Reuters: Prices up 9% Over Last Year
By Cesar Illiano and Lucas Bergman BUENOS AIRES, Oct 22 (Reuters) - Rising commodities prices are stoking inflation in Latin America, a trend that will force monetary officials to further raise interest rates to stop their booming economies from overheating.
Analysts say rising global demand for raw materials such as oil, grains and biofuels, coupled with high public spending by Latin American governments is creating a potentially dangerous inflation cocktail in the region, though for now the situation remains under control.
"Governments will be obliged to tighten monetary policies because the phenomenon of inflation will continue to grow due to domestic consumption, " said Enrique Alvarez, Latin America debt strategist with IDEAglobal.
Interest rate rises, increasing reserve requirements for banks, or reduced public spending are among restrictive policies that could be coming as Latin American governments seek to tame price rises.
Earlier this year inflation concerns were concentrated in Venezuela, which has double-digit inflation, and Argentina, where consumer prices are up almost 9.0 percent over the last 12 months.
4 comments:
So I hate to be "that guy that doesn't know his economics" but is that good or bad, the restrictive policies latin american governments seek to tame rising prices.
"The crux of the biscuit," as Frank Zappa used say. You cut right to it, my friend.
By my particular lights, you have two choices: you can try to run your own economy yourself... or you can let the big dogs of the world run it for you.
Lettin' the big dogs run it for you is less work... but don't be surprised if they run off with the best parts for themselves.
For the last 25 years or so, we've all been trained like good dogs to salivate anytime the phrase "free trade" is mentioned. I even do it myself... I'm just as conditioned as anybody else.
But the fact of the matter is that free trade works when it works. When free trade doesn't work...well, it doesn't work.
God only knows what "free trade" means. In it's extreme, you'd have to define it as: any country can sell anything to any other country and the receiving country can't prohibit or restrict those goods (and maybe... services) from entering your country.
But don't forget: you can't prohibit or restrict the profits from leaving your country either. Otherwise, it wouldn't be "free trade."
Sounds good, doesn't it.
But wait... there's more.
Free trade doesn't ALWAYS work. It isn't ALWAYS a good idea. Nothing is ALWAYS a good idea. That's how you separate the liars from the rest of us.
Even the big dogs that yelp like holy-roller preachers anytime anybody institutes "restrictive policies"... they don't allow free trade.
For example, you can't buy imported sugar in the US.
Well, you probably could... but why would you pay 2,3,4 times the price of US sugar for imported sugar that is exactly the same?
Why is imported sugar more expensive to a US consumer? Because the US as a sovereign nation wants to protect its own sugar producers. Sounds ok to me. The US is a sovereign nation and ought to be able to make sure that their supplies are not cut-off or manipulated by foreign powers.
But dig this: the worldwide price of sugar is the "fair trade" price of sugar: about half of what the rest of the world pays.
That doesn't bother you... you pay 2/10th of a cent for a teaspoon of sugar instead of 1/10th of a cent.
But if you're wondering why penny-candy producers don't exist in the US anymore...Hey! you still get the candy! They import it... from places like Argentina! Ever see ARCOR on your candy wrapper back home?
And if you are a sugar farmer in the Caribbean or Africa or Brazil... it's hard to swallow that the same big dog that demands that you let THEIR products in to YOUR country won't let your biggest product into his.
What does "restrictive practices" mean? I don't know. What ever Fox News tells us, I guess.
Free trade can be good. But if free trade means destroying your own country's ability to produce certain essential goods... only to wake up one day and find that everything is way more expensive because some other country now controls the price and supply, I think anyone would agree that would be bad.
The "free trade" big dogs protect themselves but howl like hell whenever anybody else protects themselves.
OK...so much for that. But here's a question right back atchya:
"Why is it perfectly fine for investment capital to move freely across any border it wants and come freely back... but workers can not?"
well i'm not a gigantic free trade guy, and my hero Ron Paul is against it for the very reason you mentioned. (yes i'm calling him my hero now). I will have to think about that question, it's a bit advanced. I have to figure out what investment capital is first.
Very sharp comment Yanq. Especially la last question...
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