Who benefits from Argentina’s high inflation?

This article was written by Adam Dubove, who is a columnist, consultant and popularizer about Bitcoin. He is co-founder and director of Ichimoku Fibonacci, an online company focused on financial advice.

6.0%; 6.6%; 7.7%; 8.4% So far this sequence ends with 7.8%. The numbers are accompanied by different scenes that at this point have already become classics in the local media.

A group of journalists trying to guess how much a supermarket cart with different products costs; some surreal statement from some government official; a reporter on the streets of Buenos Aires asking those who walk by if they make ends meet with their salary. The scene is repeated every month when it is announced that inflation in Argentina has risen again.

But inflation in Argentina is not a staging. The hardships are tangible, and inflation is a harsh reality.

With a rate of 114% in the last year, inflation in Argentina It is the most serious problem that the country’s economy has, among the many problems it has. Its effects are felt by the person who receives his salary and who can buy fewer things each time, the merchant who must remark his prices several times a month, and even the entrepreneur wants to make an economic projection for one year.

However, in this scenario where we all know losers, winners remain in the shade.

Unlike what happens in a voluntary transaction in the market, where a priori both parties consider that they will benefit from the transaction, and both win, in the case of inflation it is different. It is a zero sum game, where what some win is what others lose.

“Inflation always benefits some groups of the population before others, and more than other groups. And in most cases, it benefits these first groups at the direct expense of the other groups,” explained educator Henry Hazlitt.

This is due to the so-called Cantillon Effect, alluding to the Physiocratic economist Richard Cantillon, who in the 18th century described how the monetary issue did not affect everyone equally, but that those who receive the “fresh money”, recently issued, had an advantage in front of the rest The money has to get into the economy somehow. It’s not distributed from a helicopter, evenly. Hence those who receive the money first can spend it before the market notices the increase of the money supply and adjust their prices accordingly.

In other words, the closer you are to the spheres of political power, the more likely it is that you will benefit from inflation.

In Argentina, as in other economies, the main beneficiaries of inflation are two: the government and the banks. In the case of the former, it receives direct financing from the central bank through the purchase of government debt with money fresh from the printing press (or in a new accounting entry), or through the so-called transitory advances: credits that the Argentine central bank it extends to the government.

Banks, on the other hand, buy debt securities issued by the central bank, in an operation that generates the obligation of the monetary authority to pay monthly interest, which comes, of course, from the monetary issue.

“Prices go up by the elevator, wages by the stairs”

A popular phrase in Argentina, coined by former President Juan Perón, responsible for the Argentine inflationary disaster in the mid-40s and the first half of the 50s, accurately reflects the non-neutral effects of monetary issue. Although the sentence contains an error, he distinguishes wages from prices, but wages are also prices. Beyond this problem, the phrase manages to convey the idea of ​​the unequal effect that inflation has on the population.

And of course, as a good interventionist politician, Perón’s phrase focuses on price increases, not at the origin of inflation, which is the monetary issue. This strategy has been used since time immemorial by those who, without defending inflation, seek to divert the discussion away from those truly responsible —that is, the government and its central bank— toward businessmen and merchants.

In fact, when one searches about who benefits from inflation in Argentina, most analyzes They focus on the sectors that adjusted their prices the mostand how the supposed “price makers” get rich on inflation.

Inflation levels in Argentina have diluted the “monetary illusion” generated by this monetary phenomenon. The Argentine peso lost its function as a unit of account long ago. Wage earners no longer believe they are better off because their income level increases nominally.

The impact of inflation of this magnitude impact on the well-being and quality of life of each one, that the number increases no longer means anything. And yet, there are a significant number of journalists and analysts parading through the media who, although they don’t apply it to analyze their personal finances, focus on nominal increases to accuse companies of getting rich off inflation. Pure hypocrisy.

Bitcoin fixes this

The very high inflation in Argentina, a chronic problem for the country, has led Argentines to take refuge in the dollar. Although the US currency has lost 98% since the creation of the Federal ReserveArgentines see the dollar as a safe haven, a solid currency.

Sure, against the Argentine peso, the vast majority of fiat currencies around the world could be considered hard money. Unfortunately, the dollar is a similar trap, but one that is executed at a slower speed and with less impact on daily life.

“The Central Bank must be trusted not to degrade the currency, but the history of fiat is littered with breaches of that trust,” Satoshi wrote. a few months after commissioning the bitcoin networka refuge, that will be there, when people need a sanctuary from the monetary cataclysm.

Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias.