Here is a short article I would like you to comment on, it can be found here....please dont post my email
http://dailyreckoning.com/the-argentine-boom-and-why-its-killing-the-peso/10/13/10 Buenos Aires, Argentina – “This country is in a boom,” said the editor of a financial magazine in Buenos Aires. “Everything is going up. Everything is selling. And inflation is roaring at 25% per annum.”
To hear him tell it, Argentina is everything America wishes to be. Its people shop. Its restaurants are full. Its economy is growing at more than 8% a year.
“Inflation. Everyone wants to get rid of cash. You hold onto it and it’s worth less and less. So you buy an apartment.”
Amazingly less than 10% of property transactions in Argentina include mortgages. People pay with cash. Still, prices are not as low as you would expect. The lot next to our office is on the market for $250,000.
“It should be about $100,000,” said a friend who keeps an eye on real estate. “But everything is high.”
The cab ride from the airport was 70 pesos when we came 4 years ago. This time it was 128 pesos. Two glasses of wine at a local bar were 40 pesos. They would have been half that a few years ago.
“There’s a boom going on,” continued the financial editor. “But it can’t go on forever. You can’t have 25% inflation and have a healthy economy. People don’t make wise investments. They just try to avoid getting ripped off by inflation. They don’t make long-term investments. They just try to park their money where it won’t disappear. That’s why real estate is so expensive. People will save their money and buy an apartment whether they need it or not. They figure it will still be there in five or ten years. The peso won’t be. At least not today’s peso.”
Nor will the dollar.
for The Daily Reckoning
Hi, I’m afraid there’s some misinformation in that article. Restaurants packed and the economy growing 10%? Restaurants are as full as in any metropolis, specially tourists, and once you go to the suburbs you don’t SEE much restaurants to begin with. Heck no, the economy isn’t growing 10%, I’d be surprised its growing at all.
We don’t have inflation because everyone wants to get rid of their money, we have inflation because our money isn’t worth anything and inflation is rampant, we don’t even have good data on how bad inflation is because our socialist government thinks ignoring problems makes them go away.
Its not about people making investments, wise or not, its about people having to pay crazy prices for basic necessities such as food, power and taxes, that’s the real problem, not the increase in wine of cab fees.
Argentines use cash because we no longer trust banks and specially distrust this authoritarian government, and we spend that much money because that’s how bad basic necessity goods and services prices are.
It is true that people parked their money on real estate… 4 years ago.
These days? The market isn’t good. Its not easy to sell or even rent places any more, even in the downtown capital district a condo or office may go 6 months before renting. A couple years ago it would have been rented in one or two months.
One thing is true though: This situation can’t go on for long, sooner or later it will blow up. Its not realistic to spend more money to live in Buenos Aires than in most USA cities. Wages are going up, but they don’t even come close to keep up with the inflation, so that’s why we have more and more poor and more crime each passing year.