The incredible shrinking inflation

Remember the scandal about the inflation rate of January 2007? Well, the February rate has just come out: 0.3%. Needless to say, nobody believes it. Either the statistical sample is not representative, or the figure has simply been tweaked. Página/12's article, which I'm linking to, explains that both have happened in a way — to outrageous extremes. In some cases it's almost the case of one department of government telling shops to display certain prices so that another department records those prices, and not the real ones; in the case of tourism, it's literally one office asking another one what the prices are in their area of control, without actually checking reality at all. Less than a third of one percent is less monthly inflation than any other since 2004, and it's difficult to trust INDEC when so many things you buy almost every day seem to be so much more expensive. Is the government truly and so evidently manipulating the figures? That would be, as we say, peeing outside the can — a big stupid mistake.*

First of all, you can't enrage people more than they are already by presenting them with numbers that mean nothing. Less than 1% is simply not "true" for Doña Rosa.† Second, if you start rewriting reality like that, when will you stop? Third, and most importantly, regardless of whether this ridiculously low figure is real (no matter how twisted the method used to calculate it), trust has already been lost, and the Argentine State has already issued bonds indexed by inflation to refinance its debt. For every 1% of increase in the inflation rate, the government's debt increases by 1,500,000,000 pesos (about 500 million dollars); and the symbolic value of an index is one of those things that shortsighted politicians like Néstor Kirchner delight in.

Today I'm hearing in the radio (I'm having trouble finding the info online) that Merrill Lynch is offering "low inflation insurance": if you have an Argentine inflation-indexed bond and our annual inflation is less than 9.5% on average over the next five years, M-L will cover your losses. They may or may not believe that the rate reported by INDEC is fake, but that's not important for them or for financial speculators.

Speaking of speculators' fear, you probably heard that the Chinese government decided to cool their economy and stop short-term speculation, and screwed up the whole world's stock markets. Like Argentina, China is experiencing problems due to its fast growth. However, while Argentina may happily sink into the Atlantic Ocean with nobody else noticing, China is the engine of the world's economic growth, since its huge population is waking up to the joy of consumerism. If China stopped buying soybean completely (unlikely, but let's take an extreme case), Argentina would see its foreign trade surplus go down to zero, and its fiscal surplus would get a noticeable dent as well (because soybean exports pay taxes). Maybe we should ask the Chinese to send some of that growth our way, since we, unlike them, can handle it so well we're having less and less inflation every month.

Yeah, right.


* Mear fuera del tarro ("peeing outside the can"): doing something in a context where it's not appropriate at all to do it, such as offering an uninformed opinion in a delicate matter without being invited. You don't want to use the verb mear in a formal situation, but other than that, it's pretty harmless.

† Doña Rosa: the lowest common denominator of public opinion; the lady next door who comments on every piece of news as she were an expert.