The Economist on Argentina: "Overdosed"

Here is an article from last week's Economist (mine tends to arrive in the mail a bit late...) on Argentina's current struggles with inflation. Since we contrasted the U.S. with Argentina briefly yesterday, this is worth a look. The article does a nice job, giving a quick overview of the links between inflation and monetary policy. Note in particular the following paragraph:

In a successful effort to resuscitate the economy after the collapse of 2002, the central bank pumped in money. It printed pesos to buy dollars, thus also boosting exports and import-competing local businesses by keeping the exchange rate undervalued. Conveniently, this allowed the government to impose export taxes to boost its revenues. These policies, together with non-payment of debt, engineered an impressive recovery: output is now almost back to its pre-collapse peak of 1998.

That may sound like a mouthful, but I suspect it is the kind of thing you can follow...

Also, they pick up on the fact that both monetary and fiscal policy are expansionary. See the following:

But the authorities carried on boosting demand for too long. In the three months to December, the monetary base rose from 47.5 billion pesos ($16 billion) to 52.5 billion pesos. The government joined in too: "discretionary" federal spending rose by 19% last year, while the government decreed wage increases for the private sector. [...] The inevitable result of more money chasing not many more goods has been price rises.

Don't cry for me...?