Tag Archives: Currency Devaluation

News

Socialist Argentina follows-up runaway inflation with price controls on groceries

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Take a look at this article from the leftist Washington Post, which reports on how the socialists in Argentina have imposed price controls in order to minimize the impact of runaway inflation caused by money printing.

Excerpt:

Argentina announced a two-month price freeze on supermarket products Monday in an effort to stop spiraling inflation.

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.

[…]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.

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.”

Isn’t ironic that the United States is pursuing the exact same policy of printing money and overspending as Argentina has? Excerpt we are a little further along.

So what happens next in Argentina? Zero Hedge explains:

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.

[…]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.

Just to be clear, price controls are a clear signal to suppliers to stop supplying, since they cannot make any money if prices are held low by government decree. Price controls lead to shortages, necessarily.  And that’s what’s in store for Argentina once the private sector food suppliers (and other companies) pull out of there when they can’t make a profit. There are other places they need to be.

Imagine if America elected a charismatic, incompetent fool to run our country like socialist dictators do in Argentina or Venezuela. Imagine if the mainstream media, with their non-quantitative degrees and lack of real-world experience, covered for his every blunder. Where would we be then?

News

Egan Jones cuts U.S. credit rating again, this time from AA to AA-

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Story from CNBC.

Excerpt:

Ratings firm Egan-Jones cut its credit rating on the U.S. government to “AA-” from “AA,” citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality.

The Fed on Thursday said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market.

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.’s real gross domestic product, but reduces the value of the dollar.

In turn, this increases the cost of commodities, which will pressure the profitability of businesses and increase the costs of consumers thereby reducing consumer purchasing power, the firm said.

In April, Egan-Jones cuts the U.S. credit rating to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.

Moody’s Investors Service currently rates the United States Aaa, Fitch rates the country AAA, and Standard & Poor’s rates the country AA-plus. All three of those ratings have a negative outlook.

Could this have anything to do with the decision to print $40 billion a month to “stimulate” the economy? Once you’ve given up on letting businesses create jobs by lowering their taxes and removing burdensome regulations, then printing money is all you have left. But no one mistakes that for economic growth, least of all credit rating agencies.

News

QE3: Obama ushers in hyperinflation with more “quantitative easing”

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Investors Business Daily explains Obama’s latest desperate ploy to cover up his economic failures.

Excerpt:

The Federal Reserve announced a third round of quantitative easing Thursday afternoon, and it is big: A net $40 billion a month in additional purchases of mortgage-backed securities. And policymakers said additional accommodation will continue “for a considerable time after the economic recovery strengthens.”

[…]Ordinary Americans can expect to see higher gasoline prices. Quantitative easing also pushes up commodity prices — both by boosting demand for financial assets and by weakening the dollar.

Crude oil prices have been trending higher, and were up $1 to nearly $98 a barrel in mid-afternoon trade.

That will quickly filter down to gasoline prices at the pump. Gas prices moved back to $3.847 a gallon last week, the highest since April. They’ve risen for 10 straight weeks in part on anticipation that QE3 was coming. Gas prices could once again threaten the $4 level — it’s already well over that mark in California. And that’s with no major supply issues or feared disruptions around the world.

Higher oil and gas prices also could push food prices higher, by encouraging more corn burning to produce ethanol, as IBD’s Jed Graham recently noted. Corn prices are near record highs due to this summer’s historic drought.

The producer price index shot up 1.7% in August — the biggest jump in three years — on higher food and energy costs. Gasoline prices at the wholesale level exploded 13.6%. Food costs rose 0.9%, the most in nine months.

With job growth and wage gains so weak, higher food and gas prices will cut into consumers’ buying power on everything else. That will offset much of the modest QE3 benefits.

First and second round of quantitative easing:

Third round of quantitative easing:

It means they are going to print the money. There really is no difference between Barack Obama and Robert Mugabe when it comes to economic policy. The only thing stopping him is the Republican House and the conservative alternative media.