Inflation is afoot. Breitbart is on the story:
‘Prices rose 8.6 percent from a year ago in October, the second consecutive month of the fastest annual pace of inflation in records going back 10 years.
‘The Department of Labor said the Producer Price Index accelerated to show a monthly gain of 0.6 percent, up one-tenth of a percentage point from the September gain. That was in line with analyst expectations.’
And the Daily Mail reports that ‘meatflation’ is getting serious:
‘…the cost of bone-in ribeye beef has nearly doubled from $8.71 per pound in November 2020 to an astounding $16.99 per pound this week, according to the US Department of Agriculture’s Retail Price Report that was released on Friday — an increase of over 95 percent.’
The Bureau of Labor Statistics will have a price misinformation update later today. Here, we pause to reflect on what inflation actually is…and where higher rates of it are taking us.
Democracy is best described as ‘two wolves and one lamb voting on what to have for dinner’. But after they’ve fully digested the lamb, the wolves are still hungry. What do they do?
First, they borrow. And when that source is exhausted (excess borrowing raises interest rates, which depresses the whole economy…and lowers tax receipts)…they print.
Inflation is just another way to squeeze blood out of a population of turnips. It is a tax levied on consumers. It’s a particularly noxious tax, in that it distorts and damages the entire economy.
And when a country relies too heavily on it, it soon becomes a god-awful mess.
Take our favourite basket case, Argentina, for example.
Runaway debt? Out-of-control inflation? Pandering to the masses? Buying votes? Corruption…incompetence…absurdity — the Argentines have been there and done that for the last 70 years.
Now, The Wall Street Journal is on the story, ‘Argentina’s Welfare State Warning to America’:
‘Socialist ideologues know that the welfare state is addictive. New entitlements create dependencies that, once born, demand to be fed and to grow no matter the party in power.
‘Argentina proves the rule.’
Yes, ‘Peronism is Argentina’s most successful export,’ jokes a friend in Salta.
Juan Perón took a little from Mussolini…a little from Hitler…a little from Stalin. And then he added a tango beat and chimichurri sauce.
The result was a pampa variant of the socialist infection. And it has proved remarkably durable.
By 28 April 1945, Mussolini was hanging from a lamppost by his feet. Two days later, Hitler was in cinders. Stalin’s Soviet Union limped along until 1991, when President Gorbachev resigned and began doing luggage commercials for Louis Vuitton.
General Juan Perón, who ruled Argentina from 1946 through 1955, and again briefly in 1973–74, was patient zero. He came back from Italy in 1941, bringing the dreaded disease with him.
It has run rampant through Buenos Aires’ popular neighbourhoods ever since.
What makes Peronism so ‘sticky’ is that once groups acquire a taste for money that isn’t their own, they are very reluctant to give it up.
Then, politicians need to keep the money coming or they can’t win an election.
And since they can never tax or borrow enough to make good on all their promises (especially since they are simultaneously strangling the productive economy), they resort to the inflation tax…and blame it on greedy businessmen.
Corruption runs wild. In the courts, in the bureaucracy, in the schools, in the medical system, and in private industry too. Nothing is on the level. Nothing works as you think it should.
At first, you attribute it to ‘incompetence’. But the Argentines are as competent as anyone else. They just react to different incentives.
And in a corrupt system, corruption — petty and great — not only pays, it is a survival tool.
Life goes on
That’s the endearing and enlightening thing about the Argentine system. It has a kind of illicit flexibility that keeps life tolerable…even agreeable…in the midst of perpetual crisis.
Coups d’état…military governments…mass murders…widespread terrorism and kidnapping…hyperinflation…humiliating defeats and depression — Peronism has survived them all.
Even today, the inflation rate is around 50%…where it has been for several years. The US dollar trades on ‘white’, ‘black’, and ‘blue’ exchanges — at very different rates.
Businesses routinely keep at least two different sets of books — one for the government and one for themselves. They trade invoices with each other to manage their tax burdens. And rich people flee to Uruguay or Florida.
Still, life goes on…tolerably well, for many people.
But a deeper crisis is coming. The Argentine government is broke. No one will lend it money. And if it keeps printing more money, it risks a Venezuela-style catastrophe.
Broken status quo
Meanwhile, an important election is coming on Thursday. The Peronists are facing a big challenge. But not necessarily a big change.
As The Wall Street Journal puts it, the opposition is ‘not much more than a milder version of the status quo’.
Alas, the status quo — now becoming familiar north of the Rio Grande, as it has been south of the Rio de la Plata for many years — is in a shambles.
How easy it would be, in theory, to fix it. No more free lunches. No more deficits. No more bribes. No more money printing.
But how impossible it is, in practice, to do it…
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