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Argentina Freezes Supermarket Prices To Halt Soaring Inflation; Chaos To Follow

Tyler Durden's picture




 

Up until now, Argentina's descent into a hyperinflationary basket case, with a crashing currency and loss of outside funding was relatively moderate and controlled. All this is about to change. Today, in a futile attempt to halt inflation, the government of Cristina Kirchner announced a two-month price freeze on supermarket products. The price freeze applies to every product in all of the nation’s largest supermarkets — a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies’ trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported. As AP reports, "The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1."

Perhaps they will. What consumers will certainly do is scramble into local stores to take advantage of artificially-controlled prices knowing very well they have two short months to stock up on perishable goods at today's prices, before the country's inflation comes soaring back, only this time many of the local stores will not be around as their profit margins implode and as owners, especially of foreign-based chains, make the prudent decision to get out of Dodge while the getting's good and before the next steps, including such measures as nationalization, in the escalation into a full out hyperinflationary collapse, are taken by Argentina's female ruler.

As such expect photos of empty shelves from Buenos Aires to start popping up in a few days, comparable to how threats of a gun and weapon ban by the US government did more for the top and bottom line of US arms dealers than any military conflict ever could.

Sure enough:

Economist Soledad Perez Duhalde of the abeceb.com consulting firm predicted on Monday that the price freeze will have only a very short term effect, and noted that similar moves in Argentina had failed to control inflation. Consumers shouldn’t be surprised if the supermarkets are slow to restock their shelves and offer fewer products for sale, she added.

In other news Argentina, just like the rest of the "developed" world, appears to have a slight inflation tracking problem:

Polls show Argentines worry most about inflation, which private economists estimate could reach 30 percent this year. The government says it’s trying to hold the next union wage hikes to 20 percent, a figure that suggests how little anyone believes the official index that pegs annual inflation at just 10 percent.

The BLS has the solution: just exclude any product whose price is rising from your CPI calculation, and voila. For everything else there is a hedonic adjustment.

The ironic comparison to the US does not end there however:

A more effective way to contain inflation would be to “reduce government spending, which is financing an expansion of the money supply, and to have a credible price index.”

Wait, are they still talking about Argentina or the US?

The government announced the price freeze on the first business day after the International Monetary Fund formally censured Argentina for putting out inaccurate economic data. The IMF has given Argentina until September to bring its inflation and economic growth statistics up to international standards. If Argentina doesn’t comply, it could face expulsion from the world body in November.

Well good thing the US complies with the IMF's stringent "seasonally adjusted" data reporting quality control. Or else, the US may have been expelled from the IMF too. And then who would fund the creeping bailout of Europe (aside from Germany of course)?

The IMF censure “is not just a new error ... it’s also a clear example of the organization’s unequal treatment and double standards in regard to certain member countries,” Lorenzino said. “Argentina, just as it agreed with the IMF to do, will keep working to improve its statistical procedures in accordance with good international standards.”

So to summarize: first capital controls, then a currency crisis, then expectations of sovereign default, then a rise in military tensions, and finally - price controls, after which all out chaos usually follows.

Study this sequence well: it is coming to every "developed" country near you in the months and years ahead.

But, as with every other hyperinflationary implosion, there is a silver lining: the stock market is soaring...

... at least in Peso terms. When priced in USD, the 360% stock market "rise" is more like -9% in the past 21 years. But luckily, the general public has a gene that prevents it from grasping the difference between nominal and real - something Ben Bernanke is very well aware of.

 

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Tue, 02/05/2013 - 13:10 | 3216668 Chaos_Theory
Chaos_Theory's picture

Bush's Pre-emption Doctrine at the Micro level.  Soon to be renamed "pre-crime" policing.

Tue, 02/05/2013 - 00:40 | 3215510 Walt D.
Walt D.'s picture

How can a country that produces somebody as talented as Lionel Messi produce somebody as stupid as Cristina Kirchner?

Tue, 02/05/2013 - 00:47 | 3215521 Northern Lights
Northern Lights's picture

Actually, if I have it correctly, Messi was born in Argentina and left as a little kid to live elsewhere.  As he's Argentinian born, he was welcomed to play for the national team.  Problem is, the Argentinians have lukewarm feelings for him because they dont' consider him a true "brother".

Tue, 02/05/2013 - 06:38 | 3215781 lakecity55
lakecity55's picture

How could a country which produced Ben Franklin elect an Indonesian?

Tue, 02/05/2013 - 00:41 | 3215514 dunce
dunce's picture

It starts with just the erosion of private property rights, limiting what you can do with your property for safety or environmental reasons, zoning laws building codes and higher property taxes and this is where it ends, price controls. Eventually most of the wealth is destroyed and that was the goal from the beginning, economic equality, every body is broke. Capitalism has creative destruction as oxymoronic as that sounds, socialism manages to merely be destructive of every thing of any value including morality.

Tue, 02/05/2013 - 01:09 | 3215523 devo
devo's picture

Argentinians hyperinflate every ten years. Buncha crazy kids.

- ludwig von feces

Tue, 02/05/2013 - 02:03 | 3215621 chump666
chump666's picture

Yeah their benchmark mark is 12,000%

Tight.

Tue, 02/05/2013 - 02:49 | 3215685 resurger
resurger's picture

crazy fucking world

Tue, 02/05/2013 - 02:49 | 3215686 ersatzteil
ersatzteil's picture

A smart Argentinan government would re-invade the Falklands and declare food and gasoline rationing, universal draft and martial law. And have the central bank finance the whole thing, monetizing the national debt in the process.

Take it, policy advisors. It's all yours.

Goes for you too, advisors to David Cameron. Why let the French have all the action?

 

Tue, 02/05/2013 - 05:38 | 3215761 smacker
smacker's picture

I think if Cameron allowed himself to be drawn into another war with Argentina/Kirchner, he'd first have to bomb Paris to keep those pesky Excocets out of the way. Not that Britain has much of a navy left these days to go down there. Some drones might be useful...

Tue, 02/05/2013 - 07:50 | 3215812 Woden
Woden's picture

4 Eurofighters are already waiting at Falklands. There will be no second invasion.

Tue, 02/05/2013 - 17:34 | 3217705 smacker
smacker's picture

Yeahbut...would Eurofighters be able to transfer and land enough boots to retake the islands? hhmmm. And they wouldn't be able to use Brazil or any other countries to land/refuel etc. I think the best solution would be to go for Argentina's jugular straight away (ie bomb Buenos Aires until they've had enough).

Tue, 02/05/2013 - 20:02 | 3218223 ersatzteil
ersatzteil's picture

Logistics would be a bitch, too - high performance turbines only have so many operating hours until they need an overhaul. They also need command and control, airborne radar support craft and a secure runway *not* under naval fire to be operated as intended.

Shiny and sexy aircraft? Yes. Hyper-advanced deterrent to Argentinian aggression? No.

That's why this is such a great plan. Argentina can be all over the islands in a week, giving the British time to get riled up, selling war bonds and mobilizing reserves all the while rockin' out to "Rule, Britannia!"

Tue, 02/05/2013 - 02:57 | 3215690 Wile-E-Coyote
Wile-E-Coyote's picture

Hey that oil recently discovered around the Falklands must look real tempting. Does that bitch Kirchner have the balls?

Tue, 02/05/2013 - 03:26 | 3215700 TWSceptic
TWSceptic's picture

Someone should direct Cristina Kirchner to the nearest kitchen.

Tue, 02/05/2013 - 04:28 | 3215733 Me_Myself_and_I
Me_Myself_and_I's picture

Buenos Aires is home to a large proportion of Argentine citizens.  As combined commercial, financial, and political capital, it is rife with corruption.  

Plus, being a very expensive city within which to live, most are on the edge or in abject poverty, with little chance of economic advancement for those who play by the rules.

Therefore all the conditions are set for fiat currency boom and bust, hyperinflation and hyperrecession, political turmoil and turnover.. again and again.

None of this is judgmental.  I greatly enjoyed spending time in Argentina, getting to know her people and culture.  Its just sad to see so much potential get squandered by this Randian 'I-win/you-lose' political/corporate mentality held by the top few percent that run the show:  government, union, and business.

Tue, 02/05/2013 - 05:29 | 3215756 smacker
smacker's picture

Well, wod-da-yer-know, once again lunatic Argentine socialists have wrecked the country's economy, being driven by dogma as they are. Price controls must soon be followed by wage controls, followed by economic stagnation, hyperinflation, followed by collapse of the Peso and three noughts being deleted from the currency notes or a New Peso introduced. Brazil can offer Kirchner plenty of advice on how to manage this process.

 

Argentina needs a team from the Austrian School to take control of its economy. And Kirchner needs locking up.

Tue, 02/05/2013 - 10:27 | 3216085 slackrabbit
slackrabbit's picture

'Argentina needs a team from the Austrian School to take control of its economy.'

lol, dude that was classic.       

Tue, 02/05/2013 - 06:09 | 3215770 falak pema
falak pema's picture

Argentina has one of the biggest reserves of frack shale gas in the world.

I think Lady Kitchner is waiting for somebody to come develop it when its time to sing "frack is my sweet ass of energy plenty".

In the meantime she won't play ball as she represents the Argentinian Oligarchy and says to the US financial cabal:  "you can bang your balls on my wall, I ain't coming out until hell freezes over and you come drill into my very own frack nirvana sweet ass, AND PAY me for it bigtime --like hungry wolves tamed by a she wolverine!"

Cool lady, she has her hat on and she is prepared to play Kim Basinger in 9 and 1/2 weeks of slow tantalising strip poker. WHy should Chavez be the only latino maccho winner in this energy game?

"All hell breaks loose!" Did you say?

"We've been there before! In Argentina! Olé. Our land is big, our land is full of future energy and goodies."

Hey, the world is now one big casino poker table. Lets not be blind to the sad poetry of this mad game...

As we ALL now sing like Oligarchy King Dick Cheney : Our way of life is NOT negotiable! 

Tue, 02/05/2013 - 07:57 | 3215815 smacker
smacker's picture

Methinks that after her Ladyship took state control of the Spanish Repsol subsidiary in Argentina, she may find it a tad difficult to get external folks in to exploit the fracking for her.

Tue, 02/05/2013 - 13:24 | 3216692 falak pema
falak pema's picture

ever heard of the chinese?

Their home market is biggest frack shale potential in the world. 

Wed, 02/06/2013 - 03:39 | 3219225 matrix2012
matrix2012's picture

falak pema,

your lines explains my wandering partially why a substantial country rich in natural resources like Argentina (among other is a major exporter of soybean) be in a mess as it's pictured today.

Is the hardship mainly caused by the raids of the global financial cabals due to Argentina's past deliberate default hurting their interests?

 

Tue, 02/05/2013 - 08:54 | 3215884 Black Markets
Black Markets's picture

Soon Argentina will belong to the Falkland Islands.

Tue, 02/05/2013 - 09:05 | 3215913 youngman
youngman's picture

One thing that will be growing is the overnight travel across the borders.....moving cash.....goods...and things that go bump in the night into and out of the country.....

Tue, 02/05/2013 - 13:06 | 3216649 smacker
smacker's picture

Ponte Amizade, Iguaçu.

Tue, 02/05/2013 - 10:25 | 3216074 slackrabbit
slackrabbit's picture

Ben has a picture of her in his private toilet...

Tue, 02/05/2013 - 10:53 | 3216164 earnulf
earnulf's picture

For my two bits, I can see prices staying the same for three months, as the portion sizes get smaller.   Remember that the US leads the worlds in turning a 39 oz can of coffee into a 33.9 oz can of coffee and selling it for the same price!    A half gallon of ice cream is now 3 1/2 quarts, 64 oz of orange juice is now 59 oz!   3 oz of Salmon is now 2.6 oz.   Of course we can keep the price of the container the same, we just put less in it!   Then we slap a "
NEW, IMPROVED, SUPER" label on it and people will snap it up!

Bet the black market in Argentina is loving this.

Tue, 02/05/2013 - 13:11 | 3216677 smacker
smacker's picture

Same thing going on in the UK. Only today, I saw a tub of butter which used to be standard 500gr is now 400gr. Same price.

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