Wednesday , July 6 2022

Causes of Inflation: New Report Rejects Government Theory and Points Out Central Bank Issuance



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The government and businesses are preparing to negotiate a price freeze on more than 1,200 products. In the speech of the President at the IDA Colloquium Alberto Fernandez He referred to the problem and said that the items in the base basket had “incomprehensibly increased”.

“We need to find one agreement To stop it but everyone should know it We are flexible In this case. A society where some win and millions lose is not the same as a society, but a Cheating. I am confident that the balance will be found in a public table discussing this issue, ”the President said, calling for a price agreement.

Official diagnosis Although the increase in prices appears to be linked to business profits, an Earl’s report signed by an economist George Vasconcelos Shows that there is no such correlation. On the contrary, it explains that the reason for the rise in inflation is the severe monetary crisis at the Central Bank.

How Much Money Do Argentine Companies Make?

Related to the basic logic behind consumer price freezing measures Assuming there is a ‘surplus’ in profit margins Companies can evolve more than the cost trajectory with price increases. With this logic, it is assumed that the freeze will have a positive impact on overall demand, as there is no risk of a decline in investment in the affected sectors or a market deficit resulting from those measures, ”Vasconcelos pointed out.

However, the economist said so No evidence This theory is supported if the usual profitability or cash flow ratio of the balance sheets of companies listed on the stock exchange is taken into account.

“It simply came to our notice then profit Interest and taxes were the same as before (EBIT in practice) 15.1% of turnover The companies listed on S&P Marwal are 6.5 percent lower than the companies listed on the S පවුo Paulo Stock Exchange, up 21.6%, with no correlation with inflation data and showing annual gaps between 5 and 1 in Argentina and Brazil. He said.

According to the Iral, domestic inflation is much higher than in the neighboring country, but Argentine companies earn less than Brazil.  (Photo: Damien Dopacio / NA).
According to the Irish, domestic inflation is much higher than in the neighboring country, but Argentine companies earn less than Brazil. (Photo: Damien Dopacio / NA).

The same line is mentioned in the report Local stock value It will be associated with a depression process. The value of Argentine companies is equal to one-fourth of that of Brazilian companies, for a similar cash flow. This arises from the relationship between Share price And EBITDA (interest, taxes, depreciation and pre-loan earnings) ”he analyzed.

He charted: “The average Bowespa company multiplies the Ebitida by 7.2, while the average Marvel company multiplies the corresponding Ebitda by only 1.8. On the other hand, a local company has to earn 4 times its turnover to be equal to the value of a Brazilian company. In that sense, he explained it Business value As a multiplier of its profit Decisive in investing And calibration of the task expansion volume.

Reasons for inflation

Inflation for September this week stood at 3.5% and was released. A) Yes, It was fast again Accumulates 37% after five consecutive casualties and during the year. We need to look for real reasons for the price increase for the Irish Money problemThat is, with the peso issued by the central bank for a variety of reasons, such as financing the public sector deficit and buying foreign currency in the exchange market.

During the second semester, the rate of disbursement increased sharply.  (Photo: Mario Perdo / TN).
During the second semester, the rate of disbursement increased sharply. (Photo: Mario Perdo / TN).

“This 2021 second semester cash flow rhythm is back to the 2020 pattern, so we should not be surprised about its variability before the end of the year and above all in the first part of 2022. Cash basis Returns to the level of 50% from year to year“Vasconcelos warned.

According to the calculations of the economist, in First semester This year they usually vaccinated, $ 137,000 million per month Between direct injection and interest payments on central bank loans. “Jumping on the track stands out from here The second half, Going to a normal emission $ 354,000 per month, By multiplying the numbers by 2.6 in the first half of the year, ”said Vasconcelos.

Causes of Inflation: New Report Rejects Government Theory and Points Out Central Bank Issuance

GMA capitalization also showed that monetary expansion was one of the factors explaining inflation. “So far in 2021, $ 1.6 billion is printed daily. But if it had not been sterilized through payroll liabilities and appealed to SDR’s creative accounting to cancel temporary advances, the daily amount would have increased 5 times ($ 8,200 million), ”he said in a report.

“In an imminent horizon it needs to be known in advance Rising from inflationary pressuresRecessionary prices should be reinstated (suppressed inflation) and the exchange rate, tariffs and family basket products should also be suspended with effect from 1st. October, ”Vasconcelos warned.



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