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🇦🇷Argentina's "Booming Economy" Chart is Hiding a Main Street Collapse ⛔️
The government and a lot of others are correct when they claim that both Gross Domestic Product (PIB) and Private Consumption have hit "historical records" for this dataset.
But an "all-time high" on a macroeconomic aggregate chart does not mean the country is experiencing an all-time high in widespread prosperity.
This is a textbook definition of a "K-shaped" economic cycle. The top arm of the "K" (the top 10-20%, financial speculators, export sectors) is shooting upward, while the bottom arm of the "K" (the middle class, local retail, domestic manufacturing) is plunging downward.
There are a lot of factors for this.
These charts don't measure who is consuming and that is VERY important. Because the peso is artificially strong and the government opened up imports you have a situation where the richest 10% to 20% of Argentines who have a lot of disposable income and probably benefited from the stock market and/or especially carry trade.
Also don't forget that the government had a money laundering program "blanqueo" that brought in billions of dollars from many people.
These rich are buying new cars, traveling outside of Argentina, buying a lot of imported Chinese goods. Many of these wealthy were buying this stuff anyway before but weren’t included before in any statistics. They might have been buying it in Miami in cash. Now they can buy it online.
If one rich person buys an imported $100,000 USD SUV and 400 middle class families are forced to cut their grocery spending by $250 USD each the total aggregate consumption on the chart stays exactly the same or even goes up. The massive luxury and financial consumption of the top 10% to 20% is entirely hiding the collapse of supermarket and retail sales at the stores.
So the chart can be accurate but it’s hiding the truth of the reality on the street. The middle class is getting absolutely destroyed. Record “consumption” means nothing if the majority are suffering.
When you signal to the wealthy they won't be asked about income or spending like you had before in other administrations, of course this will cause spending to go up for people at the top of the market.
Look at the loss of purchasing power the past few months. Look at the jazzed blue lines. Big swings from quarter to quarter. That means instability not strength. There is a lack of consistent momentum. Strong economy signals smooth, sustained growth. Not whiplash.
There is a Carry Trade ("Bicicleta Financiera") Illusion going on.
The stock market and the carry trade. When the government maintains an artificially strong peso (a crawling peg that devalues slower than inflation) while offering high local interest rates, it creates a massive, short-term wealth effect for the financial elite. They are generating massive yields in USD terms without actually producing any goods or services. That financial windfall immediately turns into high-end consumption, heavily distorting the "average" spending metrics.
If "private consumption" is truly hitting record, sustainable highs, then the collection of the VAT (IVA)- which taxes consumption -should be skyrocketing in real terms. The fact that tax collection is dropping or stagnating proves that the volume of everyday transactions on Main Street is collapsing. The quality and formality of the economy are bleeding out.
Activity is recovering but quality, formality and sustainability are all very questionable. It's important to see both sides of it.
A healthy, structural economic recovery looks like a smooth, compounding curve. Massive, whiplash swings from quarter to quarter indicate an economy reacting to shocks, speculation, and defensive spending rather than steady, sustainable business investment.
The macroeconomic success is being entirely subsidized by the financial destruction of the middle class.
