Headline, August 11 2022/ '' '' ARGENTINA'S INFLATION ARMOURIES '' '''



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ARGENTINA : AN ECONOMY WARPED BY INFLATION. As the peso's value collapses, Argentina relies increasingly on stacks of U.S. Currency. About 37 percent of Argentines live in poverty, up from 30 percent in 2016.

Eduardo Rabuffetti, an Argentine says he can pick up a counterfeit dollar bill by touch. He can tell you exactly what $100,000 looks like. And on numerous occasions, he has walked down the streets of Buenos Aires with tens of thousands of U.S. dollars tucked into his jacket.

NEARLY EVERY MAJOR PURCHASE IN ARGENTINA - land, houses, vars, expensive art - is made with in tall stacks of U.S. currency. To save, Argentines stuff bundles of American bills into clothes, beneath floorboards and in bombproof safe deposit boxes behind nine locked gates and five stories beneath the ground.

ARGENTINES hold so much U.S. currency - experts say perhaps more than people anywhere else outside the United States - that sometimes it gets thrown away by mistake. Last month, passers-by found tens of thousands of dollars at an Argentine dump.

The dollar is king in Argentina because the Argentine peso is disintegrating in value, particularly over the past month. One year ago, about 180 pesos could buy $1 on the black market. It now takes 298 pesos to buy a buck. With the peso plummeting, prices are soaring to keep up.

Many economists expect inflation in Argentina, already at 64 percent this year, to hit 90 percent by December.

It is one of the country's worst economic crises in decades, and that is saying something for Argentina. As countries around the world try to address rising prices, there is perhaps no major economy that understands better than Argentina how to live with inflation.

The country has struggled with rapidly rising prices for much of the past 50 years. During a chaotic stretch in the late 1980s, inflation hit 3,000 percent and residents rushed to buy groceries before clerks with price guns could make their rounds. High inflation returned, exceeding 30 percent every year since 2018.

Argentines have developed an unusual relationship with their money. They spend their pesos as quickly as they get them. They buy everything in installments, whether TVs or clothes.

They don't trust banks. They hardly use credit. And after years of constant price increases, they are left with little idea of how much things should cost.

In Argentina, people have found ways to adapt to years of high inflation. Life is especially manageable for those with the means to make the upside-down system work. But for all those striking work-around means that few who have held political power doing years of economic distress have found themselves paying a real price.

''We ask ourselves the same thing : How is society allowing these things to happen?'' said Juan Piantoni, the head of Ingot, a company that provides safe deposit boxes where business is booming as Argentines pay to stash their cash.''

''At this moment, I think we're on the eve of a situation that could lead to a major crisis.'' he added. ''No one has lit the fuse yet. But the day that happens, we'll see what we're up against.''

Wages for many jobs are rising at nearly 50 percent a year. Landlords can raise rents at similar rates. And millions of Argentines use the black market to evade government restrictions on buying U.S. dollars.

The result is that in the wealthier areas of Argentina's capital, construction continues apace and restaurants and bars are packed. The next available dinner reservation for two at Anchoita, one of the city's hippest restaurants, is in January next year.

In poorer neighborhoods, people collect scrap cardboard to sell, pool their money for food and swap used goods to avoid the peso altogether. Argentina's poor typically don't have jobs with automatic wage increases, and they certainly don't have extra cash to buy U.S. dollars. 

That means they are left making few pesos while everything around them becomes much, much more expensive. About 37 percent of Argentines live in poverty, up from 30 percent in 2016.

On July 2, Argentina's economic minister resigned. Over the next 26 days, the peso's value dropped 26 percent. President Alberto Fernandez fired the new economic minister. It was the 21st time that an Argentine economic minister had lasted two months or less.

Argentina's recent bout with hyper inflation is linked to the same factors that have driven up prices worldwide, including the war in Ukraine, supply-chain constraints and increases in public spending.

But many economists say Argentina's inflation is self-inflicted. In short, the country spends far more than it takes in to fund free or heavily subsidized health care, universities, energy and public transportation. To make up for the shortfall, it prints more pesos.

The International Monetary Fund, which is owed $44 billion from Argentina, has asked the government to cut its deficit and pass stricter monetary policies. Last week, the minister of economics, Sergio Massa, took one of the most significant steps in years when he pledged that Argentina would stop printing pesos to fund its budget.

The Honour and Serving of the Latest Global Operational Research on The-State-of-the-World, continues. The World Students Society thanks authors Jack Nicas, Ana Lankes and Natalie Alcoba.

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