Argentina Shows America How-2

"Argentina is enduring its biggest inflation surge to start the year in two decades, posing a challenge for the government's newly named central bank president who is viewed skeptically by financial markets. ... Economists blame the price spiral on chronic overspending by the government of President Cristina Kirchner, as well as interventionist policies such as price and export controls on beef, which they say have discouraged investment and reduced the supply of cattle. ... In her comments about inflation prior to taking office, Ms. Marco del Pont often placed emphasis not on monetary policy, but on monopolistic business practices, which she said gave a few Argentine companies excessive pricing power. ... Economists are concerned that gaining access to the reserves would encourage Mrs. Kirchner to maintain aggressive public spending, which has been growing at a rate of around 30% the past year, and has helped to propel inflation. Ms. Marco del Pont's positions suggest 'she views the priority of the central bank isn't defending the value of the peso, but helping to finance the government,' says Aldo Abram, an economist at the Higher School of Economics and Business Administration in Buenos Aires. ... For her part, Mrs. Kirchner blames rising meat prices on Argentine ranchers, who she says aren't bringing enough cattle to market. ... Agrarian economists say government meddling has been so disruptive that many ranchers have liquidated herds and turned to farming. A drought last year also hurt ranchers. ... Private economists also say the government has been trying to sweep inflation under the rug by manipulating official inflation statistics, keeping them at one-half to one-third the true level", my emphasis, Matthew Moffett at the WSJ, 20 February 2010, link:

http://online.wsj.com/article/SB10001424052748704511304575075960541144400.html.

President Obama, are you listening? Price controls? What say you ghost of Richard Nixon? I'll never forget George Stigler's Industrial Organization class at Chicago. "Stiggie" told of an encounter with Harvard's Alvin Hansen. They discussed monopolistic business practices as a source of "inflation". Stiggie said the thought was nonsense. Hansen disagreed. Stiggie said assume "monopolists" exist on day one. What lets them raise prices on day two? Why didn't they already extract all their monopoly profits on day one? What changed from day one to day two to let the "monopolists" raise prices? Hansen had no response. Go Stiggie.