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Argentina’s Economy Is Cratering, Again

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Bob Adelmann
New American
January 28, 2014

While Wall Street declined by three percent over global growth concerns last week, few were noting or even interested in the 11-percent decline in the Merval, Argentina’s stock market index. It hit a high of 5,970 on Tuesday, January 21, the day before the Argentina government devalued its currency. It closed at 5,337 on Monday. The peso itself has been in decline far longer, having lost nearly 35 percent of its value against the dollar over the last 12 months.

In an address to her country the day after the devaluation, Argentina’s President Cristina Fernandez, in a brilliant display of economic ignorance and hubris, announced her solution to the problem: more government spending. This time, she announced a 600-peso ($84) monthly “stipend” to students, to be paid for with more printing-press money.

This was entirely predictable: Efforts were made to grow Argentina’s economy through deficits, and inflation of the currency rose as the peso lost value, reaching 28 percent last year. As citizens tried to preserve what little purchasing power they had left, Fernandez clamped down with more than 30 different stifling capital controls. This would force those with capital to suffer the brunt of the inflation. Those controls included:

• Increased taxes on credit card purchases

• Limits on online purchases of products made abroad

• Taxes on vacations taken outside the country

• Limits on purchases of foreign currencies

  • A d v e r t i s e m e n t

• Confiscating private pension plans, converting them into pesos, and then adding them to the country’s social security fund

Full article here

This article was posted: Tuesday, January 28, 2014 at 6:08 am





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