The economic future of Argentina

[QUOTE=Member #2041]If the current trend continues, things will certainly suck for people living in Argentina in a couple of years. But for an American traveling there, I don't expect that they will suck at all, because we will be getting 5-8 pesos per dollar, and the fact that prices will have doubled internally, will be completely transparent to those of us spending dollars when we come in. And bad local economies always have meant MORE ladies will turn to prostitution, and the increased supply will keep prices in check, at least for those of us who's costs are calculated in other currencies than the Argentine Peso.[/QUOTE]Member#2041,

Like Thomaso, I live in BsAs and could not disagree with you more. Let's look at a few items from your previous and current post.

- 30 months ago the exchange rate was 3.00 to 1, recently it has ranged roughly 3.10 to 3.20. This is only a 5% depreciation of the peso to the dollar.

- In the last 30 months prices across the board with few notable exceptions have increased from 50 to 100%

- Now I'm an "old math" student so bear with me, but in my book my buying power has decreased 45-95% depending on the good or service I'm buying.

Your discussion has been presented entirely from the prospective of a "tourist", not someone who is actually living here. I'm happy for you, and welcome your opportunities to visit - make the most of it. But please don't tell us "locals" that it is not as bad as it seems - because your data and math just don't add up.

With regard to a "bad local economy" producing a huge surplus of new providers is highly debatable for a number of reasons. Portenas have learned from previous hard times or their mothers that generating cash with their bodies is worthwhile in both good and bad times. Secondly, based on your privado "visit list" - you know that many of the good providers are from other countries (Paraguay, Peru, Brazil, etc. They tend to follow the pricing policy of their local handler, I. E. Privado madame, club management, or other chicas at the cafe. This is the most important: The Argentine mentality has no concept of supply and demand. They apply reverse principles - less sales necessitates the need to raise prices. It doesn't work at any level of this society, but they stick with it!

Bottom line: I would currently need an exchange of 4.5:1, but probably closer to 5.00 to be even in buying power with 2 1/2 years ago.

[QUOTE=Alan23]Your discussion has been presented entirely from the prospective of a "tourist", not someone who is actually living here. I'm happy for you, and welcome your opportunities to visit - make the most of it. But please don't tell us "locals" that it is not as bad as it seems - because your data and math just don't add up. [/QUOTE]I never did say that. You get to join the list of folks who have failed to actually read what I DID say. I simply said that it's not bad at all for a tourist coming in and spending U. S. Dollars. I have not the slightest doubt that things ARE getting worse for folks who live in Argentina. The post of Thomaso276 that I took issue with was the one where he said that he couldn't see why anyone would continue to come to Argentina, with the rapid increase in prices. My point was, they are NOT increasing for American tourists anywhere NEAR as fast as they are in Thailand, Brazil, or Europe. In the past 24 months, compared to the U. S. Dollar:

The Dollar has risen against the Argentine Peso, from 3.04 to 3.18 (+5%)

The Dollar has fallen against the Thai Baht, from 38.5 to 31.9 (-17%)

The Dollar has fallen against the Euro from 0.79 to 0.64 (-19%)

The Dollar has fallen against the Brazilian Real from 2.2 to 1.69 (-23%)

Even if one assumes that during this same 24 month period of time, Argentina has experienced 30% overall inflation, while the rest of the world has experienced 12% overall inflation (It's actually been closer to 20% in Thailand during that time), the simple fact is, Argentina has still become a better deal for Americans in that time frame than any of these other destinations has.

At no point did I suggest that things are not getting substantially worse for people living in Argentina, who's wealth is measured in Argentine Pesos. I certainly acknowledge that to be the case. But, quite simply, it's become a BETTER deal - relatively speaking - for Americans spending dollars than the other mongering destinations have during that same timeframe, because it's the one major mongering destination that has seen the U. S. Dollar appreciate somewhat against the local currency - as opposed to depreciate substantially.

Thomaso276 DOES live in Argentina - which is why things are getting a lot worse for him, than they are for someone who is just visiting and who's spending power in Argentina is defined in U.S. dollars, as mine are. And when the dreaded collapse occurs, again, it's going to hurt plenty for the folks who live there and who's wealth is measured in Pesos - but it's going to BENEFIT American Tourists who spend U.S. dollars and who come to Argentina. That's an economic fact - as unpopular as it may be for you folks that live there.

Alan, the fact is, your buying power with U.S. dollars in the past 2 years has actually declined by about 25%. But it's declined by 30-40% In nearly every country OTHER than Argentina during that same timeframe.

Here is a pop quiz: Suppose I have 10 currency units to spend each period and one of the goods I buy is widgets, which cost 2 currency units apiece. If the price of widgets goes up 50% , by how much does my buying power go down?

Alan's "old school" math would say 50% , but that isn't right. Before, I could buy 5 widgets: 5 x $2 = $10. Now I can buy 3 1/3 widgets: $10 / $3 = 3 1/3. So, my buying power has only dropped by a third and not by a half: (5 - 3 1/3) / 5 = 1/3.

Now let's look at Member #whatever's assertion that inflation is hurting the Argentines. It is hurting some and helping some. One of the reasons for the inflation is all the wage increases being handed out. If I am a colectivero and I get a 30% raise I am even better off than I was before, even if inflation is 25%. My buying power increases.

Now let's look at whose wages will go up faster than inflation: those whose goods and services are price inelastic. Price inelastic goods and services are those which have few close substitutes or which comprise a very small portion of the consumer's income. There are other determinants but those are the two most important. The types of labor for which there few close substitutes are those with specialized skills that are in high-demand, or and importantly, those for which substitutes cannot be used due to [b]powerful union contracts[/b]. Sra. K is left of center and so is giving a lot of wage increases to powerful unions. Those people are better off.

So what kind of services have many close substitutes? You guessed it: prostitutes fall in that category. This is why most of my hookers have not raised their prices nearly as much as general inflation.

Argentina is in the middle of an economic [b]boom[/b]. On a country-wide level, things are getting better and not worse, largely due to two factors: high prices for the agricultural products the country exports, and increased tourism due to the strong Euro and due to idiotic articles in the New York Times and such about what a great place it is to visit.

And another thing is that many Americans who live here do [b]not[/b] have their wealth denominated in pesos (in fact I would guess most do [b]not[/b] have it denominated in pesos and if they do they are stupid) so they too will benefit from the next economic collapse.

The main problems that inflation bring are: 1) it makes it difficult to make future economic plans, and 2) it discourages saving, which decreases the investment base.

So what Americans who reside here get hurt by inflation in Argentina that exceeds the rate of inflation in the US? Those who are on pensions that are fixed in dollars, i.e., retirees. For those who fall in that category, I feel your pain but it is a risk you chose to take. For those who are merely vacationing here, Member # makes a good point that the exchange rates and inflation in other alternative destinations has to be considered too. Look what is going on in Colombia. Bascially the stupid crap the US government has been doing the past few years is reducing Americans' ability to vacation [b]in total[/b], including, importantly, the ability to vacation within the United States due to high energy prices.

It is also worth pointing out that if wages increase, capital (equipment, automation) can be substituted for labor to some extent, but that is hard to do in Argentina due to a lack of financing for capital spending. As mentioned above, inflation exacerbates this by discouraging the savings base that fuels the investment capital supply.

[QUOTE=Member #2041]The Dollar has risen against the Argentine Peso, from 3.04 to 3.18 (+5%)[/QUOTE]I would have to disagree with your characterization that "The Dollar has risen against the Argentine Peso"

In my opinion, it would be more accurate to state that the dollar and the peso have both fallen in value against other world currencies, but the peso has fallen faster.

Thanks,

Jackson

[QUOTE=Jackson]I would have to disagree with your characterization that "The Dollar has risen against the Argentine Peso"

In my opinion, it would be more accurate to state that the dollar and the peso have both fallen in value against other world currencies, but the peso has fallen faster.

Thanks,

Jackson[/QUOTE]Fair enough, but that's just semantics. The net result is exactly the same - the buying power of dollars has improved, relative to pesos, (or, if you prefer, has declined less than that of pesos have) over time, in Argentina.

[QUOTE=Member #2041]That certainly doesn't explain why it's gone from 3.1 pesos to the dollar, to 3.2 very recently, and that the Argentine government is buying pesos heavily in an effort to keep it from rising beyond 3.2 - a strategy that will clearly fail over time.[/QUOTE]Look at the exchange rate in a little depth. The current rate of ARG$3.22 is still with-in the trading range of the past few years. It has been that a few times but with time and a big wad of money, they peg it back. It hasn't been an easy road the past 5 weeks and I am sure other countries after such a degree of domestic turmoil, would perhaps have a few ripples in their orchestrated exchange rates. Don't forget that they have cash reserves of upwards of U$40 billion and they will use it to maintain stability.

The exchange rate has depreciated against the U$ dollar by less than 1% per annum; a stable situation given with what occurred before it stabilised at around 3 to 1. Chile, Peru and Brazil have appreciated by as much as 20% , very much in line with most of the USA's trading partners.

Those of us that live here and have done so for many years, generally have a different perspective than new arrivals. I've seen it crash twice before; and by the same failure to understand basic economics. And that is that wealth comes from efficient production and not from taxation.

There is no imperatives at present to change. If there was, the rate would be the opposite of your scenario. ARG$2.50 to the U$1.

As my lecturers asked me, "Do I make myself clear?"

Argento

[QUOTE=Argento]As my lecturers asked me, "Do I make myself clear?"

Argento[/QUOTE]Clear, yes, but I disagree with what you claim. Right now, the rate is at the high end of the trading range in the 3. 2 vicinity, and the government is presently being forced into buying massive amounts of pesos to hold it inside that range. I'm willing to bet that in the event of the aforementioned collapse, the "pegging" to slightly over 3 pesos to the dollar will fail as the Argentine government cannot keep up, and you will see something closer to 5+ pesos to the dollar. If the natural exchange rate absent govt. Intervention were really around 2. 5, then the dollar would be trading at the LOW end of the recent trading range, not the high end, and the Argentine govt. Would be putting more pesos into the market, not buying them up with dollars. Rather, what has happened is that the pegging of the Peso to Dollar rate at 3. 1 has required too many pesos to be injected into the market, and Peso inflation has run rampant within this trading range. This means that the natural Peso to Dollar exchange rate is something HIGHER than the 3. 2 that is presently being seen with government intervention. You watch, when the government can no longer keep up, the rate will end up pushing above 5 pesos to the dollar.

Member #2041

To answer your question below, I've always thought of myself pretty much as CockSucker & a MotherFucker, never an Asshole. Assholes are stupid, I'm not.

I pride myself in that I "Rent" my friends, that way their desposable and I never get attached to them. One never knows they one of them is going to turn on you and end up fucking you.

I don't own a cell phone and refuse to carry one while I'm in Argentina.

To run my "Vast Business Empire" while traveling in Argentina I prefer communication using computers and long line telephones, not cell phones, such as yourself. For what I do for a living the internet cafe or telephone store is unexceptable.

The dollar doesn't buy as much as it did anywhere in the world, including the United States. Inflation is a world wide problem.

But Argentina's "Hyper Inflation" is eating up the Mongering power of our dollar and everyone on this board knows it.

The only statement you've made thats makes sense is, considering other destinations, Argentina provides more value for the money spent. But that is changeing right before our eyes. Soon it with be more cost effective to fuck the the local prostitute you meet on Craigs List in your home town rather than travel to South America.

Everything for sale in Argentina is up 50 to 100 precent in the last two years, including pussy. I traveled to Buenos Aires before the devaluation, I thought I was in New York or London the prices were so high. The devaluation made the country affordable, with the peso pretty much pegged to the dollar that is all changing.

Exon

[QUOTE=Exon123]The only statement you've made thats makes sense is, considering other destinations, Argentina provides more value for the money spent. [/QUOTE]And in fact, this is basically the entire crux of what I have said relative to the mongerer's dollar. I'm glad that you agree that it makes sense. I never said anything to the contrary. The fact is, relative to Thailand, Brazil, or Europe, this is more true now than it ever has been, and it continues to be, as we are losing purchasing power in those venues noticeably faster than we are in Argentina.

Good for you that you like to use landlines and cannot use internet kiosks nor cellphones. You are more than welcome to pay $10 a day for this privilege, but as I have no need to, I will be happy to let you absorb these costs yourself, rather than subsidizing them for you.

Furthermore:

V = Q / P

Where:

V = value
Q = quality, and
P = price

The quality of the mongers' target product is higher here than in most other places, increasing the V for any given P.

Many mongers are experiencing a greater than necessary loss of purchasing power because they are ignoring the "substitution effect. " When the price of beef rises compared to the price of chicken, eat more chicken and less beef. The market is screaming for this to happen. Maybe Madaho's and 2036 Santa Fe are beef and maybe Ness and 343 Uruguay are chicken. Now, an argument can be made that if I prefer beef to chicken I am less well off if this occurs. I respect and accept this argument [b]if, and only if, [/b] one has actually [b]tried[/b] chicken.

I got fresh 18 year old pussy and a large glass of whisky for 130 pesos last night. My purchasing power remains strong and the price of my pussy has gone up considerably less than the rate of general inflation. Quality is subjective (and so ineluctably is value) but I am pretty satisfied.

As an example of the substitution effect, it has always been the case that it was cheaper to go to Uruguay to renew my visa than to go to immigration to extend it. Now the extension is 100 and the boat ride is 106, so I will have to consider substituting standing in a couple of lines for sitting on a boat. Flexibility is the key.

[QUOTE=Dickhead]Furthermore:

V = Q / P.

Where:

V = value.

Q = quality.

And.

P = price.

The quality of the mongers' target product is higher here than in most other places, increasing the V for any given P.[/QUOTE]But, since Quality is subjective, I ignored it for the purpose of these discussions. Personally, I still find the quality in Thailand to be the best available anywhere, and I know more than a few folks who would contend that Brazil is even better. But, that's really a matter of personal taste.

[QUOTE=Member #2041] I'm willing to bet that in the event of the aforementioned collapse, the "pegging" to slightly over 3 pesos to the dollar will fail as the Argentine government cannot keep up, and you will see something closer to 5+ pesos to the dollar. If the natural exchange rate absent govt. Intervention were really around 2.5, then the dollar would be trading at the LOW end of the recent trading range, not the high end, and the Argentine govt would be putting more pesos into the market, not buying them up with dollars. Rather, what has happened is that the pegging of the Peso to Dollar rate at 3.1 has required too many pesos to be injected into the market, and Peso inflation has run rampant within this trading range. This means that the natural Peso to Dollar exchange rate is something HIGHER than the 3.2 that is presently being seen with government intervention. You watch, when the government can no longer keep up, the rate will end up pushing above 5 pesos to the dollar.[/QUOTE]Give me a time frame on your scenario. Subject to that, we can discuss the bet. Jackson can hold the wagers if he agrees.

Argento

[QUOTE=Member #2041]Even if one assumes that during this same 24 month period of time, Argentina has experienced 30% overall inflation, while the rest of the world has experienced 12% overall inflation (It's actually been closer to 20% in Thailand during that time) the simple fact is, Argentina has still become a better deal for Americans in that time frame than any of these other destinations has.[/QUOTE]Please note we have a bit of an "apples and oranges" discussion going on here. I have referred to a period of 30 months (2 1/2 years) - the length of time I have lived in BsAs. You have referenced inflation numbers of some pretty reliable governments, with the exception of the Argentine. But the most important factor in measuring inflation is what comprises the "basket of goods". I was careful to note the increases I had experienced on the goods and services I purchase, which are very specific to certain demographics.

I appreciate your comparison to other countries and their current inflation situation. But the point is I have chosen to live in Argentina, so the other country comparisons are interesting - but somewhat irrelevant. I moved here from a country other than the USA, due to a deteriorating inflation situation.

I thank our resident Professor for the Econ 101 pop quiz and the correction - he is absolutely correct, I misspoke / wrote: My cost has increased 50% , not my buying power. While the comparison between Argentine and USA inflation is a necessary academic exercise, I would not waste much time on this -given the USA CPI-U inflation for the last eight years has averaged 2.78% , compared to a country with 15, 20, 30%!

Would appreciate Dickhead expounding on the following: "Bascially the stupid crap the US government has been doing the past few years is reducing Americans' ability to vacation in total, including, importantly, the ability to vacation within the United States due to high energy prices." in the appropriate thread of course.

[QUOTE=Argento]Give me a time frame on your scenario. Subject to that, we can discuss the bet. Jackson can hold the wagers if he agrees.

Argento[/QUOTE]My point was contingent upon the "collapse" of the Argentine economy that several posters have contended is coming - some said 2 years, others have claimed that it is much more imminent. I personally see little reason to dispute these forecasts, although I will admit that I lack local knowledge. Suffice it to say that if and when the aforementioned collapse occurs, it will coincide with this currency effect. If there is no collapse, it's a moot point, as the status quo will continue.

[QUOTE=Alan23]Please note we have a bit of an "apples and oranges" discussion going on here. [/QUOTE]I totally agree. My issue was that I was always referring strictly to the issue as it relates to a U. S. Tourist deciding where to visit for hobbying. It was Thomaso276 who framed his argument that things were going to hell in a handbasket in terms of the place becoming a poor value for U. S. Tourists, which was not accurate - when what he should have done was confined his complaint to the degree that people living in Argentina were seeing a decline in their purchasing power - something that I have never disagreed with in the slightest.