The news from Argentina is getting steadily worse.
One of the great books written about inflation is When Money Dies by Adam Fergusson. It tells the story of the inflation that hit the Weimar Republic in the early 1920s (and, indeed, the long run-up to it, which began during the First World War) and was written as a warning to Brits in the 1970s of what could lie ahead if they failed to get inflation under control (FWIW, I reviewed the book on its reissue here). Similarly, while the story of what’s currently happening in Argentina is interesting in its own right, it too can be seen as a warning.
And the news from Argentina is getting steadily worse.
Argentina’s central bank expects monthly inflation in August to have accelerated to almost double the pace of July after the government devalued the peso, two officials said in another sign the economy is quickly deteriorating.
The central bank estimates consumer prices will increase at least 10.6% from July, the fastest monthly rate since Argentina was coming out of hyperinflation more than three decades ago, the officials said, asking not to be named citing preliminary internal high frequency data and private online researchers like PriceStats. Beef, fresh produce and medicine prices are seen as the biggest contributors to the acceleration, according to one of the people.
The August data, to be released by the country’s statistics agency on Sept. 14, would dwarf the 6.3% monthly inflation that Argentina posted in July, confirming the significant impact on prices from an 18% peso devaluation announced by the government earlier in August.
Meanwhile, according to TN Campo, the price of beef rose 60 percent in August.
Argentina is also, sadly, providing a real time example of what life is like living with three-digit inflation. An example of this comes from a New York Times article from the end of June, describing how spending priorities shift when a money dies:
Argentines are eager to get rid of the currency as quickly as they can, and that means the middle and upper classes are going out to eat more often — and that restaurateurs and chefs are plunging their revenues back into new restaurants. . . .
The boom, in a way, is a facade. Everyone appears to be out having a good time. Yet, in much of the country, Argentines are scraping by and hunger is on the rise.
And in wealthier circles, the rush to go out is a symptom of a shrinking middle class that, no longer able to afford bigger purchases or travel, is choosing to live in the here and now because people do not know what tomorrow will bring — or if their money will be worth anything. . . .
The restaurant boom is a phenomenon that cuts across classes, said Santiago Manoukian, an economist at a Buenos Aires consulting firm, Ecolatina, though it is largely driven by middle- and upper-income earners, many of whom have had their earnings keep up with inflation, but have still had to adjust to the crisis.
For members of the middle class in particular, expenditures like a vacation or a car have become largely out of reach, so they are indulging in other ways.
But even lower-income gig workers, who saw their earnings shrink by 35 percent since 2017, according to data gathered by Ecolatina, are dining out before their money devalues even more, Mr. Manoukian said.
JP Morgan is now forecasting that the country’s inflation will be running at 190 percent by year-end.
The poverty rate currently stands at 40 percent, up from 11 percent in 2020. Not everyone is eating out.