Why people in Argentina are in a race against time to spend their earnings
LEILA FADEL, HOST:
Inflation - when it gets out of control, it can destroy an economy and people's lives. Imagine half of your savings was gone and your rent was doubling every year. This is what's happening in Argentina right now, as NPR's Stacey Vanek Smith reports.
STACEY VANEK SMITH, BYLINE: The moment you get paid in Argentina, you are in a race against time. It starts the second those pesos touch your hand.
INEZ MARCHESIN: It burns your hand because you say, OK, I have the money now. It won't have value tomorrow.
SMITH: It burns your hand. Inez Marchesin (ph) lives in Buenos Aires, works in communications.
MARCHESIN: That insecurity makes things very unstable.
SMITH: Inflation in Argentina is more than 100% right now, some of the worst in the world. Prices are more than doubling every year.
MARCHESIN: You know that pesos - they won't last. You save your money in dollars.
SMITH: When Marchesin gets paid, she immediately takes her pesos to one of the many local money changers and trades them in for U.S. dollars. Then she takes that cash, those dollars, to the bank, but she does not put them in her account.
MARCHESIN: But in a safe...
SMITH: Safe deposit box, or...
MARCHESIN: Yes, safe deposit - yes.
SMITH: This is how people save money in Argentina. They buy U.S. dollars and stash them in a safe deposit box. When Marchesin needs to buy something, she takes some of those U.S. dollars out of her safe deposit box, goes back to the money changer and trades the dollars in for a stack of Argentine pesos, a stack that gets bigger every month.
MARCHESIN: Now it's like this big.
SMITH: That's like the size of a brick.
MARCHESIN: Yeah, that's correct - a brick. And you think you've got a lot of money, but it's not (laughter).
SMITH: And the moment you get that brick, you spend it. After all, prices are rising all the time. Every one of Inez Marchesin's paychecks buys fewer and fewer dollars. The Argentine peso is losing half its value every year. So people are spending their pesos as fast as they can, stockpiling necessities - things like toilet paper, flour, sugar - and people who have a little extra are going on spending sprees. Fancy restaurants are booked solid. People bring backpacks of cash to buy a flat-screen TV or concert tickets while they can still afford them.
MARCHESIN: At least you give yourself a happiness buying something that you like.
SMITH: This is what people do when they lose faith in the value of their currency - spend it while it's worth something. Of course, all that spending pushes prices up more, makes inflation worse - the dreaded inflationary spiral.
JOHN TAYLOR: You can see where there's been real messes.
SMITH: John Taylor is an economist at Stanford. He's done groundbreaking work on inflation. He says in the case of Argentina, the government didn't take a lot of the tough steps it needed to to bring down inflation early on. And those steps only get harder as inflation gets more entrenched. And if countries put off dealing with it for too long, things can get really ugly.
TAYLOR: Zimbabwe - I have - carry Zimbabwe notes in my wallet just to illustrate how terrible it can be. I think it's here somewhere. There it is - $100 trillion. So this is what happens if you have inflation.
SMITH: How much is this worth?
SMITH: A $100 trillion bill, and it won't even buy a cup of coffee. That is how bad inflation can get. This happened in Zimbabwe in 2008, and the country fell apart. Argentina's inflation isn't anywhere near that bad. But once an inflationary spiral starts, things can get bad very quickly. Already in Argentina, poverty and homelessness are skyrocketing. People are leaving the country.
MARCHESIN: There's a lot of stress - effects to your job, to your work, to your family.
SMITH: And with elections in just a couple of weeks, says Marchesin, nobody knows what to expect. She hopes whoever wins will get the situation under control so that brick of pesos doesn't keep getting bigger and Argentina doesn't end up with its own $100 trillion cup of coffee.
Stacey Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.
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