Posted on 10/13/2010 7:42:36 PM PDT by blam
The Argentine Boom…And Why It’s Killing The Peso
By Bill Bonner
10/13/10 Buenos Aires, Argentina – “This country is in a boom,” said the editor of a financial magazine in Buenos Aires. “Everything is going up. Everything is selling. And inflation is roaring at 25% per annum.”
To hear him tell it, Argentina is everything America wishes to be. Its people shop. Its restaurants are full. Its economy is growing at more than 8% a year.
Why?
“Inflation. Everyone wants to get rid of cash. You hold onto it and it’s worth less and less. So you buy an apartment.”
Amazingly less than 10% of property transactions in Argentina include mortgages. People pay with cash. Still, prices are not as low as you would expect. The lot next to our office is on the market for $250,000.
“It should be about $100,000,” said a friend who keeps an eye on real estate. “But everything is high.”
The cab ride from the airport was 70 pesos when we came 4 years ago. This time it was 128 euros. Two glasses of wine at a local bar were 40 pesos. They would have been half that a few years ago.
“There’s a boom going on,” continued the financial editor. “But it can’t go on forever. You can’t have 25% inflation and have a healthy economy. People don’t make wise investments. They just try to avoid getting ripped off by inflation. They don’t make long-term investments. They just try to park their money where it won’t disappear. That’s why real estate is so expensive. People will save their money and buy an apartment whether they need it or not. They figure it will still be there in five or ten years. The peso won’t be. At least not today’s peso.”
Nor will the dollar.
Loose monetary policy causes inflation not good economic times.
Don't believe this. I took a car from the International airport to downtown Buenos Aires- 20 USD per passenger.
Farm ground around us is expensive. Too much money floating around.
Isn’t every Argentine related to Italian royalty? Endless plastic surgery too. They are not really well liked by others in SA. Argentina was once - one of the wealthiest countries in the world before Peron and the endless Peron kleptocratic mentality in Argentina.
Old vine Argentinian Malbec is the best bang for austere wine in the world. Buy it, although it’s a hit or miss on rotgut or something world-class it’s worth the crapshoot.
My ex used to work at Neiman Marcus at the Galleria in Houston. She said it was routine for the rich Mexicans to take vacations to Houston just to shop. She said it was not unusual to have one person buy $10,000 worth of perfume.
And, they tipped well too.
The Carmenere that’s coming out of Chile is pretty spot-on too. I find it’s a little more consistent that the Argentine Malbecs - doesn’t have the extreme highs, but doesn’t have the rotgut lows either.
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