Economics

Argentina Wants To Keep Its Inflation in the Bag

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Inflation Cat in Bag

Argentina's novel solution to inflation? Silence anyone with evidence that it exists. The Argentinian government issued $125,000 fines and criminal charges to at least two private economists who published data contradicting official inflation figures, The Washington Post reports.

Plenty of people aren't buying the official numbers, however:

"No one believes the government's statistics — not the [International Monetary Fund], not the World Bank, not the U.N.," said Robert Shapiro, who helps oversee a Washington group lobbying for Argentina to pay its debt to American investors. "You can't change underlying economic reality by decreeing it isn't so."…

Labor unions, for instance, routinely seek and win 30 percent annual raises for workers, not the single-digit increases that would be expected were the inflation rate as low as the government contends. Public spending also rises at that rate. Even a government-organized commission of economists from five universities concluded that the official inflation figure was vastly lower than the real rate.

The official inflation rate began to fall in 2007, the same year political appointees replaced statisticians at Argentina's National Institute of Statistics and Censuses. Unofficial sources contend actual inflation levels began to skyrocket around the same time says The Post.

President Cristina Fernandez de Kirchner, whose approval rating dropped as low as 20 percent in 2009, didn't have to actually improve Argentina's economy to win reelection by a landslide last month. She just had to convince voters that she had. 

Argentina has thus far managed to partially shirk responsibility for its reckless policies by refusing to pay back international debts. They defaulted on $100 billion back in 2001, the largest sovereign debt default in history. The country "has since defied numerous judgments from U.S. courts to pay up," and still owes another $22 billion.

Thankfully, there are some sensible voices in South America's second-largest economy:

Some pressure has been taken off by congressman Ricardo Gil Lavedra and other opposition lawmakers. They have begun a monthly compilation of the average rate of inflation from data provided by the consultants and are publicly releasing the numbers.

"This is about more than just having a good set of data," Gil Lavedra said. "This is about respecting the right of free expression."

Reason on inflation here, here, and here, and international economics here.

Matt Welch talking inflation among other things on Freedom Watch below.

H/T to the acrimonious John