[bernawil]

Argentine here. Both economies are pretty similar. Both are pretty diverse in their composition but not in their contribution, so you have the fact that primary activities (farming, oil, etc.) are the great contributor to the tax base and basically all other activities receive subsidies. This is the reason ar & br have one of the highest tariffs for electronics.

The root of the inflationary problem both in ar & br is, and has always been, the printing of money to cover for the fiscal deficit. Government hikes taxes every year and every year it consumes a bigger % of the pib.

[koolkat]

Printing of money to cover for the fiscal deficit is not rare or bad by itself. Inflation can be a form of taxation if the goverment fully controlls the creation of money. The problem is that goverments are stripped from their right to do so and evey cent they create is actually borrrowed from the central bank.

[tsotha]

In a fractional reserve system borrowing from the central bank is creating money.

[koolkat]

Thats what i said. Goverments can't print money they need to borrow it from the one that prints it. Also borrowing from normal banks is creating money.

[tsotha]

Why is printing money "not rare or bad by itself" when borrowing from the central bank is a problem? They're literally the same thing.

[koolkat]

That is true for the goverment printing but the central bank printing its just printing i mean if you follow the chain to the creation maybe the BIS or something. Because when you print money you don't pay interest to anyone so instead of borrowing you could just jump the middleman and just print he is printing anyways. If you borrow you need to pay exponential sums. Using inflation to collect taxes was normal when the logistics were a nightmare. Its dangerous maybe but not necesarily bad and there are a lot of financial gambels done by goverments which are more dangerous.

[tsotha]

>Because when you print money you don't pay interest to anyone so instead of borrowing you could just jump the middleman and just print he is printing anyways.

>Because when you print money you don't pay interest to anyone so instead of borrowing you could just jump the middleman and just print he is printing anyways.

While that's true technically, when governments borrow from the central bank they tend to roll over the debt instead of paying it back, so the interest is never really paid.

The big advantage to borrowing from the central bank is the average person thinks you can only borrow deposited money and doesn't realize what's happening.

[ufo]

I thing you want to say Gross National Product instead of Produto Interno Bruto here :)