In his inaugural speech, the new president clearly explained what he expects from the implementation of his neoliberal government program to curb inflation
Javier Milei and Argentine peso
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247 During his inaugural speech on Sunday 12, Presidentelect Javier Milei once again mentioned “stanflation”, a term he had already introduced before taking office. “There will be stagflation because if the budget reform is carried out, it will have a negative impact on economic activity,” Milei said a few weeks ago. But what exactly is stagflation?
The new president has clearly stated what he expects from the implementation of his neoliberal government program. Although he reiterated during the campaign that the adjustment would not be “paid for” by the people, this statement signals a different path, a report from Page 12 points out.
What is stagflation?
In short, stagflation is the combination of the terms “stagnation” and “inflation”. This means that prices will continue to rise, albeit at a faster pace, but unlike what is currently happening, economic activity will decline.
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Perhaps that is why, after his challenging forecast for the country, Milei assured that “the only wallet that will be open will be that of human capital to support the fallen.” The “fallen” will be those excluded from the system, the newly unemployed.
It is no coincidence that in the last few hours there has been news of mass layoffs in industry and public construction. One of these companies is linked to the family of future Economy Minister Luis “Toto” Caputo.
Is it possible to avoid stagflation?
However, the path of stagflation that Javier Milei believes Argentina faces is not the only possible one. This was stated in AM750 by the economic development doctor, director of the National Bank and elected national representative, Julia Strada.
According to the expert, if Argentina is heading towards a stagflation scenario, it will be due to the policies that the president himself will pursue. This implies a policy of price liberalization without any regulation of imports and exports.
“Milei is preparing for what his own policies will cause, namely a decline in economic activity with high inflation. That's what's happening these days. “That’s what happened when Macri won in the second round,” Strada said.
She added: “We need to highlight why there will be inflation. Because there will be a policy of sharp devaluation of the currency. He himself expects it. In addition, there are a number of government regulations that he does not believe in.”
Failure to follow these measures will only result in a sudden and abrupt increase in prices. Something similar happened when the deadline for fair prices expired after the elections and the readjustments were emphatic.
The alternative path to stagflation
The alternative is to stimulate industry and generate foreign exchange to bolster reserves, as Strada explains. She explained that the path to be taken was exactly the opposite of that suggested by Milei.
“We must avoid a price rise like the one he is driving and increase economic activity, which requires a new framework for dollar generation. On the contrary, we see cases of layoffs in the sector,” concluded the expert.