You call this inflation? Look at Argentina in the 1980s
In the U.S. high inflation is like a Walkman: many heard of it, few have actually experienced it. I’ve been a Houstonian since 2016, but I come from a country — Argentina — where that kind of economic disease is practically chronic. We currently rank seventh in the list of countries with the highest inflation rates at a solid 50 percent (and prospects of ending this year with 80 percent), but for 15 years — 1975 to 1990 — the annual rate averaged 300 percent, with an infamous 1,000 percent peak in 1989.
So, while the latest inflation figures for the U.S. are brutal — consumer prices rose 8.5 percent over the last year, a 40year high — rest assured there are worse scenarios to deal with.
My recollection of hyperinflation in Argentina is basically formed by comments and stories from the adults of my family. I was just 9 years old in 1989, but some memories are clear. When prices rise so fast, money evaporates in your pocket. My friend Néstor recalls buying a night lamp one morning, and paying exactly twice the amount in the afternoon for the same object to complete the set. If money is hot, checks are lava. Monthly salaries become bimonthly salaries to help employees catch up (which is like running against your shadow).
Businesses are constantly reviewing pricing strategies, since the smallest miscalculation can knock you out; when the forecast is really opaque, they just stop selling their products, waiting for calmer waters. In an unstable country like mine, that means shortages and, sadly inevitable, public riots in the most vulnerable sectors of society.
If you’re rich, you find solace in a more stable foreign currency (as much as you are allowed) or in stock, property or other investments. If you are poor, there’s not much you can do, except wait for some sort of help from the government or other institution. My family, and others who clung to the middle class, went to the store for food as soon as the salary was paid.
Grocery stores in times of hyperinflation are not unlike
grocery stores during hurricane advisories. Aisles are pretty empty, lines are long and people are frustrated. You have to be faster than the guy with the price tag machine, otherwise you’ll end up paying 20 percent extra or more. No time for “what can we eat tonight?” Quarrels are not infrequent among customers whose patience is more devaluated than the Argentine peso.
Gas is also a problem, as you can imagine. Prices are regulated by the government, and when it has no option but to increase them — which happens quite often — they give you a few hours’ heads up. As expected, everyone rushes to the gas stations, where lines are eternal — I suffered several with my father — and there’s a limit to the amount you can buy. Many turn off the engine and push the car.
My only attempt to maneuver around inflation those days might be the smartest financial decision I’ve ever made, at least in relative terms. With birthday money from an aunt, I bought
... one U.S. dollar. I would daily follow the exchange rate with contentment, unaware of what it meant for most of my fellow Argentines. I see it with some remorse now, but watching my humble investment skyrocket made me feel a little bit like the Scrooge McDuck of my comics. Another monetary illusion ignited by an economy on fire: I wasn’t getting rich; I was just shielding the little savings I had.
The unoriginal and ineffective way the Argentine government usually tries to tackle the problem — one that has soundly failed in the ’70s, in the ’80s, in the 2000s and again this year — is price control policies. Egyptians, Babylonians and Romans already learned — the hard way — that those types of measures don’t work, yet we seem to be always willing to give it another try.
We could number a lot of factors that are causing today’s inflation in the United States. The pandemic, the labor shortage and the war in Ukraine are the first things to come to mind for some politicians. Others blame the size and amount of COVID relief. It is not mentioned enough that the United States monetary base reached a record high in December 2021 — I’m talking about how many dollars the Federal Reserve poured into the economy in different ways, especially during the worst hours of the pandemic in 2020. the Fed is raising interest rates for the first time since 2018.
We — the commoners with little to no knowledge on these issues — turn to educated guides to fix the problem, while these guides, regardless of their background or ideology, can only apply solutions that are a tad more than shooting in the dark.
As portrayed in the book “Diary of a Season on the Fifth Floor” by Juan Carlos Torre, back in the ’80s, in the midst of that ferocious fight against inflation in Argentina, the Stanford-educated economist Adolfo Canitrot was asked about his theoretical approach to the problem: “To lower inflation, I am a monetarist, structuralist — whatever it takes; and if we have to resort to the macumba, then that too.” If he used AfroBrazilian fetishism and sorcery back then, it didn’t work.
In Argentina today, several politicians’ language echoes this bit of economic magic realism. A few weeks ago, the presidential spokeswoman in Buenos Aires claimed: “Inflation is an endemic phenomenon, almost a hex.” Later, Alberto Fernández, the president himself, blamed the monetary debacle on “some demons ... who must be brought to their senses.” Meanwhile, neither of them mention the 40 percent increase of the country’s monetary base just in 2021 — an election year, “coincidentally” — pumping up the economy for short-term political gain but setting up long-term inflation.
Of course, the U.S. and Argentina are not the only ones bearing the cross. Euro currency countries saw consumer prices rise by an annual rate of 7.5 percent in March — an alltime high. Spain’s inflation is 9.8 percent, its highest since 1985, and Germany — although far from its Weimarian nightmare — is at an unprecedented 7.3 percent. In her March 17 speech on monetary policy in an uncertain world, Christine Lagarde, president of the European Central Bank, concluded that “our outlook today can be neatly summed up in the words of Maya Angelou: we are ‘hoping for the best, prepared for the worst, and unsurprised by anything in between.’” That’s it. You can’t afford milk for your kids anymore? Here’s an inspirational quote.
Where is the world heading? That’s always hard to predict. Yet, no matter what, there is one outcome of which we can be certain: we can try to defend our money by changing consumption habits, but in the end, the rich will be richer, the poor and the middle class will hardly get by, politicians will blame others for their faux pas and our kids will be even further from affording a decent life in the near future.