Argentines have advice for Americans affected by inflation

For many Americans, the sudden burst of inflation that has rocked the economy has been disorienting.

Consumer prices have been so stable for so long in the United States that the population is a bit rusty with the basic tactics of the inflationary era.

So for advice, we turned to people who have become experts in the art of surviving runaway inflation: the Argentines. Walk through Buenos Aires and you’ll hear conversations between people of all ages, from college students to retirees in their 90s, about currency exchange rates, skyrocketing prices, and strategies to deal with them.

Of course, the 50% inflation faced in a typical year in Argentina, the product of decades of political mismanagement that has destroyed confidence in the central bank, is much higher than the 6.8% rate that Americans are bearing. But many of the principles that shape the daily habits of Argentine workers, consumers, and savers are still widely applicable in the United States today.

Here are the tips they gave us on what to do and what not to do during the inflation rush.

Spend your salary immediately

In a high inflation economy, the money in the bank is losing value. Every day, those $ 100 in deposit buy a little less. As a result, many Argentines spend their paychecks as soon as they are received, taking groceries for weeks in a single shopping trip, even if some of it (excess meat, chicken, fish) will stay in the freezer for months.

The practical application of this technique in the United States, where inflation is not high enough to justify such a crazy race on payday, is to accelerate plans to buy expensive items: appliances, bicycles, furniture. If you have money to pay for that couch now, do it.

“Don’t leave your money under the sofa ”, says Federico Pieri, 30, who works in sales in Buenos Aires. “That is the worst thing you can do”.

Borrow a lot of money

And don’t hesitate to borrow money to finance some of those big purchases. If you can get a loan at a rate below inflation, something that is possible for many Americans today, do so. Inflation will make it easier to repay the loan in the coming months and years.

It is as they teach in economic textbooks, says Fernando Iglesias Molli, owner of a cafeteria: “Get money at very low rates. I went into debt to buy the best equipment and create business opportunities ”.

Negotiate a raise or two

It is important to remember, Argentines say, that those old 2% salary increases that you received every year are no longer enough. Any increase in your paycheck that is less than the 6.8% inflation rate is effectively a pay cut. Your real wage, as economists call it, is declining.

Unions and Argentine companies negotiate annual wage increases for workers that take into account expected inflation. When prices rise more than anticipated, those agreements are often broken and the two parties return to the negotiating table to agree on new terms.

It’s a powerful tool that American workers can draw inspiration from, though it would create anguish among monetary policymakers trying to avoid a spiral in prices and wages.

Buy inflation-linked bonds

There are few good options for savers in a high inflation economy. One of Argentines’ favorite saving tricks, converting peso savings into dollars, doesn’t work in the United States, of course. Cryptocurrencies are another favorite, but many Americans discovered them long ago.

Then there is debt linked to inflation. Investors in Argentine bonds are so scarred by years of rising consumer prices that they insist that the government sell them securities whose value increases at the same rate as the consumer price index. These bonds represent almost 50% of the local debt market.

In U.S, represent less than 10% of the general market. However, demand for them is increasing, even among investors, who have started piling up on the retail version of the securities.

“Try to invest in something that can at least be correlated with inflation”Says Pieri.

Buy houses and cars

Another ancient hedge against inflation is real estate, the value of which tends to increase over time. Cars are also a popular savings investment among some Argentines. That option may seem a bit strange in a country like the United States, where cars tend to depreciate rapidly in value, but the supply of cars around the world has recently changed that dynamic.

“Buy things”Says Marcos Lalanne, a 29-year-old lawyer. “There are things that will hold their value with inflation”.

And for those Americans really frustrated by rising prices, Lalanne offers one more piece of advice: “Come to Argentina to spend your dollars. Here it would be very rich”.