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Comment by gtirloni | Hacker News Reader

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.

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