Argentina inflation hits four-year low

[Porphyry Fedotov]

I'm as sceptical of libertarians as they come. However, how did this whacko manage to bring down inflation so successfully? So, sometimes even libertarian policies can work?

[aurum]

7 hours ago, Porphyry Fedotov said:

how did this whacko manage to bring down inflation so successfully?

Austerity.

He's essentially just doing neoliberalism. Nothing new here.

[Jacob Morres]

not sure about the specifics here, but one thing i learned is that most philosophies have their place in some shape or form. in some contexts, a philosophy might be good in extremes, some contexts none at all, and other contexts somewhere in between  

[Lews Therin]

Each type of measure is useful in a certain context to help with a certain issue. The problem is when people turn said measure into an ideology and try to apply it to everything else.

Argentina’s problem was public debt and lack of trust in the currency. he is cutting expenses, less expenses mean more money to pay the debt, less debt makes the currency more trustworthy.

There is a cost of course, less money is flowing from the government and so the economy is cooling. That doesn’t affect their capacity to make money as much because they are an exporter of food and other basic products. But it does affect the population, as agrobusiness’s money usually doesn’t circle around a lot.

So he is fixing the problem, the question is if his political capital will last long enough for the debt to be paid, since an increase in poverty can make the people angry.

[Hardkill]

4 hours ago, aurum said:

Austerity.

He's essentially just doing neoliberalism. Nothing new here.

It's also because of a couple of other major reasons:

1. The Argentina central bank's interest rates were historically high around last year and during the earlier part of this year. This has greatly decreased the aggregate demand in the country.

2. The lingering effects of the COVID-19 Global supply chain shocks have been greatly subsiding year over year. This has greatly replenished the aggregate supply in the country to probably relatively normal levels.

When aggregate demand doesn't exceed the aggregate supply in the country then you have low inflation overall. This is because there is no upward pressure on prices. In this situation, the demand for goods and services is in balance with the supply, so businesses do not feel the need to increase prices. 

Now, what happens when there's more supply than demand in the economy? Well, it can put downward pressure on prices, leading to low inflation or even deflation. In this situation, businesses might lower their prices to encourage people to buy their products, since there's a surplus of goods and services. As a result, the overall price level can drop, causing inflation to fall way below target levels – or even become negative, which is basically deflation.

It's worth mentioning that these economic concepts were the true main reasons that the US got out of the stagflation mess that lasted from the 70s to the early 80s. By around 1983, the country had finally recovered, and here's the thing: the idea that Reagonomics, which was implemented during Reagan's first term, was the magic solution that saved us from stagflation is very misleading and largely a lie. The only thing from Reagonomics that I believe actually worked to help reduce inflation in our country over time was the significant increase in free trade.

Even then, much of Reagan's policy on free trade, which has stuck with us for decades greatly contributed to the decades-long growing economic inequality in our country. I wouldn't be surprised if that's what also happens in Argentina in the long-run because of Milei's policies. There needs to be both free and fair trade.

Edited December 13 by Hardkill

[aurum]

@Hardkill good addition. Lots of different factors at play.

From what I've read, they were printing too much money for interest rates to really have a positive effect on inflation. Also, their central bank and currency in general were not trustworthy.

It will be interesting to see how dollarization works out for them.

[Hardkill]

58 minutes ago, aurum said:

@Hardkill good addition. Lots of different factors at play.

From what I've read, they were printing too much money for interest rates to really have a positive effect on inflation. Also, their central bank and currency in general were not trustworthy.

It will be interesting to see how dollarization works out for them.

Well, what do you expect from a 2nd world country like Argentina? I don't think it's economy is as developed as Brazil's economy is.

Argentina's economy reminds me of Turkey's economy.

 

Edited December 13 by Hardkill

[Leo Gura]

Inflation has come down across the world after Covid.

Be careful simplistically attributing such things to individual people or policies.

Edited December 13 by Leo Gura

[Lyubov]

When I was there earlier this year the exchange rate was so good if you had dollars, but you would end up carrying a ton of cash around. Restaurants were really cheap and great quality. I love this country. 

[Alex_R]

You dont know what u are talking about. At all.