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Elections: record issuance of $ 1000 Bill and “Plastic” Consumption

In this sense, if we take the historical series of the BCRA we will be able to observe below how the circulation of banknotes of all denominations accelerated, but if we put greater emphasis on the banknote with the highest denomination, which is the $ 1000 (put into circulation at from 2017), we will see that this one accelerated much more even if we put it in comparison with the $ 500, $ 200 and $ 100 bills; that is, with the same speed with which tickets are printed, it is the same with which the value of the peso loses its purchasing power.

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The loss of the purchasing power of the peso is one of the main consequences generated by the current levels of inflation (according to the latest INDEC data it is 52.5% year-on-year), and it is evidently what most impacts the pocket of the ordinary citizen.

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There was no possible parity recovery in the face of the variation and acceleration of prices. According to the Index of Salary Variation of the Indec there was an increase of 3.2% in August 2021 compared to the previous month, as a result of a rise in registered wages of 3.3% and an increase in wages in the unregistered private sector 2.5%. Inflation that month slowed to 2.5%. However, September accelerated to 3.5% and the floor for October is 3%. On the ground gained from the loss of purchasing power, it was quickly diluted in the pocket of the Argentines. Not to mention the Non-Registered Wage Earners, who compared to an interannual inflation of 52.5%, their level of increase was 35.8% interannual. A loss due to a landslide in the face of huge consumer price developments for unfortunately a growing number of Argentines in that situation.

For its part, the freezing of prices is being a real problem for the small traditional mass consumption trade and SMEs of the food industry in general. According to a report from the CIPBA (SME Research Center) of the FECOBA (Commerce and Industry Federation of Buenos Aires) the freeze for 4 out of 10 MSMEs is impossible to sustain due to the increase in the cost of raw materials, 6 of each 10 see problems in the market due to import restrictions and 3 out of 10 see distribution problems affected by logistics costs.

The other side of the loss of purchasing power of wages and income of Argentines is that, as current income does not reach it, consumption with a Credit Card has grown. According to a Prisma Report, credit card consumption grew 5.6% in the Third Quarter of 2021 compared to the previous Quarter and 26.3% year-on-year. Argentines receive pesos in their pockets that are worth less and less and are not enough.

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To try to promote the purchase of durable goods from the domestic white line of high average ticket such as Refrigerator, Washing Machine, Fans, Air Conditioning, among others, the Government launched the Now 24 and Now 30 Plans. According to the Prisma Report, it did not have any good result in retail business operations. Regarding the use of all Plans Now they are represented by a participation of 1.3% and 0.2%. Nothingness itself. For an Argentine, 2 years or 2 and a half years is long term. In that same election-to-election period, accumulated inflation is 101.4%, the devaluation of the peso against the dollar, the official exchange rate was 89%, and at the parallel exchange rate, 269%.

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In turn, the need to oxygenate the pocket of Argentines with payment by Credit Card is reflected in the activation growth of at least once in the Third Quarter of 2021 throughout the country except in the province of Córdoba, which had a drop of 1.4%.

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Increasing current consumption by taking on debt and income that will be lost in the face of future price variations will imply restriction on future consumption. Correcting local macroeconomic distortions such as relative prices, exchange rates, utility rates, exit from the price freeze, as well as having a social and economic cost, will always generate negative expectations. Accumulating them will still generate only chaos and social and economic overflow. One of two will have to be chosen after the national legislative elections, but what cannot be done is to avoid both again.

Source From: Ambito

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