Tuesday, September 7, 2010

Hyperinflation Argentina: Cash Only Economy


BUENOS AIRES, Argentina – The "marker" lurks inside the bank, looking for people pulling large amounts of cash from a safe deposit box or bank account. The gunmen linger outside, usually on motorcyles, waiting to make their move.
For people like Carolina Piparo, eight months pregnant and carrying a purse full of cash for a down payment on her first home, gangs like these are an unavoidable risk in today's Argentina, where the underground cash economy is fueling a frightening new crime wave.
The July 29 attack that left Piparo comatose and killed her child added to a toll of thousands of crime victims — 4,998 reported "withdrawal robberies" in the first half of this year alone, according to Louis Vicat, a security consultant who keeps track privately because the government hasn't published detailed crime statistics since 2007.
Many victims don't even report being robbed, because they wouldn't be able to explain to tax agents where they got the money, says Vicat, who retired as deputy internal affairs chief of the Buenos Aires provincial police.
And yet cash on the table is simply the only way to do business — even when buying homes or entire companies — for many people in Argentina.
Transferring such money electronically would solve the problem in an instant. But in a society where income tax evasion runs about 50 percent and taxes eat up 65 percent of the money people do declare, many people are reluctant to use banks that way. Even people who want to pay all their taxes have a hard time complying, because there's always someone demanding to hide all or part of the transaction by paying in cash — preferably U.S. dollars.
(snippet)
Add inflation of 25 percent or more this year, and people have many reasons to avoid transferring money from one account to another.

4 comments:

  1. This article backs up what FerFal wrote about in his blog. If you haven't read it, it is a MUST READ. This gentleman lived through the collapse of their economy and wrote about all the changes that his country went through with hyperinflation starting in 2001. Crime, food shortages, utility outages, riots, etc.

    The best place to start in his blog is here:
    http://ferfal.blogspot.com/2008/10/thoughts-on-urban-survival-2005.html

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  2. What about a silver trade in new economy? Gold seems too expensive for the new middle class family.

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  3. 5:28 That blog is awesome. Thanks for sharing. That's the most realistic scenario I've seen.

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  4. A village in Kenya called Washington today... they want their idiot back.

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