The rate of inflation in the US has gone down. Six months ago, it ran 8% a year over the previous year each month. That came down to 5%, according to the CPI. The PPI showed even slower growth. The Fed’s target is 2%, bringing the rate back down to where it was three years ago. It is unimaginable that the rate could be in double digits. The last time this happened was in 1981, bringing the American economy to its knees.
In Argentina, the rate today is just over 100%. Bloomberg recently reported people can barely afford to live and certainly not add to their savings. (10 things Americans need to fear about inflation.)
Argentina does not have access to capital from outside the country. Its government owes $44 billion to the IMF. The government “prints money” to pay its debt. That is a contributor to the problem.
Argentina has been in a recession for most of the last decade. Normally, this would bring inflation down. The currency, the peso, has lost a huge amount of value. Both goods from overseas and some from inside the country have become prohibitively expensive.
The Guardian describes the problem: “In Argentina’s markets, shops and homes, the impact of rising prices is being felt keenly as one of the highest inflation rates in the world stretches people’s wallets. “
It will take something akin to The Great Depression to suck all the demand out of the economy to pull demand for goods and services down.
It is hard to imagine that one of the world’s largest economies will have to be destroyed before it can be improved. Unlike the US under Franklin D. Roosevelt’s presidency, the government will not ride to the rescue with programs to add jobs and stabilize the financial markets. Ultimately, it took WWII to finish FDR’s job. And another world war is not likely. Argentina’s trouble has no foreseeable solution. (Fight inflation, don’t buy these 9 items.)
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