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Lesson in Inflation

By Nicole Simpson on May 22, 2013

Well, we arrived in Buenos Aires yesterday, but are still missing three of the students (whose flights got messed up). They should arrive today. We are getting a lesson in inflation and currency depreciation. While I knew that inflation was high and that the Argentine peso was weak, I did not fully understand the implications of that on a practical level. The Argentine government is restricting the amount of pesos I can withdraw from the ATM’s, and the unofficial exchange rate is nearly double the official exchange rate. Meaning: if you have US dollars (in cash), your money goes twice as far but if you pay by credit card or use an ATM (where you get the official rate),  you are out of luck! Crazy. While I teach macroeconomics at Colgate almost every semester, never have I ‘lived’ in an environment with a tanking domestic currency. It brings it all to life. We did have a fabulous steak dinner last night at a typical Argentina parilla, but had to pay with credit – ouch!


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