Argentina Sleepwalks into Hyperinflation (Yet Again)
The Argentine peso has lost half its value in one year. Both the official and parallel exchange rates with the US dollar and the Mexican peso have doubled in one year. Consumer prices have doubled in one year. The quantity of Argentine pesos has doubled in one year. All the rates at which these variables are increasing have also doubled in one year. Expecting everything to double again in half a year is now a conservative projection.
Argentina was the richest country in the world at the beginning of the twentieth century. It has now endured almost one hundred years of fiscal dominance, meaning that the central bank always accommodates whatever deficit the government decides to run. Argentina has been practicing modern monetary theory since before it was even a concept. Today more than half the people in Argentina are in poverty by worldwide standards, and the highest-earning quartile has an income comparable to the lowest-earning quartile of a developed country.
The Argentine economic policy consists of everything that even the most mainstream economic principles course teaches should never be done: there is fierce and indiscriminate protectionism, the labor market is overregulated to the point that hiring is prohibitively expensive, and price controls are ubiquitous. Everyone is acutely aware that there is a problem, but the current administration has decided to stay the course and focus their efforts on short-term measures to mend the cracks in the haul so that the ship does not sink before the election later this year.
Meanwhile markets are already starting to break down and people are starting to panic. Some merchants are deciding to reduce the mercha
Article from Mises Wire