Hi Ferfal,Interesting article: http://www.zerohedge.com/news/2013-09-14/dare-question-argentinas-inflation-data-prepare-go-jailJeff
Argentina is trying again to criminally prosecute people who publish independent inflation data, just as Congress opens debate on a 2014 budget that assumes economic good times next year.The government is predicting strong annual economic growth of 6.2 percent, inflation of just 10.4 percent and a peso dropping only 10 percent against the dollar.Independent economists call these numbers wildly optimistic, and say that Argentina’s growth prospects are troubling and inflation is actually running more than twice as high. They maintain that illegal currency trading reflects much greater pressure to formally devalue the currency than the government has acknowledged.As Economy Minister Hernan Lorenzino proposed the budget to Congress, Commerce Secretary Guillermo Moreno went to court, accusing four different consulting firms of criminal “speculation” for publishing inflation data that contradicts official reports.Among those Moreno targeted Thursday was economist Orlando Ferreres, who estimates inflation is rising by 23.8 percent annually. He called the accusations against him “ridiculous” in an interview with Radio La Red on Friday, and said they only make sense in “an upside-down world.”Moreno also asked the judge to approve similar charges against economists with M&S, Buenos Aires City and Finsoport SA consultancies. If charged, tried and convicted of “speculation,” they could face two years in prison.
As of December 2010 we’ve seen an interruption on the imports of Argentina. It started with products that supposedly were already being produced locally, but as time went by it was clear that the import ban had expanded to other areas as well. Soon products such as English tea, even chocolates and ketchup were phasing out of existence in the stands of the different stores you used to find them. Oh, you can live without tasty chocolate made in France, Switzerland, USA or UK. Local tea isn’t nearly as good as the imported one but this is a survival website, we wont get our panties all bunched up over that. Toys? No, they’ve been banned from importation as well. Again, not a problem. How about medications? I talked with a 50 year old person this week that has a high blood pressure condition and he told me he’s having problems finding his medication. This has been a problem before and its worth keeping in mind. What people did here was ask a pilot or stewardess friend, someone that traveled abroad frequently to get it for them. Some hospitals also organized purchases and had people bringing it directly to them from the labs.
The president who shall not be mentioned ( its bad luck) supposedly took these measures for two reasons, or at least that’s what most consulting firms are saying. 1) To protect the national industry 2) Two balance the import/export sheath during an election year, that due to the large amount of imports has caused exports to fall in comparison 58%. http://www.elnuevoherald.com/2011/03/09/900174/argentina-limita-importaciones.html
Now if we look a bit beyond what we’re being spoon fed here, a few things become obvious. First, Argentina doesn’t produce most of these products that are getting banned. I know we don’t make English tea any more than we make Nerf guns, so why is all this getting banned? Second, our president ( she who shall not be mentioned ), claims that only 12% of the imports being banned are consumables and non-basic necessity or luxury items, that 71% of the ban is industrial equipment and supplies. What the heck!? How soon before everything starts malfunctioning (again) then? Are we supposed to get by like Cuba then, fixing all with wire, glue and duct tape? Oh right, Duct tape that actually works is imported so bye-bye to that too. We are only left with the local made one that has the adhesive power of a booger and happens to be more expensive.
So what´s the real reason why imports are being stopped? The real, no BS reason is that the Argentine peso keeps falling like a rock in real value and its getting extremely expensive for the government to keep the dollar at 4 pesos. I already mentioned that the official price of the peso differs from the one on the streets. To stop it from going through the roof the central bank has to sell millions of US dollars. As the peso keeps loosing value inflation is forcing the socialist government to raise salaries so as to not leave the entire country below the poverty line, but that presents a new problem. If I keep raising salaries and keep the exchange rate 4 to 1, then you have another artificial situation: Argentine Salaries that are high in US Dollars. You have a truck driver making 3000 USD a month or more, and that still not being enough to sustain his standard of living though time. We are past the ridiculous point and we can’t have people earning more dollars here than in USA. Everything from abroad keeps getting cheaper and cheaper in comparison, so why buy anything made here, why spend pesos when you can spend dollars? That’s the real reason imports are getting banned, because the peso is losing value, the 4:1 exchange rate is as much of a lie as the 1:1 exchange rate was. As much as salaries have gone up, they don’t keep up with the 30% to 50% inflation per year, so we’re still getting more poor people every year dropping form the middle class.
Its admirable though that they’ve managed to keep everything together under these conditions for so long. The word on the street and the one I believe to be true, mostly because there’s just no other way out of this mess, is that after the elections in October 23th this year, the peso will devaluate considerably, the beginning of a new crisis. After all, the worst hyperinflation we’ve seen before the 2001 collapse was during Alfonsin’s presidency. One of his last desperate attempts was to stop importations as well… less than a year before hyperinflation in 1989 doubled the amount of poor in this country. History keeps rhyming.
1977 film Star Wars was on theaters before I was born, but I still remember some of the feelings when watching it for the first time in my life, several years later. I was a kid of course, about five or six, don’t remember, but I do remember Darth Sidious. Darth Vader had more screen time, a more visible character. To me he was evil but not as scary. He looked like a robot, cold and heartless, but a puppet in the end. On the other hand, the physical representation of evil was perfectly represented by Darth Sidious. He’s creepy, old and wise. He’s not heartless like the more robotic Darth Vader but his heart is black, full of hatred, a miserable old man, with extreme power so as to fulfill his desires of misery and suffering over billions of people across the known galaxy. Yes, Darth Sidious was the real villain, the evil old politician that smiles all the time, and its only because of George Lucas innocence during his younger years that Lord Sidious was a politician. Had Lucas written that script 20 years later he would have made him a banker. Why become a politician when you can just buy a handful?
Sorry for the off topic Star Wars pondering, let´s go back to this article’s issue.
Before Argentina collapsed financially in 2002 the IMF along with the help of corrupt local politicians including the ex-president Carlos Menem and former minister of economic( from Harvard), Domingo Cavallo, buried the country in public debt and then forced the selling of national assets including oil, airlines and other state owned companies. After the country was left in ruins a man named George Soros moved in and bought huge amounts of land and producing capital, becoming the largest holder of land for beef production, as well as soy bean plantation and the largest owner of processed daily production companies. George Soros was no stranger to Argentina and other emerging markets like Brazil, but his financial movements have always been… lets just call them, extremely well timed. Soros owned lots of real estate in Argentina during the 90’s some of the most significant buildings and shopping malls. He sold them right before the economic collapse and then moved back to buy land and property after the devaluation. Since he already knew where the country was going he also speculated with Argentine debt when it collapsed. Soros owns massive amounts of lands in Uruguay and Argentina as well. His objective? “Our mission is to become leading food and agricultural company in the planet”
Keep in mind Soros is called “The man than broke the Bank of England” http://www.telegraph.co.uk/finance/2773265/Billionaire-who-broke-the-Bank-of-England.html he made 1 billion dollars short selling UK pounds on what was later called “Black Wednesday”, forcing UK to devaluate.
Maybe this all seems like far away and little consequence to you. Probably sitting in front of the computer now, over in USA several thousand miles away. Well, then you probably should check this video.
In April 2005, Soros got together in a secretive meeting (called “the Phoneix Group” ) with about 70 other like-minded elite rich left leaning Democrats. The purpose of this meeting was to see what they would do about the US political situation in the next 5 years. Soros donated $23,581,000 to various “527” groups dedicated to defeating President Bush.( A 527 group is a type of American tax-exempt organization named after a section of the United States tax code, 26 U.S.C. § 527. This party within the Democratic party became known as the “Shadow Party”, these guys, billionaires in the financial and tech sector, support politicians of their choosing through direct donations (as large as legally possible) and through their foundations and non profit orgnaizations, such as moveon dot org. The rabbit hole goes on with implications on how to handle the media so as to change people’s opinion, get reporters, journalists and why not celebrities in their pockets.
When the anti-Bush campaign failed, Soros secretively gathered with other like minded elite so as to decide what to do next. A young charismatic Obama was chosen as the focus of their new efforts. Not only with the largest possible legal donation but using other channels as well, including what may have been millions of $25 private donations. When you hear for example that 90% of the donations to the Clinton Foundation comes from $250 donors, these are the things you don’t see due to its lack of transparency. http://www.npr.org/templates/story/story.php?storyId=98467642
People think its Bob and Jane selling pies to send 250 bucks to Hillary because they just like her, when in reality its 10.000 x250 donations by the same person, or 31 millions from a uranium mining company owner in Kazakhstan. http://en.wikipedia.org/wiki/Clinton_Foundation
But what about the IMF? And the World Bank? What’s that got to do with all this?
Its all the same old buddies, scratching each other´s back, supporting one another’s foundations or charities or whatever legal structure they are using.
If USA ever ends up like Argentina, it will be because its orchestrated that way, because that’s exactly what these men want. And they are saying so as clearly as possible.
Prepare as well as you can. Without panicking, without going nuts and hiding under your bed or running for the hills, but fully understanding that things have already changed and will keep changing, sometimes not for good.
Take care folks,
Several people emailed me these two links. Basically its what I often write about here, but the situation gets more crazy as time goes by with non stop inflation. All people can think of here is when will it all finally blow up (probably right after this years elections). You just know you can’t keep on forever with 10% inflation every given month, it eventually has to stop.
Not much you can do other than putting what little you have in gold or silver. People here just buy a car and make monthly payments so as to have something of value in the long run. You try to cut expenses as much as possible and try not to go nuts thinking about it.
No One Cries for Argentina Embracing 25% Inflation of Fernandez
As an immigrant to Argentina in 1992, Zheng Jicong had to learn Spanish and adapt to local customs. As he’s built a chain of three supermarkets in Buenos Aires, he’s still adapting to inflation that’s about six times the rate in his native China.
Zheng, 35, says he has to change prices in his stores daily as suppliers send him new lists, with increases on some products ranging from 5 percent a month to as much as 5 or 10 percent in a single week.
“If I didn’t change the prices, maybe I’d end up selling goods at a price below the new costs,” Zheng says. “In Argentina, you have to get used to this.”
A decade after it defaulted on $95 billion of bonds following a four-year recession, Argentina is again witnessing an upsurge in inflation, Bloomberg Markets magazine reports in its May issue. While official numbers put the rate at about 11 percent, independent economists estimate that the number may be about two and a half times as high.
Accelerating spending by President Cristina Fernandez de Kirchner’s government is stoking prices, economists say. Outlays on everything from highway construction to pensions climbed 37 percent last year from 2009 — and increased 39 percent in January of this year alone. Fernandez’s largesse is made possible in large part by the global commodities boom.
Foodstuffs such as soybeans, wheat and flour accounted for about 70 percent of the country’s export revenue in 2010, according to Agritrend SA, a Buenos Aires-based research company.
Export tax revenue, led by a 35 percent levy on soybeans, rose 11.2 percent in February from a year earlier to 3 billion pesos ($740 million).
Argentina’s 40 million people are spending, too — as a way to protect themselves from rising prices. They’re buying everything from flat-screen televisions to cars and even property. Sales of such goods as home appliances, toys and clothing soared 39.5 percent in December from a year earlier, the biggest increase for that month since at least 1998. Auto sales gained 43.3 percent in unit terms, the most since 2004.
Demand for construction supplies such as cement, steel and paint was up 20 percent in December. Consumption helped push economic growth to 9.2 percent last year from 0.9 percent in 2009. Fueling that growth — and inflation — is government support for annual wage increases of 30 percent or more.
Prices — and wages — have been rising so fast that in November and December, the Central Bank of Argentina was unable to print enough money to meet the demand for cash from consumers and companies trying to cover year-end salaries and bonuses. As Argentines lined up at empty ATMs in the middle of a heat wave, the central bank took the unprecedented step of hiring Brazil’s mint to crank out 160 million 100-Argentine-peso notes, so that there would be enough cash for individuals eager to buy holiday gifts and start their summer vacations.
“If we have an inflation rate of 25 percent to 30 percent, that means an important monetary expansion,” says Roque Fernandez, a former president of the central bank and an economy minister in the 1990s. “What we didn’t know until then was that there were problems with issuing that amount of bills.”
Central Bank Response
In most countries, scenarios like that would strike fear in the hearts of policy makers and consumers. Not in Argentina.
Inflation is a result of companies being unable to meet consumer demand and should be resolved by boosting loans for production, Mercedes Marco del Pont, the current central bank president, says. She plans to increase the money supply by 28 percent this year to accommodate economic growth, a move she says won’t affect inflation.
“The price problem doesn’t have monetary roots,” the Yale University-educated central banker, 51, says. “The conditions that could cause inflation to accelerate don’t exist in Argentina.”
In fact, Marco del Pont says, the global economic slump of the past few years has shown how central bank intervention can play a role in developing the country’s economy. “The bank has a goal of stability not only in the financial system but also in the real economy,” she says.
‘We Had It Much Worse’
Many ordinary Argentines, who remember the days in 1989 when the annual inflation rate exploded to 5,000 percent, are taking today’s numbers in stride, too.
“We had it much worse,” says Carlos Roberto Acosta, a 35- year-old taxi driver from Avellaneda, on the outskirts of Buenos Aires. “I was a teenager working in a store when we had hyperinflation,” Acosta says. “I remember the owner coming up to me one day and saying ‘Don’t sell anything’ because we didn’t know how much it would cost to replace it.”
Much of the country’s economy is geared toward coping with inflation. “It’s all about adaptation,” says Marcos Katz, who runs a fabric store in General Guemes, a town of about 30,000 people in the northwestern province of Salta. He says he visits bigger cities such as Cordoba or Buenos Aires once a month to look at the prices in larger stores. “I try to keep up with their pace,” he says. “That’s what a lot of small-business men do.”
‘Banks Are a Dreadful Thing’
Katz, who’s been in business since 1974, says he’s learned to work mainly without banks after living through bouts of hyperinflation. “Banks are a dreadful thing,” he says. “You get a lot of financing from your suppliers.”
One consequence of Argentina’s long history of inflation is that people often pay in cash for even the largest purchases, such as homes or cars.
“It’s easy for Argentines to remember how to face inflation,” says Claudio Loser, an Argentine who led the Western Hemisphere Department at the International Monetary Fund during the 2001 crisis. “They defend themselves against inflation by investing.”
Eduardo Costantini knows that well. In four days during October, the head of Buenos Aires-based real-estate and asset management group Consultatio SA says he sold 900 lots in an undeveloped housing project outside Buenos Aires for a total of $75 million, without even advertising.
Costantini, 64, says Argentines are wary of investing abroad because of financial turmoil and are unsatisfied with near-zero interest on dollar bank deposits — not to mention the negative real interest rates on peso deposits.
Nowhere to Invest
“If you buy dollars, you are dead,” says Costantini, an art collector who founded the Museum of Latin American Art in Buenos Aires. “If you invest abroad, you don’t know what will happen because of the uncertainty, and if you deposit money in banks, they pay nothing.”
The construction boom has boosted business for Ceramica Fanelli SA, a brickmaker in Buenos Aires that’s investing 5 million euros ($7 million) for equipment from Italy that will increase its output by 50 percent this year.
“Production is being outpaced by demand,” says Claudio Moretto, the company’s commercial director. “It’s incredible, the pressure I’m getting from our clients.”
There’s a dark side to the increased demand, says Moretto, 50, who estimates inflation was 25 percent last year and forecasts a similar leap in 2011. “We can’t pass on to clients all of our cost increases, so the company’s margins are narrowing,” he says.
Inflation’s Dark Side
Rampant inflation threatens the whole country’s long-term economic health, says Roberto Lavagna, who as economy minister for Fernandez’s late husband and predecessor, Nestor Kirchner, led the country’s debt restructuring in 2005.
Argentina, Latin America’s third-biggest economy, has sunk to sixth in the region as a destination for foreign direct investment. It attracted just $2.2 billion in the first six months of 2010, according to the United Nations, compared with $17.1 billion for Brazil, $12.2 billion for Mexico and $8 billion for Chile.
“There’s a combination of a satisfactory situation regarding economic growth on the one hand but with imbalances that are reflected in high inflation and an investment rate that is below what the country needs on the other hand,” Lavagna says.
Costs for Importers
Inflation in Argentina is putting a lot of pressure on costs for importers, says Hector Trevino, chief financial officer of Coca-Cola Femsa SAB, Latin America’s largest soft- drink bottler. The Mexico City-based company saw its Argentine freight costs jump almost 70 percent and salaries climb 35 percent during the fourth quarter of 2010, he said in a conference call with analysts in February.
“The impact that we have had in freight cost in Argentina and salaries is tremendous,” he said.
Companies with employees in Argentina, which raise wages to keep pace with inflation, feel a similar pressure.
“In 2010, payroll costs in Argentina were up about 20 percent in dollar terms,” Antonio Brufau, chief executive officer of Repsol YPF SA (REP), Spain’s biggest oil company, said in a Feb. 24 news conference in Madrid. In 2011, those costs will rise as much as 25 percent in pesos, he added.
After presidential elections in October, the next government will have to make hard decisions on whether to tighten fiscal and monetary policy, says Lavagna, who now runs the Institute of Applied Economics and Society in Buenos Aires.
Fernandez Leads Polls
Fernandez hasn’t yet announced whether she’ll seek a second term. According to a Jan. 24 to Feb. 3 survey by pollster Management & Fit, Fernandez would win 27.1 percent of the votes in a presidential election, followed by opposition leader Ricardo Alfonsin, son of former President Raul Alfonsin, with 6.6 percent, and Buenos Aires Mayor Mauricio Macri, with 5.4 percent. About 38 percent of those polled were undecided or didn’t say whom they’d vote for.
Fernandez, 58, owes her lead in the polls partly to her continuing many of the policies of her husband, whom she succeeded in December 2007. She has kept the peso weak, so local goods have remained cheap and exports have been strong. Since Fernandez took office, the Argentine peso had fallen 22.4 percent as of March 24, the most among major Latin American currencies. As a result, unemployment tumbled to 7.3 percent in the fourth quarter of 2010 from 22 percent in 2002.
Kirchner, who died of a heart attack in October, also created or kept price caps on everything from electricity to beef. And he threatened foreign investors who stepped out of line, calling for a national boycott of Royal Dutch Shell Plc (RDSA) for raising fuel prices in 2005. The company backed down.
And when inflation remained stuck at about 10 percent in 2006, Kirchner replaced the officials in charge of the CPI report. Since then, Lavagna says, the government has underreported the consumer price index. The bureau says prices rose just 10.9 percent last year, while research firm Ecolatina, which Lavagna founded 30 years ago, says the gain was 26.6 percent.
“What we said when we took office is that consumption ensures an active market, ensures growth,” says Lavagna, who left Kirchner’s government in 2005 and finished third in the 2007 presidential race. “But consumption that generates investment is one thing. Consumption that generates inflation is another thing.”
Fernandez last year invited the IMF to visit the country to help create a national inflation index. In February, her government began threatening independent research institutes, including Ecolatina, with fines of as much as $125,000 for not revealing how they calculate their CPI estimates. Jorge Todesca, a former deputy economy minister who heads Finsoport, one of the firms that received letters from the government, said the move is aimed at intimidating researchers and the companies they talk to.
Beef Prices Double
Threats or not, there are increasing signs that Fernandez won’t be able to use artificial means to hold off inflation. The price of beef — a sacred staple in a country that’s the No. 2 consumer of meat per capita in the world — more than doubled as ranchers couldn’t meet demand from depleted herds. Argentina’s trade surplus shrank to $241 million in December from $1.2 billion a year earlier. Despite the economy’s growth, it’s failing to attract enough investment to meet consumer demand, Loser says.
“The first effect of any inflationary process is euphoria, because people go out and spend,” Lavagna says. “But later come the costs of that policy.”
Once the party ends, Argentina’s next president will have to tally those costs.
To contact the reporter on this story: Eliana Raszewski in Buenos Aires at email@example.com
An Inflationary Crack-Up Boom
We want to comment on recent events in Argentina, which have not gotten much play in the news media given the flood of newsworthy events in recent weeks. Argentina represents an interesting real time case study of a developing inflationary crack-up boom, or as Mises termed it in the German language ‘die Katastrophenhausse’ (literally, the ‘catastrophic bull market’).
Officially, ‘inflation’ , or rather, the decline in money’s purchasing power as measured by an official ‘price index’, runs at about 11% in Argentina, but most independent observers reckon it is closer to 25% (we have to use quote marks due to the fact that rising prices are not inflation, but represent one of its effects, and price indexes are not measuring anything, because what they purport to measure is unmeasurable). Everybody knows that Argentina’s government is just making the numbers up, i.e. they are constructed in such a way as to downplay the situation and the government is quite testy about competing inflation estimates. We doubt that even the unofficial estimates truly capture the extent to which the value of Argentina’s money is spiraling down the drain; one only has to consider the first paragraph from a recent Bloomberg article quoted below:
Hi guys, it took me a little while to get done with this today but I really wanted to finish it and share it with you.
Please take a look, I’m sure you will all find it pretty educational.