Monday, May 7, 2018

Argentina raises interest rates to 40%

Image result for argentina peso rate 40%

Argentina raises interest rates to 40%

Argentina's central bank has raised interest rates for the third time in eight days as the country's currency, the peso, continues to fall sharply.
On Friday, the bank hiked rates to 40% from 33.25%, a day after they were raised from 30.25%. A week ago, they were raised from 27.25%.
The rises are aimed at supporting the peso, which has lost a quarter of its value over the past year.
Analysts say the crisis is escalating and looks set to continue.
Argentina is in the middle of a pro-market economic reform programme under President Mauricio Macri, who is seeking to reverse years of protectionism and high government spending under his predecessor, Cristina Fernandez de Kirchner.
Inflation, a perennial problem in Argentina, was at 25% in 2017, the highest rate in Latin America except for Venezuela.
http://www.bbc.com/news/business-44001450
I have been following you since I first saw your write up on Western Shooter (I think) over 10 years ago.  I bought both of your books years ago since I believe that the US will crash after they can no longer keep the economy going through printing money.
-Mike

Hello Mike,
Argentina is going through yet another complicated economic period (and its seen more than its fair share by now).
I still have some hope in Argentina’s president, Mauricio Macri, but with such a devastated country it’s hard to turn that ship around.

A country has basically three ways of financing itself, economic prosperity, printing money or debt. Of course the most healthy way of running a country is with the first way, with a robust economy, growing at a healthy pace and with a strong middle class. Now the truth is a country like Argentina which had its national industry destroyed can hardly rely on that.

What the Peronists have done for years is the second way, just print more money. That works very well, doesn’t it? Need money, lets print some! Of course the problem is that printing money makes it lose value, whats even worse, as money loses vale the people that suffer the most and to whom the debt is really transferred to is the poor and hard working lower class. The guy that works all day for minimum wage is the one that carries the burden. People that are already relying on benefits and social assistance will keep getting them and there’s nothing the State can take away from that guy, often living better that the person that wakes up every day at 6 AM to work. The rich fat cat doesn’t care if a bottle of milk costs 2 dollars or 20. In his budget, things like food and utility bills are pocket change anyway.

Now, Macri knows this and has tried to avoid printing money and went out to get foreign financing, meaning good old debt, which also has a way of drowning a country but is a tad less cruel than inflation, printing money.

In the case of the United States, given that the world still considers the US dollar the global currency, it can still allow itself to work the printer 24/7. Don’t get me wrong, it still causes inflation and it is as cruel as its always been, to exchange honest labour and goods for what someone else just prints or “creates” by pressing zero a few times on a keyboard, but the United States can continue doing it.
The big question is of course, for how long can they keep doing it, with a debt of $20 trillion and still growing.
FerFAL

Fernando “FerFAL” Aguirre is the author of “The Modern Survival Manual: Surviving the Economic Collapse” and “Bugging Out and Relocating: When Staying is not an Option”

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