic production was strong. So you get... prices going sky high on imported goods. Either way you dice it, they're fucked. It's an entire country stuck in a debt trap. The only outcome is economic collapse, and all the government can really do is fudge the numbers to slow it down.

It's my understanding Argentina actually isn't heavily dependent on imports. Not only are taxes high on imports, they have a net trade surplus. Argentina also is extremely lucky like US they have extremely diverse environment including excellent farm ground, natural resource, and coastal access. Defaulting on debt might be a good option.

The goods neccesary to raise cattle and grow soy, both some of the most important exports Argentina has, need to have the basics imported such as tools and seeds.

Another problem is that exporting meat have been limited by law to try and control local prices [0], it has instead made Uruguay and Brazil start exporting what Argentina did previously and can't anymore because of state control.

[0] https://batimes.com.ar/news/economy/argentina-extends-export...

> A somewhat popular opinion is that the country is very corrupt but you can live with it if you earn in dollars.

That was the exact same mentality that a lot of people in venezuela(me included) used to have at the beginning of the crisis "The inflation doesn't affect me, I earn in dollars" was a very common attitude for people with remote jobs, but then even the price in dollars started to increase due to the corruption on every level of the supply chain, companies leaving or closing, terrible mismanagement of public services like electricity, water and transportation, and many other terrible decisions. We were too naive...

Whilst similar, you need to take into account that there is a diversity in argentine economic activity that never existed in venezuela. If there is some redeeming quality that can be gleaned from argentine history is that it rebounds rather quickly.

And it's the same kind of ideology that ruins both countries in spite of both being extremely rich in natural resources.

My impression is that the various offshoots of Marxism, e.g. Chavismo in Venezuela or wokism in the US, is a means for a coalition of mostly upper middle class people to replace the current ruling coalition with something that is effectively feudalism with themselves on top. These people seem to feel like they have the right to occupy the most powerful roles, either due to the excellence of their ancestors or envy of those that are perceived as their superiors, but doesn't because they are mostly mediocre and often have wealth as well as position through inheritance. That's why prosperity typically fall after their takeover, as these are primarily motivated position and not by an obsession about what the job entails.

Has this been your experience with the Venezuelan ruling class?

If you read history, you quickly realize that this is what socialism always was, even back in the mid 1800's: A counter revolution against the capitalist emancipation of the world.

Traveling Europe it's easy to see how much more convenience and position inherited wealth used to grant. It's very human to feel entitled through birthright, and to change the rules to benefit your in-group over the majority of people.

In the case of Venezuela that's not correct.

Chavismo was definitely not a coalition of mostly upper middle class people. Quite the opposite + very very strong ties to the army.

The poor Chavista street thugs are no more in power in Venezuela than the antifa street thugs are in the US, if so they would be fat and wealthy like Maduro. You have to distinguish the tool from the master wielding it.

The way Chavez revolutionized the Venezuelan republic into a marxist feudalistic state pretending to be a republic was by building upon a subverted legislature, executive and presidential role. These are all except the presidential role privileged roles that require some measure of education as well as position. Especially the roles that require lawfare is difficult to subvert without first subverting lawschools to produce large numbers of revolutionary lawyers, and this is exactly what has happened in the US.

Chavez as well as the current woke US administration is a sign that subversion has already taken deep hold, so neither was the start of the subversion but enabled by decades of a slow walk through the 5 institutional pillars of western society that the Marxists identified; church, government, enterprise, law, and education that tie it all together (Gramchi came up with the slow march, countering Marx that thought the peasants would rebel on their own).

Fun fact: the electronic voting system Dominion used in the US was first developed to help Chavez cheat in elections, as he was too unpopular to win otherwise

I don't get the connection you're trying to make between chavismo and what you call "woke" movement in the US.

What happened in Venezuela is not that. Chavez was surrounded by anything but the upper middle class. His closest allies were from the army which are the same that rule the country now (eg. Diosdado Cabello). They didn't subvert any institution or pillar, they just replaced them. They created parallel government, law and education systems by replacing the constitution the supreme court and the parliament with their own more powerful and aligned versions. They also cut funding to universities and created their own via the "misiones" in the 00s. There was indeed a thin layer of ideology from certain old school intellectuals at some point but really nothing you could describe as upper middle class, that was also removed after a few years.

"Fun fact: the electronic voting system Dominion used in the US was first developed to help Chavez cheat in elections, as he was too unpopular to win otherwise"

That's just not true. There was never any proof of fraud or cheating in any of those elections, specially via those machines. As painful as it is, Chavez was immensely popular while alive and won all of his presidential elections.

Paulo Freire Marxist liberation theology heavily subverted both churches and schools in Venezuela before Chavez came to power, this is the root of critical pedagogy that has taken over American schools and liberation theology that has subverted churches.

This is just one out of many examples.

I am in Argentina right now. in the two weeks that I've been here I exchanged dollars for 196, 206 and 210 Pesos in each few days. I can't believe the rate changes this quickly.

Tip: if you're planning to visit Argentina make sure you're bringing cash. Using your credit card would mean paying double the amount due to the difference between official and "blue dollar" exchange rates.

Millennials now nothing BUT inflation now. It's not a way of life, it's an agonizing, debilitating continuous death by a trillion cuts.

There is currently a mass exodus of professionals from the country due to it - massive, and I mean massive talent is spreading all over the world instead of helping at home. People have either given up or drank the Kool Aid, as there is absolutely no expectation of even a possibility of change.

It really is depressing, as even mild complaints are usually met with long winded explanations or insults about how things aren't actually bad and they could be so much worse you should actually be thankful and maintain the status quo. The democratic voting system inevitably gravitates to a two-party rotation with more in common than they allow traditional media and paid coordinated social media to admit - with the only ultimate goal of keeping a class of elites in power and as many people as possible depending on the state to survive, whether it's via subsidies, handouts, or straight up state employment so keeping things as they are becomes a matter of survival for them even more.

At least it's amusing seeing newspapers pretend such a thing is cute and quirky. This is very much a preview of the future road for an incredibly large number of economies all over the world, so read some of the comments here very carefully.

And never, ever, ever save all of your life's accumulated value in just one form. Be it currencies, stock, real estate, crypto, food, metal, whatever it is, never forget that any basket can break when it's holding all of your eggs.

> Worried about inflation? In Argentina, it’s a way of life.

The article implies the same will come to your own country soon, so do not be surprised, learn from Argentina.

The consent for coming inflation is being built.

Looking at the global fiscal recklessness, there is a clear lack of intent to pay back the amassed debt.

Now nobody is impressed by a trillion anymore.

Eventually (soon) a quadrillion will be a commonly used word. 100 trillion is just a 0.1 quadrillion; Japan's debt has already reached 1.2 quadrillion JPY.

So inflation or country bankruptcy is the only way out.

As I read on Twitter the other day: this is the country where you buy home appliances in 24 monthly payments (without interests) but you buy a house in one payment, cash only.

Cash = USD.

Why, when presented with an article like this, do we discuss the content of it, but seldom why does it exist in the first place?

Why would this newspaper want to say these things precisely now?

What prompted the editor to pick this story and this angle?

Nobody finds that question interesting?

Making everyone very, very concerned about inflation and starting to talk about it.

The USA could probably use a decade of double digit inflation (with coupled wage-inflation so a nice wage-price-spiral) to adjust asset values and wealth disparity back down to more reasonable levels. It would come with economic stagnation but that will be better than the alternative.

What all the talk about inflation is doing is getting people very worried about any uptick in inflation and prepared for austerity measures to prevent it, which will probably lead to a depressive spiral and lancing the long-term bubble that we're in. If the "Great Resignation" trend of workers having power over wages continues, then I suspect you're going to see a large degree of inflation panic pushing for austerity.

I don't think it'll land this year, though, this is just the warm up act. The Fed policy changes this year will likely be insufficient and its more likely that this time next year it really starts to ratchet up (and I don't know what'll happen in the midterms exactly other than the Republicans will make gains which makes austerity even more likely). Things will likely be getting exciting again in 2024. Sooner or later we're likely to have a post-pandemic party for a bit, then I think policymakers will start to seriously panic about inflation and workers demanding raises and drive the economy into a depression. I could be off in the timeframe, but after 2-3 years of workers having negotiating power I think policymakers will start to think that it is intolerable.

The inflation messages, though, are clearly the manufacturing of consent for what is likely to come.

It all depends on how the pandemic goes. As Bill McBride says over and over, the course of the economy is dependent on the course of the pandemic.

https://www.calculatedriskblog.com/2021/10/early-q4-gdp-fore...

I'm particularly interested to see how long supply disruptions in China persist, as effected as they are by China's zero-COVID strategy.

>The USA could probably use a decade of double digit inflation

It's a very thin ice to walk on. High inflation threatens USD's global reserve currency status and it's in addition to using financial control for political pressure of opponents (e.g. threats to ban countries from SWIFT). When (not if) this status will be lost you will get serious additional inflationary pressure from foreign governments and private investors dumping USD-denominated assets. In the best case scenario it will be a prolonged multi-decade process as with GBP, but in the worst case scenario unwinding can be quite fast, especially considering China's reserves (i.e. it can start selling USD-denominated assets as a form of financial attack).

I think the depression we hit due to austerity could also severely threaten the global reserve currency status.

Although that's another good argument as to why policymakers are going to panic over inflation.

I think you might enjoy this video from Tom Nicholas, "The Myth of a Free Press: Media Bias Explained"

https://www.youtube.com/watch?v=v-8t0EfLzQo

What causes inflation is obvious. But I am continually disappointed by the government and the mass media, including the Wall Street Journal, routinely being mystified by it.

For example, inflation in the 1970s was blamed on OPEC oil prices, today it is blamed on "supply chain disruption".

The refutation is straightforward. If the 1970s inflation was caused by OPEC price increases, when gas prices later went down, there should have been corresponding deflation. But there was no deflation, not a penny. Today, when the supply chain disruption is past, is there going to be deflation? Nope.

What actually causes inflation is the supply of money increasing faster than the goods and services it represents. What causes the supply of money to increase faster?

The government money printing press.

The US government has been creating money at a fantastic rate. That's why we have 7% inflation today, and it ain't turning into deflation.

Why does the government persist in misinforming us as to the cause of inflation? Because inflation is how the government spends money it does not have. The purpose of the Federal Reserve System, created in 1914, was purportedly to create "stability". That is propaganda. The true purpose was to inflate the money so the government can spend it without raising taxes. It's called a fiat money system, and shortly afterwards every country with their own currency adopted it.

And every single one of those countries blames inflation on some sort of unknown voodoo, wage price spiral, cost-push, greedy businesses, profiteers, and reckless speculators.

You will hear a US President say "the government has a monopoly on violence" before you hear one say "printing money causes inflation". If there's one thing higher ranking officers in the federal government think is more holy and sacrosanct than their right to jail and kill a lot of people is their right to get below market rate interest loans from the Fed.

Amen.

I used to work with team members in Argentina. They received in local currency, so they had salary raises every now and then. It sometimes didn't match inflation, though, and the moment the members started talking about missing eating premium meat or going to restaurants, I knew the company was running late to one of those raises.

The raises are often negotiated months to a year in advance based on predicted inflation (and other factors). This means they can easily fall short. When inflation rises enough faster than expected, there may be additional raises put in to compensate, but it isn't guaranteed.

It's going to be really interesting to see how Jack Mallers' app Strike now entering Argentina is going to change things in the country.

Why would anything change? There is a dozen apps/bank analogues and fintechs that deal with crypto. They are all subject by and large to argentine banking law.

I don't know the app landscape there but assume it's sparse and probably not as easy to use

Incredibly easy. Binance is even sponsoring the argentine football team

https://www.coindesk.com/business/2022/01/25/binance-to-spon...

I don't understand why Argentina doesn't just do like Brazil did [0] to fix its inflation.

0 - https://en.wikipedia.org/wiki/Unidade_real_de_valor

Study Argentine history. They have tried everything imaginable, and managed to control inflation for a while. Look at the 1-1 peg between the peso and the dollar that lasted 9 years. It's much more complicated than you think.

Except reducing the fiscal deficit, seems like no goverment wants to try spending less than what they have.

They never tried a program like the Real.

Currency pegs are one of those things that known to fail every time, by the way.

Anyway, the answer to the GP is that the government will need to severely cut their spending. That's the same reason on every country with high inflation.

Exactly. The reason inflation happens is that the government overspends, then prints money because it can. There are no magic tricks to stop inflation if you're constantly devaluing your currency.

The peg was one of the main reasons why Argentina got into this mess in the first place.

That is an opinion. The 2001 crash caused a crisis, then a recovery, then two decades went by with many ups and downs. The entire peg might have never happened and Argentina might still be where it is today. Are you old enough to remember the hyperinflation of the late Alfonsin period? I lived through it. No peg preceded it.

I mean, they tried everything, except the measures that actually work, i.e., reducing public spending, raising interest, stop printing money for a few years.

Every country that did that got inflation under control, the problem is Argentina doesn't want to spend less, so they print like there is no tomorrow.

This resolves the psychological inertia component of inflation. Its not a solution on its own. It also requires political compromise, reduction of govt expenditure and ,at the very minimum, curtailing expansion of the monetary base.

what I've always wondered in situations like this is why the locals don't just move over to dollars? I assume every local store would accept the dollar equivalent for a purchase since it is more stable. every exporter can sell their goods in dollars and just use them. when it comes time to paying taxes just exchange the dollars for local currency at the better-due-to-inflation rate. government employees who earn local currency would be at a disadvantage, but so would anyone using the local currency.

They sometimes do, Ecuador is an examples that is fully dollarized, but how are you going to dollars as a local? Your job can’t provide them to you as your salary. The dollar is quasi legal tender in Cambodia, but only locals in tourism can earn them easily.

Argentina will auto convert dollars when they are transferred to banks via official channels, so unless you go for a suitcase, it is really hard to even have dollars given to you.

> Your job can’t provide them to you as your salary

Why not? I don't know macro-economics that well, but isn't money a more or less closed circuit? I want milk so I give dollars to the grocery store owner who gives it to the employees and suppliers who then want a haircut from my barber. The currency is just an easy way of trading, but I could get milk directly for a haircut if we both agreed.

The issue of banking is a problem. If there is no service to store dollars in Argentina (due to laws, for example) then I could at least rent a secure box for my dollars. It will a least protect against inflation.

> Why not?

This is something you need to take up with the governments themselves. In rare cases, an expat can get paid in another currency in some countries via a swiss bank account or something, but it is extremely rare, and the laws are really narrow in most places on what you can be paid in.

> then I could at least rent a secure box for my dollars. It will a least protect against inflation.

Many people do that. And it isn't simple to set up, and it definitely isn't legal. If you don't mind taking the risk of going to jail, or rule of law isn't really a thing, then no problem.

Is this article trying to gaslight us into believing that the current fiscal crisis is fine and that we should just get used to it?

This reminds me of the "fake money" story NPR did a while back about why the Brazilian currency is called the "real" (pronounced "reh-al" but literally "the real").

It's a fascinating story on how to approach inflation using a combination of classical and behavioral economics

https://www.npr.org/sections/money/2010/10/04/130329523/how-...

Video: https://m.youtube.com/watch?v=sWr-Ht1S_4U

Is this better or worse than Bitcoin? Not an an economist, or Bitcoin invester, just curious.

Inflation as a way of life is living with a mercurial definition of a measuring stick for the promise of economic stability provided by someone else.

Personally I'd say its a lot worse.

For a look at hyperinflation in 1920s Germany https://en.wikipedia.org/wiki/The_Black_Obelisk is highly recommended.

Argentina has bartering clubs that operate with their own internal currency.

First and foremost, a pro-tip: If you are planning a trip to Argentina in the near future, do some research about how to make the most of your money, because using a debit or credit card is worst than shooting yourself on the foot. There are both legal and "illegal" ways to do this, and there are also grey areas in the middle (Like, crypto)

---

This is an interesting article, but I haven't seen this happening much (yet).

First and foremost you have to recognize that Argentina is a very large country, with very different local economies, so there isn't a "one size fits all" experience.

All this brings back memories from my childhood (I'm in my late 40s) when there was a period of hyper inflation in the country; my parents used to tell the stories about those times when they went to the market right after getting their salaries and would pick stuff from the shelves before the person that was up marking the prices (This happened sometimes twice a day) got to the stuff they were picking.

But I wouldn't agree that this note is that accurate.

You have to understand that, except for the past 5 or so years where we had inflation rise almost from a single digit [1] to where we are now, we had a period of around 10 years with inflation below 11% (and some times as low 5%, as per the graph) a few years of turmoil (2001 - 2003) and then around 10 years (If I recall correctly), the last decade of the 20th century, of the dystopian "1 peso - 1 dólar".

So, basically, out of the past 30 years, the very first 25 were very easy for us compared to the previous decades.

What is stated in the article might apply to people +40 that might remember what the 80s were, and are frightened for what the future looms. But for a lot of middle class Argentinians this is new territory, up to the point where a lot of people that has money to expend (again, middle class) struggle with the prices - in a very first world problems way - because prices vary so rapidly that it's impossible to know if something is expensive or not.

I wouldn't go (much ;) ) on the economics of it at length because that's not what this article is about; my position is that the peronists failed to seize the opportunity they had in the first decade of this century, and then failed miserably trying to hide their failures. And the next government (Macri's) literally did a pull rug of the country's reserves with the 50+ bill credit lent by the IMF.

Besides that, as stated in other comments in this thread there are a lot of "funny" things happening like the mess of regulations that you have to go through when working for a company in a foreign country when you loose aprox. 60% of your buying power if you do enter the money illegally (While, at the same time, tourists are allowed to get legally a close to black-market rate for their money), or the fact that the tax brackets for freelancers do not keep up with inflation at all, thus actually inviting evasion.

[1] https://www.statista.com/statistics/316750/inflation-rate-in...

Fortunately, lately I don't see any new article from the USA praising MMT.

Unfortunately, it's because the acolytes of MMT already won. The national debt has completely exploded and there's no putting that genie back in the bottle without hyperinflation.

MMT is not, nor has it ever even the dominant ideology of those who are actually in control of monetary policy.

I know it’s a popular boogeyman, but it’s pure fantasy.

Gotcha. Well, whatever the name of the theory is that says it's OK to just rack up a ginormous national debt, that's what I am against.

That theory is called “starve the beast” wherein tax hawks seem to believe shrinking the federal budget is simply a matter of cutting taxes and engaging in brinksmanship, despite the fact that their ultimate goal of cutting SS and Medicare has been a political non starter for decades.

Yeah, I don't really get why you would pre-emptively cut taxes in anticipation of future spending cuts. If there's one thing we can bank on in history, it's that governments always get bigger. Spending cuts are just very unlikely to happen.

Seems to be good politics I suppose.

The thing about MMT, is that it’s not about racking up gigantic debts per se, their thesis is that deficits and debt don’t matter in an absolute sense, but in relation to other monetary factors. Eg. once inflation picks up, then it becomes necessary to cut budget deficits.

Then a new goal is needed. Allow anyone to opt out of SS/Medicare for life, cutting themselves off from social aid in exchange for not providing it.

I mean, that isn’t a different goal.

The acolytes of MMT?

Sheesh! How come anything touching on "what is money" gets goofy immediately?

Most of the world's monetary systems have been run under Monetarist theories for 40-ish years. Theory is now entirely at odds with observed realities. New theories gain ground.

National debts "exploded" a long time ago. Japan's exploded over a generation ago and most of western economies "exploded" 10-15 years ago. Except these explosions aren't explosions. Central banks continue to decree whatever interest rates they want, with no market pushbacks.

The monetarists and goldbugs have been screaming "inflation" constantly for 25+ years. That does not mean that their theory of inflation (national debt) is true. It isn't.

> Most of the world's monetary systems have been run under Monetarist theories for 40-ish years.

Argentina's monetary system hasn't.

It hasn’t been run under MMT either, given that it’s an entirely new academic theory.

Both true.

I'd even say that "theories," is probably the wrong term. More "school of thought."

I would also point out that the USD/EUR/GPM/Yen/etc are "run under MMT" in the basic sense. They simply have different ideas about inflation.

Broadly, MMT thinks same year spending is the main inflationary mover. Monetarism thinks cumulative national debt is what impacts inflation.

Agreed in the sense that MMT theorists assert that their theories describe what happens in practice.

I disagree if the assertion is that policy makers have been consciously crafting policy under MMT this whole time.

I think it's less that inflation is caused by the national debt, and more that it will be nearly impossible to pay off the debt without massive inflation. Certainly the Fed is in a box with the debt, as it can't raise interest rates without massively increasing US Government debt payments. The only solution seems to be to keep rates low, which results in inflating away the debt.

> ...it will be nearly impossible to pay off the debt without massive inflation

Isn't it the opposite, that it's impossible to pay off the debt without massive deflation? 'Paying off the debt' means reducing the money supply, which means money later is worth than money now. That never ends well.

Well my understanding is "paying off" the national debt amounts to reducing the amount of value that is owed. You could do this in two ways.

Way 1 is what you described, which is directly paying off the debt. This is the path of austerity, high taxes, spending cuts, etc. Agreed that this never ends well.

Way 2 is that you reduce the value of the debt by reducing the value of the currency it is held in. This isn't really an option for most countries, but the US is unique in that it controls the world reserve currency and can directly print the debt away. This would be a far politically easier option as inflation is a complex phenomenon that can't simply be blamed on harsh austerity policies.

It does strike me that they are going to go with option 2. The political conditions for this aren't quite there yet, but you can see it forming with articles like the OP.

> but the US is unique in that it controls the world reserve currency and can directly print the debt away

This doesn't seem like a real option, though. The United States doesn't simply print money, we issue debt to increase the money supply. If we just started literally printing new, unbacked money we'd immediately lose our reserve currency status and it would likely be the end of US global hegemony. Maybe the end of the US, period.

Meanwhile, using our standard practice of issuing debt to pay for it wouldn't work here because that would be exactly counter to the thing we're trying to do: reduce our debt.

No, that's not true. The Federal Reserve does print money, in the form of being able to buy unlimited amounts of securities (Quantitative Easing) as well as being able to arbitrarily increase the amount of money in bank reserves. This is what the Fed has been doing during Covid and many would say this is the direct cause of the high inflation we are seeing now. It's very possible to inflate the currency at a pace that will not result in the complete destruction of the currency.

> The Federal Reserve does print money, in the form of being able to buy unlimited amounts of securities (Quantitative Easing) as well as being able to arbitrarily increase the amount of money in bank reserves

I mean, you're illustrating my point here: QE is when the Federal Reserve buys bonds, which means it's not printing the money out of thin air. It's making money that is backed by debt. Same goes for reserves, that money isn't just dropped out of a helicopter with no strings attached, all that money introduced is backed by a commitment to repay it. So both of these avenues for increasing the money supply introduce corresponding debt. Using this 'printed money' to pay down the national debt would be like using one credit card to pay the balance of another.

>> Same goes for reserves, that money isn't just dropped out of a helicopter with no strings attached, all that money introduced is backed by a commitment to repay it.

This is true. However, the second half of this isn't always intuitive.

Bonds come with a commitment to redeem and pay an interest rate... but both commitments are in USD. Both USD and US bonds are accounts at the federal reserve. An institution holding bonds has an account, where they can buy a bond with a dollar or redeem a bond for a dollar. Their bond account will decrease by a dollar, and their dollar deposit account will increase by a dollar. No one's net position changes.

Imagine if the rules were reversed: the treasury mints coins, deposits them in the Fed and receives bonds which it can spend.

Not clear to me what is "goofy" here. You dislike the word acolytes?

> Japan's exploded over a generation ago and

And how did that go?

> Most of western economies "exploded" 10-15 years ago.

Sure and they had 15+ years worth of runway to lower rates. So seems about right that they didn't have an issue while their strategy was still viable.

> That does not mean that their theory of inflation (national debt)

What does this even mean? Debt to GDP is ~130%. Seems like what most of them have been consistently predicting for years.

>Fortunately, lately I don't see any new article from the USA praising MMT.

UBI certainly died as a subject as well. The "basic income" benefits wasn't even universal and exactly what everyone said would happen has happened.

I still think a fiscal conservative with an army of accountants could figure out UBI and make it work. Effectively it would greatly punish anyone who works under the table.

> I still think a fiscal conservative with an army of accountants could figure out UBI and make it work.

This is totally lost on me. Why? I don't see how any of the issues with UBI are accounting based. We already can spend money we don't have in the short term so nothing prevents transfer payments of any size in a purely logistical sense.

The issues with UBI are regressive redistribution, long term effects on the labor market, and long term effects on the currency. None of those are accounting issues.

>This is totally lost on me. Why? I don't see how any of the issues with UBI are accounting based.

So lets go back to what happens. Places like Switzerland or Germany have a labour participation rate of ~80%. So if you implemented UBI there. The 20% of people who were earning nothing or at most were on government services, now get a pay cheque. This will be by definition inflationary; but with such high labour rates and removal of those other services. The actual inflationary factor will be manageable. The probability of social movement increases obviously. So their participation rate near the beginning will drop.

The USA on the otherhand has about 60% participation rate and their government services are poor compared to the rest of the world. They in turn have made their military their welfare system. So if UBI implemented. Nearly have the country would be paying the other half of the country to sit at home.

What happened with covid? Less than 10% of people got cheques and we got >40% inflation eventually in the USA. So we can do the math. For a year or 2 of UBI at around 50% is more than 5x worse. So the USA would be looking at >200% inflation.

The army of accountants would be needed to make that 100x less.

>We already can spend money we don't have in the short term so nothing prevents transfer payments of any size in a purely logistical sense.

It's abundantly clear that isn't true. Hence the out of control every market and sky high inflation. That debt ceiling sure is hitting lots of heads lately for the USA.

>The issues with UBI are regressive redistribution, long term effects on the labor market, and long term effects on the currency. None of those are accounting issues.

Oh I completely agree those are concerns as well. The approach I have in mind is that if you manage it from the economic point of view, these longer term issues will be addressable at a later time. The entire welfare system would have to die. illegal immigration becomes far less of a problem. UBI would be only for citizens. The tax system could no longer be progressive.

UBI appears on face impractical or impossible. However, with said 'army of accountants' you could likely design something that works and possibly even beneficial. bviously a ton of work needed here.

This again makes absolutely zero sense to me.

> The army of accountants would be needed to make that(inflation) 100x less.

You seem to imply some black box where accountants are the input and reductions in inflation are the output. Can you explain to me what accountants are doing in this black box that affects inflation? Can you explain why more of these accountants fixes this problem to a greater degree(what is the marginal accountant doing here?)

I can tell you the answer though. This relationship doesn't exist. Inflation is not caused by a lack of accountants or accounting, therefor having more of them has zero impact on inflation.

I'm very open to hearing the specific mechanics of what these accountants are doing and changing my mind .

It seems to me that you may have a fundamental misunderstanding of what it is that accountants spend their time doing.

Not surprised to see the good old liberal outlets like WaPo changing the narratives and trying to tell us how inflation is all normal and to suck it up. Guess what serfs, Argentina has it way worse.

I guess after 5yrs of covering Trump and spreading wokeness, WaPo forgot what struggle really feels like for people here.

WaPo always seems to support leftist political forces in South America, even where there is no parallel domestic narrative in the US. For example, they supported Evo Morales in his bid for a fourth consecutive presidential term despite the Bolivian constitution limiting presidents to two consecutive terms.

https://www.washingtonpost.com/politics/2020/02/26/bolivia-d...

My take away from the article wasnt that inflation is normal and suck it up, it was: inflation sucks we cant allow it to keep increasing

The really infuriating part is that these same damn people were just screeching insistently about how "pulling yourself up by your bootstraps" is unrealistic. The kind of savvy it takes to not slip backwards in a high inflation environment is exactly the same kind of savvy it takes to pull one's self up by your bootstraps.

Regardless of how realistically achievable you think the latter is does not change the fact that the cognitive dissonance is apparent.

This will come back to haunt them. People don't like economic uncertainty but they can't do much about it so they just deal. People really, really don't like spineless shysters that change their opinions to whatever is convenient that minute and they can marginalize said shysters in response.

Where is the captain of this ship? Why isn't there someone with a longer than next week timeline saying "hey let's stop lighting our credibility on fire like this"?

It's been a while, but I vaguely remember an economics professor of mine stating that it's not inflation which is the core issue for people, firms, and economies, but an increased price volatility which positively correlates with high inflationary rates. The take-away was that when people can reasonably predict what inflation might be MoM, or QoQ, businesses and individuals are able to price transactions and required rates of return accordingly.

So yeah, by that understanding, inflation can be normal in a healthy functioning economy. It is uncontrolled/unpredictable inflation that's problematic.*

*Grain of salt, I'm not an economist and it's been some time since I've seriously studied the subject matter. Commenting to join the discussion

Wages are “sticky”, and do not adjust as fast as prices for goods and services, and certainly don’t change much MoM/QoQ outside maybe a few niche industries.

That’s the problem with high or relatively high inflation.

The professor is correct, though, that consistent and predictable inflation is at least less bad than inconsistent and unpredictable inflation.

Good points. I think the point he was trying to make (or the one I recall, at least) was that higher inflation tends to result in more volatile price moments which damages economies more severely than that of cost increases outpacing earning power.

I do agree with you though, wages being generally sticky would make any moderate inflation, even predictable, a considerable negative on the economic fortunes of most individuals.

There are huge inefficiencies with high inflation, even if predictable.

For instance, if you know your dollar is worth considerably less every day, you're more likely to go spend it on things that you may not need as long as they retain value. Barter is inefficient as well. You'll be willing to wait on line as soon as you receive your paycheck. You'll fill up your tank more often. There's expenses with adjusting people's pay to account for inflation and keeping track of what a "reasonable" price should be or whether you're getting fleeced. I agree uncertainty is a huge problem, but even high anticipated inflation is a huge pain in the ass.

That's not even considering the capital controls that are often put into place that prevent you from holding stable assets. So you're stuck holding this depreciating asset or you're bending over backwards to buy as much stuff as possible to retain you wealth.

That’s the argument - higher inflation is correlated with lower levels of price stability and hampers one’s ability to predict. Other commenters have also (rightly, I think) pointed out the ‘stickiness’ of wages in the short term being an additional reason to take seriously even moderately higher levels of inflation

No, prices and wages are stickier and often don't move as fast as you think, even with digital communication. Menu and shoeleather costs remain serious harms of inflation even if you have some system where it is predictable. Anyway, it is not, look at how many macro people say for months "inflation is transitory" but no.

I’d agree on the wages side! Good point. Price stickiness seems dependent on the nature of the goods and contracts, I would expect at least

I phrase that poorly, the problem is exactly that price stickiness is not uniform and the disparity is a big driver of inflation.

Please don't take HN threads into political or ideological flamewar. It makes discussion repetitive, tedious, and nasty. We're trying to avoid that here.

https://news.ycombinator.com/newsguidelines.html

this is nothing, a lot of comments I've seen are already flamewar and even racist, nasty generalizations, suddenly everyone is an expert in hispanics countries as if they would be all the same or as if they would share the same currency or economical situation, a lot of ignorance.

Yes, there are other bad comments as well.

Maybe this would help: you can't expect moderation to address all the bad comments in proportion to their relative badness. That level of consistency is impossible, not because we don't care (we do!) or apply the guidelines inconsistently (we try as hard as we can to be even-handed), but for the much simpler reason that we don't read everything that gets posted. There's far too much quantity here for us to see it all.

If you see a post that ought to have been moderated but hasn't been, the likeliest explanation is that we didn't see it. You can help by flagging it or emailing us at hn@ycombinator.com.

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...

The gist of the comment was - much of the mainstream media has been wrong about inflation playing it down initially with all the transitory rhetoric. But now instead of saying they were wrong, they instead are trying to preach inflation as new normal and making baseline comparison with hyperinflationary countries.

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