Life in a place where inflation exceeds 100%

2023-05-21 18:44:47

$334,200 in Ana’s cash.

After decades of hard work accumulating every penny, the value of Ana’s savings now “shrinks” to only 22 piles of twisted $100 bills, which, if stacked, are no more than 2 gangs tall. hand.
The retired teacher shared: “There is almost no bank credit here and everyone has to keep their own money, I saved more than 20 years to buy that land.” In Argentina, most banks do not lend or provide financing, and people have to save enough money to buy a house or a car.
Of course, such large cash transactions always have risks such as being robbed or scammed, however, no citizen hires security for such purchases.
Ana’s story is just one of many “unique” points of the Argentine economy, where inflationary has surpassed 100% and is the highest since the early 90s. On May 15, Argentina’s Central Bank even had to raise interest rates to 97% to cope with inflation.

When the price no longer makes sense

One of the biggest headaches caused by hyperinflation cause no one knows the price of anything.
“Prices go up every day to the point where you don’t know how much they cost,” said Guido Mazzei, a manager of short-term rental apartments in central Buenos Aires.
“You will never shop in one place, you will have to compare prices in 5-6 different supermarkets. Shopping is like a treasure hunt. This supermarket to buy soap, that store to buy eggs… And in the end, you pay without knowing if it’s expensive or cheap,” the 39-year-old man said.
Meanwhile, Mr. Rudy Rindlisbacher – owner of a steel frame business – said that the task of pricing is equally complicated. Each month, he and his son will sit together to adjust the price list based on the official price of the dollar.
“This is complicated because there is no way to know in advance the price of a product at the time of shipment. Big companies can keep stock and just put it on the shelves when they know the price, but small businesses like us still have to sell because we need to live,” he said.No one knows the specific price for each item in Argentina.

Even Eduardo Rad – a driver from northwestern Argentina – said taking orders was also a “risky gamble”. In addition to driving, he also earns money by carving key chains, pens, lighters and some other small products.
According to him, suppose a company orders 200 pens and Mr. Eduardo Rad quotes them and the two parties close the deal. After purchasing and engraving the pens, prices can quickly change, causing Mr. Rad to lose part or all of his profits.

The crisis has no end

Before the Great Depression of 1930, Argentina was among the 10 richest countries in the world by GDP per capita. However, since the 1950s, this place has sunk into Depression long-term, and now more than four out of every 10 Argentines live in poverty.
Inflation in Argentina has also surpassed triple digits as the central bank here continues to print more pesos to deal with overspending. Resonating from the global price shock after the conflict in Ukraine, this currency continuously depreciated.
While analysts still have mixed views on how to deal with the situation, most agree that a lack of political effort is an important issue.
“The history of inflation in Argentina stretches back to the point where many generations thought 30 percent inflation was normal,” said Adam Fabry, an economics lecturer at the National University of Chilecito in Cordoba.
Meanwhile, Dr. Benjamin Gedan of the Wilson Center warned that inflation exceeding 100% is a dangerous sign for the economy. “It is true that the Argentine people have adapted to the high inflation environment. But actually 20-30% inflation is unthinkable for other economies,” he said.1,000 pesos – the largest denomination of Argentina’s currency – is now equivalent to only $ 2.4 on the black market.

Although prices go up and down day by day, Argentines are still spending enthusiastically. “You’ll find restaurants in Buenos Aires full of customers, but it’s not because people are making money, they’re actually ‘quema la plata’, which means burning money,” said Dr. Gedan.
A lot of Argentines spend as if this is their last chance. They buy everything from towels to televisions in installments. Because as long as it’s in pesos, goods are worth more than money.
Steel business owner Rudy Rindlisbacher said: “I bought a 2018 Toyota HiLux a year and a half ago for 4.5 million pesos. Six months later, it costs 7.5 million pesos. Now it’s almost 12 million pesos. Therefore, the only way to save is to buy goods.”

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