When prices increase more than normal, all politicians talk about the disastrous effects of inflation and on an individual basis it can be. If you work for someone else, you want to increase your income at least what inflation is. However, what is good for the individual is not great for the economy because if the majority do it, inflation continues to rise. The government’s role is to try to find methods to decrease inflation and what is good for the majority is good for the individual.

In an article by Brendan O’Boyle of Reuters, one country which has been wrestling with inflation is Argentina. The country elected President Javier Milel partly on the basis on fighting inflation to the mat and it appears he is on his way. President Milel made a number of cuts to government and government programs which did not help his popularity but inflation has fallen from 25% in December to presently 4.2% in June. For the economy in general that is a very good thing.

In countries such as Argentina, they have their own currency the peso, but in reality the American dollar is the still the currency of choice or comparison. The government is always concerned about currency rates between the two. The Economy Minister Luis Caputo announced a strategy to continue to fight inflation.

Argentina’s central bank started to sell US dollars in the country’s parallel foreign exchange market in an effort to fight inflation and freeze the country’s money supply. The bank issues pesos to buy US dollars on the formal exchange market, then the bank will selling an equivalent amount on the parallel CCL exchange market. The Economy Minister believes this process will be a knockout to inflation.

In the middle of July, the official exchange rate traded at pesos per dollar was 919.5, the so called CCL rate was 1.416.2 which the widely used black market was 1.500.

Linking to dividend paying stocks, all governments do not like inflation because other markets develop and become normal as people deal with inflation. In all industries there are always alternatives but most of the time the alternatives are the normal, however people quickly learn and use them. For your investments do you know about the alternative markets? what keeps your senior executives from getting a good sleep?

There are more questions than answers, till the next time – to raising questions.