Sunday, September 15, 2013

Argentina Government Threatens Jail Terms for People who Question Inflation Data

Inflationism and interventionism are intertwined. When governments resort to inflationism, the next step is to shift the blame on the public in order to justify price controls. The ensuing feedback loop between inflation and price controls would mean throwing in many other forms of social controls or interventionism, specifically wider trade controls, foreign exchange and capital controls, wage and labor controls, border and travel controls, controls on population and household activities as well as censorship and media control. 

In Argentina, those who question the government’s inflation data have been at risks of landing in jail

From Yahoo/AP (hat tip Zero hedge)
Argentina is trying again to criminally prosecute people who publish independent inflation data, just as Congress opens debate on a 2014 budget that assumes economic good times next year.

The government is predicting strong annual economic growth of 6.2 percent, inflation of just 10.4 percent and a peso dropping only 10 percent against the dollar.

Independent economists call these numbers wildly optimistic, and say that Argentina's growth prospects are troubling and inflation is actually running more than twice as high. They maintain that illegal currency trading reflects much greater pressure to formally devalue the currency than the government has acknowledged.

As Economy Minister Hernan Lorenzino proposed the budget to Congress, Commerce Secretary Guillermo Moreno went to court, accusing four different consulting firms of criminal "speculation" for publishing inflation data that contradicts official reports.
And why price inflation has been expected to balloon
The proposed budget calls for roughly $162 billion in national government spending, which is a 29 percent increase in peso terms on revenues of roughly $192 billion.

The plan also says Argentina's central bank will spend $9.8 billion in foreign reserves on bond payments in 2014, a number that does not include U.S. court-ordered payments of $1.4 billion to holders of defaulted debt that has gone unpaid since the country's 2001 economic crisis. Lorenzino defended this gamble — which risks pushing Argentina into another default if it refuses to pay the plaintiffs — saying Argentina "has lowered its debts while growing the economy and maintaining political autonomy and sovereignty."
Never mind if Argentine officials recently admitted that price inflation is higher than official figures. Since they are in power they are excused to do so, let the private sector be damned.

Yet in an interview with a Greek TV last April, Argentina’s economic minister made a booboo defending official inflation numbers by blatantly eluding repeated queries on them


Here is Argentina’s official inflation rate.


Here is the unofficial inflation rate. Contra official figures, Argentina has been in the throes of hyperinflation.


Reason? As pointed above, Argentina’s government has been in a spending binge and these are being manifested in the dramatic collapse of the Argentine peso (both charts from Cato Institute’s Troubled currency Project)


Take note, Argentina’s Merval equity benchmark have been reflecting both the Peso and unofficial inflation rates.

The Merval index peaked in May a month after the unofficial inflation rates soared beyond 100% (hyperinflation), and declined as the Peso rallied and when the inflation numbers dropped to the 30% levels. 

Apparently the new record highs of Merval suggests that inflation numbers have been rising and that the Peso has been tanking again. The Merval has been up 50% year to date.

In a world dominated by inflationism, stock markets have hardly been driven by real earnings and by the real economy, instead stock markets have been manifestations or symptoms of inflationary policies via inflationary credit and monetization of debts.

Argentina's case partly represents what has been a global phenomenon (except on the price inflation part yet).


But don’t worry says Argentine officials, official data debt (debt to GDP) has hardly been a problem.


But again that’s not how markets or creditors perceive them. 

Premium on Credit Default Swaps CDS have soared and have remained at levels indicative of a large risk from a credit event.

The bottom line is to never trust government statistics.

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