Meh… Textbook Keynesian, roaring, liquored-up, neighbourhood party (boom) before the inevitable hangover (bust) strikes – on someone’s else’s watch, of course. Same fallacies, same AE explanations.
No One Cries for Argentina Embracing 25% Inflation of Fernandez
"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.
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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.
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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.
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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.
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“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.”
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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."
Heck of a job, ladies!