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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Orly's picture

The so-called, "Blue Dollar"?

What do they call it in China?  Red Dollar?  Yellow Dollar?

Always a step ahead, ain't ya Chump?

:D

chump666's picture

Ah yes, you got my black money USD posts awhile back?

Anyways, so, we got a big correction (risk aversion to end all) forming Orly?  I am dying to throw down a huge short, then close up shop. 

Your thoughts please.

Orly's picture

I am not seeing it right now, Chump, as there is the pesky little problem of what to do with our friends the Japanese and the British.

If the paradigm that has been in place over the past several years would hold, then the Euro would be considered a very risky currency and the Japanese yen a safe-haven.  To a lesser extent, the Pound Sterling, though the GBP kind of floats back and forth between risk-on and risk-off.

Right now, the Euro is showing tremendous strength (for no other reason than the American taxpayer via the Fed...) and I believe that will continue, so it's risk-on.

Remember my missive on the Cable the other day and how it looks like the GBPUSD pair will slide back down through the bottom trendline of a wedge formation on the Weekly chart.  It looks like that is going to happen but not before there is some correction to the EURUSD to back around 1.389 or so, then up, up and away!

Once the Euro turns back higher, the Pound will turn back lower (decoupling big-time...) and both currencies won't stop until people's mouths are agape at these moves.

So what, you say?  You didn't ask me about currencies.  My point is, though, that if Euro goes much higher and the Sterling goes much lower, then that keeps the DXY relatively stable (as has been my contention all along with some of these bizarre moves in currency pairs...).

Meaning...they are still in complete control of what's going on.  And they have no intention of allowing a crash in the equity market but are more likely to allow it to trade sideways for an extended period of time.  It's ironic in a way that we are now going to see boring equity markets, while 4X markets are going to be jumping like catfish in the black water.

Stocks go nowhere, PMs go nowhere, xJPY shoots the moon, the Euro rises non-stop like an ugly zit three days before the prom (and the big story that no one is going to be talking about for a while...) the Pound craters to 1.52, then on to 1.437.

Mark Carney is going to print to the high heaven and British pensioners are screwed once again.  Damn shame, too.

Well, take it for what it's worth.  As always, we'll see.

:D

SmallerGovNow2's picture

visited east germany before the wall fell.  official exchange rate was 1 to 1 between east and west.  however, once in east germany, the black market exchange rate was 5 to 1...

chump666's picture

Brazil was the same in early 90's when hyper inflation hit.  It's a strange time, with America actually exporting inflation to all corners of the globe, while the world buys up USDs on various 'markets'.  China is the big worry.  Things get out of hand there, which they may, they could just shut down the exchange rate, close up the trade markets and just handle their own nightmare i.e iron curtain style.  Obama should grow a f*cking brain and realize that the Fed is sending us into a world of hurt.

But back to the black markets, essentially they would not be manipulated, just old style open out cry bids and offers. 

Dr. Engali's picture

Just like ammo if you're not stocked up by now you're going to be screwed. First the price controls and then come the shortages.

espirit's picture

How true Doc.  Beans, bullets, bullion - and not necessarily in that order.

DosZap's picture

Just like ammo if you're not stocked up by now you're going to be screwed. First the price controls and then come the shortages.

If ObaMao gets his way you are dead on.

Tried to find ANY .22LR rimfire lately?.

$6.00 per 50, IF you found any.

 

Dr. Engali's picture

I managed to scoop up 1000 rnds last night. I got an email update that some was in stock so I bought it shortly thereafter.

BigDuke6's picture

so you cut em in half with a machine gun and then give em a band aid doctor?

abatis's picture

If you are successful during trying times and survive, eventually, you may run low on ammo. A little forged steel may prove helpful. Personally, I find the Bone Machete re-assuring.  http://zombietools.net/tools/  and always worth a few trinkets of silver.

Acidtest Dummy's picture

Quality used kitchen cutlery has been a superior shopping experience for me. Green River Works made knives 100 years ago that are still second to none. High carbon steel makes food prep fun. Also, trivial fact: pots and pans were frequently included in peoples wills, (as an estates primary assests.) Alright, get offa my lawn now.

happy face

Dr. Engali's picture

Some nice looking blades there. Thanks for the link.

bigrooster's picture

$2.12 at Walmart in PHX last Friday.  Limit 3 boxes.

Shell Game's picture

Indeed.  2008/09 was a big wake-up call.  Bailout socialism goes broad daylight, The Fed commits to QE, the Tea Party co-opted and put down, Ron Paul viciously shut out of county/state conventions, Etc.  These declarations by the establishment made certain future outcomes inevitable, and made accumulation of certain Preps and tangibles obvious. 

Ident 7777 economy's picture

 

 

 

 

 

 

You mean "Live by the sword die by the sword" Ron Paul?

 

(Comments he twittered regarding Chris Kyle's shooting death?

 

Riiiight ... 

 

 

 

 

Shell Game's picture

hmmm, ya think MAYBE he was referring to how these guys don't have the proper treatment for perpetual warfare's PTSD?  Pharma's suicide drugs are NOT the answer. 

Paul is one of the few conservative who has the balls to speak out directly against the US's immoral militarism and MIC, so no fucking surprise. 

What galls the Christian 'Right' (who are really Leftists) is that Ron Paul has involked biblical references against prideful warfare (eg. the Golden Rule, 'Live by the sword, die by the sword..').  I mean, how dare he shed the light of truth on the unspoken oath and warfare demagogy of the 'Right'?

Shallow neo-cons will never get that militarism has severe consequences on many, many fronts. 

 

knukles's picture

Toldja so, toldja toldja toldja

Over 2 years ago I wrote here on the Venerable Hedge numerous times that with the way the world's going.... print extraordinaire to counter fiscal problems (oxymoron) will ultimately result in higher prices resulting in turn, in wage and price controls.

Many voted down and laughed.....
Get ready.
The socialists really and truly believe that they can legislate price, demand, supply, morals, ethics and thought.

I got some bad fucking news....
The socialists are here, now and planning to try the same shit because this time will be different...
God help us all for we are incapable of doing so ourselves... Particularly the statist atheistic nobs in u kno where....those who view the state as the ultimate higher power.

Husk-Erzulie's picture

Particularly the statist atheistic nobs in u kno where....

Massachusetts! (I love it, love it, love it).  I remember as a kid buying ammo at the country store, and it didn't seem  weird.  What the hell happened to my state?

Fred Hayek's picture

There's still some sanity in central and western Mass. (excluding the Amherst area) but Rt. 128 may as well be the river Styx.

e-recep's picture

what the fuck does atheism to do with believing that the state is the ultimate power?? the ignorance of the pious bunch is sickening.

darteaus's picture

Now you know why Crazy Cristina is making all that noise about the Falklands - distraction from economic disaster.

Hulk's picture

Food shortages to follow soon...

Oldrepublic's picture

Argentina is a good place to study bad economics!

An interesting place I have been there several times.Casey really likes the place.

Dr. Engali's picture

Why go to Argentina to study bad economics when we are living a case study right now?

WmMcK's picture

Cuz the locals already don't heed the gov't there?

They've been thru it before -- think black mkts and 0 sum games,

TBT or not TBT's picture

Argentina should just negotiate a deal where its currency is the world's reserve currency and have everything priced in that currency.   A lot of countries make this same mistake but Argentina has done it repeatedly.

Bam_Man's picture

Cuz they may be several chapters ahead of us, but we are catching up fast!

WmMcK's picture

Maybe for RE (ranching, polo, spas) but not for storing PM's.

ShrNfr's picture

 

Argentina Freezes Supermarket Prices To Halt Soaring Inflation; Extreme Shortages To Follow

 

fify

Sleepless Knight's picture

Coming soon to a supermarket near you!!

goldenbuddha454's picture

Christina obviously didn't get Ben's memo that food is a "Transitory Item" and thus should be ignored when calculating inflation. 

Stuck on Zero's picture

The Argentine government would have better luck with a "printing freeze."

 

moonstears's picture

They've played this game before, George Soros made a killin' over a decade ago on this, they know what to do. Anyone there a fellow ZHer? Keep us updated, go to the grocery store tonight and let us know.

PLira's picture

Keep an eye on this guy. Ferfal bugged out sometime in the last couple of years to Ireland from Argentina.

His Grandfather had Irish roots and while he was a youth, Grandpa went to great lenghts to get his family Irish Passports as he knew the unrest SA could bring.

Anyway, in the last couple of years, Feral, who went through this in the 90's and 2001, saw this stuff repeating and said, "I'm outta here". So he should have some good commentary and compare/contrast on the current events in Arg land. He still has some family there.

He peddles a book but don't hold it against him. Met him in a conference once, really nice guy who thinks Arg is an excellent model to the USA dilemma.

http://ferfal.blogspot.com/

lasvegaspersona's picture

The book Ferfal wrote is a good one...a guide to what will probable come here if it is a gradual change. Theirs (Argentina) came suddenly with a restatement of the currency (overnight  went from 1:1 to the dollar to 3:1). There was immediate panic and then the drip drip drip of lost wealth...stolen by the government.

tecno242's picture

ahhh.. price controls... the last step before falling off the cliff of hyperinflation.

the Romans tried price controls w/ laws that were punishable by death.  That didn't work either.  No one pays attention to history.. or they are just ignorant and just panic after they've already ridden failed policy into the ground.

Everyone who gets a PHD obviously knows history, but for some reason, chooses to believe they are smarter than those that walked the path before them.

Husk-Erzulie's picture

Everyone who gets a PHD obviously knows history

Apparently not.  What is it about public policy that attracts the truly brain dead?  No sense of history = the same mistakes over and over and over.  Amazing isn,t it?

tecno242's picture

arrogance and political influence. 

You are heavily influenced to be arrogant. 

This time it will be different.

As soon as you back your currency with nothing but confidence and give the political arm the power to make more money as needed, you are from that point doomed.  For politicians want to be elected, to be elected they must please the most people, to please the most people they must be the candidate that gives away the most free shit.

Free shit isnt possible until you remove the constraint that your currency is either backed by or made out of a limited resource.

Fred Hayek's picture

The Road to Serfdom has a chapter title, IIRC, Why the Worst Get on Top. I'll pause while off color jokes are made. Okay now? Anyway, when a job involves making decisions and assuming power that no honorable person would feel comfortable making you get only sociopaths like Kirchner and Obama striving for that top spot.

goldenbuddha454's picture

Heavy Crude Price Controls under Jimmuh COTTA worked so well:  http://www.presidency.ucsb.edu/ws/index.php?pid=32755

A Dollar Short's picture

 "ridden failed policy into the ground", now, that sounds like US..


css1971's picture

No, they are simply cretins.

dark pools of soros's picture

not too late to load up on cheap debt to be paid by ultra cheap dollars tomorrow...

 

think of all the scotch you can buy today from a reverse mortgage

Matt's picture

Any online money lenders lending Argentinian money? 

Acidtest Dummy's picture

Iowa's ethanol production capacity (_certainly_ burning food is a crime against humanity) is enormous. Russians might give up their Vodak and Iowa could supply them with Everclear for ~$2 per liter, delivered. It is not Whisky, but why develop a taste for expensive? SHTF, getting drunk won't be the problem.

Miles Kendig's picture

Christina Fernandez de Kirchner a la Nixonian extraordinaire .. minus the EPA as CFK is kickin' nuttin' but exhaust out of every pore

tony bonn's picture

the ghosts of nixon and diocletian haunt us yet.....don't cry for me argentina.......