Re: Incomes and Exchange rates; part 2

[Juan Jose Barrios <jota@xxxxxxxxx>]

At 09:38 PM 9/18/97 +1000, you wrote:
>Laura
>
>Is it true that the Argentine Peso is tied to and at par with the US dollar
>and has been for a number of years?
>
>Has inflation been less than 2% for 3 years?
>
>And is the projected real rate of economic growth for 1997 greater than 7%?
>
>Regards
>

These are good questions. Anual inflation is less than 1% now. Growth will
be less than 6% in 1997 (maybe around 5%).

However, are these the only and most important questions that an economist
need to ask?. I was at a seminar yesterday and the speaker (answering a
question) said tha she could not use certain langauage because she had not
been trained that way. Funny.  Maybe that is the reason why the profession
is intelectually stuck, as one of the members of these list posted a while
ago. And maybe that is the reason why our popularity is at historical
(record) low levels.

Economists should  go back to Smith and Ricardo and check whether they were
concerned about the distribution of the pie or not, with fairness or not,
and do not just look at the invisible hand and comparative advantage!

In other words, we, economists (especially neoclassicals) most of the times
ask the questions that we like to ask or ask those questions that imply
blaming someone else (the state, rigid prices, etc etc). Why do we stop in
efficiency and inflation and growth most of the times?

jj


PS: for some data of Argentina: httm//www.mecon.ar/report/report21/index.htm
>
>Leigh
>
>
>
>At 03:16 PM 17/9/97 +0000, you wrote:
>>John,
>>
>>
>>> No. I am speaking only of an angered populace like those who deposed
>>> Ceaucescu [Sp?] and the marching mothers of Argentina who aroused enough
>>> sympathy to get action. [They did, didn't they?]
>>
>>I'd like to tell you a few things about popular movements in my
>>country (Argentina). The marching mothers of Plaza de Mayo had
>>nothing to do with the changes in our economy. In fact, no organized
>>group had to do with it. If things have changed here, it's due to the
>>hyperinflation. Only after having 289% of inflation in a month, we
>>realized things had to change. It were the supermarkets ransacking
>>that showed us we couldn't live with such a high inflation. For the
>>first time in decades, we changed governments in a legal and
>>organized way. A democratic president left government 6 months
>>earlier than expected and another democratically chosen president
>>came into office. There was no revolution in the streets, the
>>revolution was in our minds.
>>
>>
>>>
>>> > I agree with you that the backing is a virtual insurance, it's
>>> > just a promise of well behaviour and only if the governments acts
>>> > correspondence with its promise the mechanism will work. You said
>>> > that vigilance is necessary and having a fixed exchange rate and
>>> > a fixed convertion rate makes the vigilance easier.
>>>
>>> Yes. My preference for a measure like the CPI as the standard has the
>>> same "virtuality" as a gold standard, but it has the advantages of:
>>>
>>> 1) It consists of enough variety to prevent the government from creating
>>> an appearance of a stable currency without an actuality of same. With
>>> gold as the standard a government can set the price high enough to be
>>> certain that at least some of the supply is surrendered to the
>>> government to be held in idle storage rather than meeting some other
>>> demand. Inflation can then rage on until it reaches a point of
>>> insufficient supply at the "official" price to leave a respectable
>>> quantity in government vaults. Then the government either devalues the
>>> currency or [as Nixon did in the U.S.] close the gold window and let the
>>> currency float.
>>>
>>> 2) It most nearly reflects the actual value in use for exchanges.
>>>
>>> 3) It is [At least in the U.S.] the measure most used for contract
>>> adjustments that are of sufficient duration for inflation to be of
>>> concern.
>>
>>
>>Using a CPI as standard works well in a low inflation country. But
>>when you're trying to  keep stable the value of the currency in a
>>high inflation country or in country with very recent inflationary
>>memory, it doesn't work at all.  Your third remark helps me to prove
>>my point, you're thinking on the basis of an economy were inflation
>>is eventually of concern and you'll eventually adjust contracts. When
>>there's high inflation eventuality happens everyday.
>>In your first remark you suggested a goverment devaluation or
>>changing into a free float  after getting enoug gold in its vaults.
>>The virtue of the gold standard or any other commodity backing is
>>that it gives a clear signal to people. If the government devaluates
>>or changes into a free float it destroys the confidence that might
>>have generated. The gold standard is a symbol, it represents a
>>promise given by the government.  It gives people the possibility of
>>protecting themselves, in case currency loses value, by converting
>>the currency.
>>
>>
>>Laura
>>
>>
>______________________________________________________________________
>Leigh Harkness                                      leigh@xxxxxxxxxxx
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