Comment by totalZero | Hacker News Reader

Comment by totalZero | Hacker News Reader

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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.

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.

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.

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.

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

> 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.

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?

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.

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.

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