Inflation downplayed as Argentina recovers

Inflation downplayed as Argentina recovers -- In December 2001, Argentina defaulted on $100 billion in debt -- the largest default in history. The move ushered in an era of utter chaos: five presidents in two weeks, cash and food shortages, deadly riots and dire poverty.

According to analysts, the crash occurred because of Argentina's enormous debt load, high public spending and overvalued currency. Greece now carries similar burdens, which has led some observers to suggest that Greece should follow Argentina's example and default and devalue.

With protests still under way in Athens, Greece's future remains murky, but in Buenos Aires, the decade since Argentina's economic collapse has been nothing short of remarkable.

South America's second-largest economy has bounced back from the brink and shaped a most unlikely recovery, driven by high commodities demand from China and a series of unorthodox economic policies that worked to help shelter Argentina from much of the economic malaise that is gripping the rest of the planet right now.

Carmen Perez, a balloon factory supervisor in Buenos Aires, says: "Before, we couldn't buy anything. And now we can. "

Argentina has enjoyed eight straight years of near 8 percent economic growth, and looks poised for more gains in 2012, factors that should help guide President Cristina Fernandez de Kirchner to a landslide re-election victory on October 23.

Her closest rivals are Hermes Binner, Eduardo Duhalde and Ricardo Alfonsin.

But Argentina's sustained economic growth has come with a cost: inflation.

Officially, inflation in Argentina is around 9 percent annually, but according to various analysts and many Argentines, it is a nearly three times that number.

"The government insists that we only have eight percent inflation, but we all know it is 25 percent," says Veronica Amsing, a teacher in the Buenos Aires suburb of Tigre. Amsing says she now has a hard time affording the staples of the Argentinian diet -- meat, milk and cheese -- because of recent prices increases.

Since 2007, the Argentinian government has been repeatedly accused by economists, investors, and the International Monetary Fund of underreporting inflation data for political gain, and to reduce returns on inflation-linked bonds. The government denies the claims.

The Kirchner administration has also worked to silence those who report on inflation statistics by subpoenaing information from local journalists and levying huge fines against analysts for publishing inflation data that contradicts official state numbers.

"It is strange. We don't understand it very well because the population can easily check in the supermarket what the prices of goods are," says economist Orlando Ferreres, who was fined $235,000 this year for publishing independent inflation statistics.

"Everyone knows that the inflation rate is 23 or 25 percent, or more," says Ferreres.

If true, that number would give Argentina one of the world's highest inflation rates and will cause big financial problems in the short term, analysts say.

Still, inflation seems to have had little political impact on President Kirchner's re-election campaign.

"Before, we couldn't buy anything. And now we can. I bought a refrigerator. And you can get financing now too," says Carmen Perez, a supervisor at the Nueva Esperanza balloon factory in Buenos Aires. "With Cristina, we are better off," Perez says, echoing the sentiment of most of her co-workers.

While people in the U.S. and Europe are tightening their belts, Argentines are partying. Restaurants and nightclubs are packed nightly. Apartment sales are soaring. International rock stars, like Red Hot Chili Peppers, Justin Bieber, Katy Perry and Ricky Martin have all played to capacity crowds here in recent weeks. In March, Pink Floyd co-founder Roger Waters will stage eight sold-out performances of "The Wall" at Buenos Aires's biggest football stadium.

"The good quality about Argentines is that we understand a lot about crisis. In my generation, we passed through a lot of crisis and the thing that I learned is that crisis really is a good opportunity to reinvent yourself," says entrepreneur Alan Faena, who just opened the new $14-million Faena Arts Center in Puerto Madero, the city's priciest neighborhood.

This inherent Argentinian ability to adapt spurred the swift comeback from the 2001 meltdown. When he became president in May 2003, Nestor Kirchner implemented economic policies that infuriated Washington and Wall Street, including two contentious debt renegotiations. Argentina is still involved in legal battles with debt 'holdouts' claiming $16 billion in payment.

When Kirchner's wife succeeded him in December 2007, she continued to quarrel with creditors, while also furthering her husband's populist policies.

Mr. Kirchner died suddenly from a heart attack on October 27, 2010, and his wife has benefited politically from an outpouring of sympathy. Over the past year, she has worn only black in public, and repeatedly refers to "him" in fiery -- and sometimes teary -- campaign speeches.

One of Mrs. Kirchner's most controversial decisions has been to limit imports into the country in hope of stimulating the local economy and staying competitive with the country's biggest trading partner, Brazil.

The government recently reduced the number of foreign cars that companies are allowed to bring into the country by 20 percent and imposed a balance policy that requires companies to export goods worth as much as the cars that they import. This move has forced auto companies to get into businesses that they know nothing about. As a result, Hyundai will soon be exporting biofuel, BMW will be shipping rice and leather, and Porsche is sending Malbec wine overseas.

"Without a doubt, we are worried about whether this foreign import crisis is going to be resolved or not. It has hurt our business tremendously," says Alberto Principe, the owner of a Hyundai dealership in Buenos Aires.

It is not just the auto industry in Argentina feeling the pinch.

Sneakers, medicine, Barbie dolls and even books have been held up at the border recently too, complicating the lives of companies and consumers alike. BlackBerrys were in short supply because of the import policy, so smartphone maker RIM relented and opened a Blackberry factory this month in the frigid Tierra del Fuego region of Argentina.

According to watchdog group Global Trade Alert, Argentina has taken 14 protectionist measures over the last three months, more than Brazil, India and China combined.

These protectionist policies and Argentina's unpaid debt have also led to other consequences for the country. In September, U.S. lawmakers voted against a $230 million multilateral loan to Argentina, one of the Obama administration's strongest signs yet that it wants Argentina to meet its financial obligations.

"Argentina has been living off its own savings in order to pump domestic consumption. That is inflationary in itself. And there has been very little investment too," says Martin Redrado, former president of the Argentine Central Bank.

Despite analyst warnings of lack of foreign investment, shrinking reserves, capital flight and soaring inflation, President Kirchner continues to tout what she calls the "Argentine model" and she thinks other countries should follow its lead.

Her former colleague disagrees.

"There must be something really weird about Argentina that when she explains this, nobody pays attention," says Redrado.

But it is likely that people will be watching to see if Argentina can continue its most unusual economic recovery. ( cnn.com )

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There is only one way out of the global recession, and government must lead the way

There is only one way out of the global recession, and government must lead the way - As the economic slump that began in 2007 continues, the question persists: Why? Unless we have a better understanding of the causes of the crisis, we can’t implement an effective recovery strategy. So far, we have neither.

We were told that this was a financial crisis, so governments on both sides of the Atlantic focused on the banks. Stimulus programs were sold as being a temporary palliative, needed to bridge the gap until the financial sector recovered and private lending resumed. But, while bank profitability and bonuses have returned, lending has not recovered, despite record-low long- and short-term interest rates.

The banks claim that lending remains constrained by a shortage of creditworthy borrowers. And key data indicate that they are at least partly right. After all, large enterprises are sitting on a few trillion dollars in cash, so money is not what is holding them back from investing and hiring. Some (perhaps many) small businesses are, however, in a very different position: Strapped for funds, they can’t grow, and many are being forced to contract.

A project at the Oakland International Airport financed by the American Recovery and Reinvestment Act Photo by Justin Sullivan/Getty Images.

Still, overall, business investment—excluding construction—has returned to 10 percent of GDP (from 10.6 percent before the crisis). With so much excess capacity in real estate, confidence will not recover to its pre-crisis levels anytime soon, regardless of what is done to the banking sector. The financial sector’s inexcusable recklessness, given free rein by mindless deregulation, was the obvious precipitating factor of the crisis. The legacy of excess real-estate capacity and over-leveraged households makes recovery all the more difficult.

But the economy was very sick before the crisis; the housing bubble merely papered over its weaknesses. Without bubble-supported consumption, there would have been a massive shortfall in aggregate demand. Instead, the personal savings rate plunged to 1 percent, and the bottom 80 percent of Americans were spending, every year, roughly 110 percent of their income. Even if the financial sector were fully repaired, and even if these profligate Americans hadn’t learned a lesson about the importance of saving, their consumption would be limited to 100 percent of their income. So anyone who talks about the consumer “coming back”—even after deleveraging—is living in a fantasy world.

Fixing the financial sector was necessary, but far from sufficient, for economic recovery. To understand what needs to be done, we have to understand the economy’s problems before the crisis hit.

First, America and the world were victims of their own success. Rapid productivity increases in manufacturing had outpaced growth in demand, which meant that manufacturing employment decreased. Labor had to shift to services. The problems are not dissimilar to those of the early 20th century, when rapid productivity growth in agriculture forced labor to move from rural areas to urban manufacturing centers. With a decline in farm income in excess of 50 percent from 1929 to 1932, one might have anticipated massive migration. But workers were “trapped” in the rural sector: They didn’t have the resources to move, and their declining incomes so weakened aggregate demand that urban/manufacturing unemployment soared.

For America and Europe, the need for labor to move out of manufacturing is compounded by shifting comparative advantage: Not only is the total number of manufacturing jobs limited globally, but a smaller share of those jobs will be local.

Globalization has been one, but only one, of the factors contributing to the second key problem: growing inequality. Shifting income from those who would spend it to those who won’t lowers aggregate demand. By the same token, soaring energy prices shifted purchasing power from the United States and Europe to oil exporters, who, recognizing the volatility of energy prices, rightly saved much of this income.

The final problem contributing to weakness in global aggregate demand was emerging markets’ massive buildup of foreign-exchange reserves—partly motivated by the mismanagement of the 1997-98 East Asia crisis by the International Monetary Fund and the U.S. Treasury. Countries recognized that without reserves, they risked losing their economic sovereignty. Many said, “Never again.” But, while the buildup of reserves—currently around $7.6 trillion in emerging and developing economies—protected them, money going into reserves was money not spent.

Where are we today in addressing these underlying problems? To take the last one first, those countries that built up large reserves were able to weather the economic crisis better, so the incentive to accumulate reserves is even stronger.

Similarly, while bankers have regained their bonuses, workers are seeing their wages eroded and their hours diminished, further widening the income gap. Moreover, the United States has not shaken off its dependence on oil. With oil prices back above $100 a barrel this summer (and still high), money is once again being transferred to the oil-exporting countries. And the structural transformation of the advanced economies, implied by the need to move labor out of traditional manufacturing branches, is occurring very slowly.

Government plays a central role in financing the services that people want, such as education and health care. And government-financed education and training, in particular, will be critical in restoring competitiveness in Europe and the United States. But both have chosen fiscal austerity, all but ensuring that their economies’ transitions will be slow.

The prescription for what ails the global economy follows directly from the diagnosis: strong government expenditures, aimed at facilitating restructuring, promoting energy conservation, and reducing inequality, and a reform of the global financial system that creates an alternative to the buildup of reserves. Eventually, the world’s leaders, and the voters who elect them, will come to recognize this. As growth prospects continue to weaken, they will have no choice. But how much pain will we have to bear in the meantime? ( project-syndicate.org )

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Population near ground zero doubles since 2000

Population near ground zero doubles since 2000 – After the Sept. 11 attacks, there were grim questions about the future of the shaken, dust-covered neighborhoods around the World Trade Center. Would residents flee uptown or to the suburbs? Would the epic job of rebuilding lower Manhattan be too much to bear? Who would want to live so close to a place associated with such horror?

As it turns out, plenty of folks.

Census figures released last week show that the number of people living near ground zero has swelled by about 23,000 since 2000, making it one of the fastest-growing places in the city.

Virginia Lam, a publicist and former City Hall operative who moved into a newly converted residential building on Wall Street in 2006, said the site is a source of inspiration, rather than fear or gloom.

New York's lower Manhattan from air - FILE - This April 20, 2010 file photo shows New York's lower Manhattan from the air. After the 9/11 attacks, there were grim predictions about the future of the shaken, dust-covered neighborhoods around the World Trade Center. Who would want to live so close to a place linked to so much disaster and despair? As it turns out, plenty of folks. Census figures released last week show that the number of people living in the area around ground zero has swelled by about 23,000 since 2000, making it one of the fastest growing places in the city

"It's pretty amazing," she said of the new towers rising from the 16-acre hole created by the attacks. "I feel like, being a New Yorker who was here on 9/11, and who has worked for the Fire Department and for the city, I think it is always in the back of my mind, but it's not something that dominates my thinking. I go about living my life."

About 45,750 people now live in the part of Manhattan south of Chambers Street, which encompasses ground zero. That is more than twice as many as there were during the last census.

There was also significant growth a little farther uptown. In all, 82,137 people were counted as living south of Canal Street, 15 blocks north of the trade center. That is an increase of 43 percent from 2000 in an area that includes the Financial District, Battery Park City, a section of tenement-packed Chinatown and the celebrity-studded streets of TriBeCa, which is short for "Triangle Below Canal."

The change around Wall Street has been especially remarkable given the area's history as a financial hub, rather than a residential district.

One by one, bank headquarters have moved elsewhere, and millions of square feet of office space have been converted to homes — a change spurred partly by government incentives intended to help revive downtown after Sept. 11.

"It's astounding," said Julie Menin, head of the local community board. "Many people thought after 9/11 that people wouldn't remain in Lower Manhattan. Not only did people stay, they came in droves."

New Yorkers have been well aware of the change. In the shell-shocked months after the attacks, the Financial District became a ghost town when workers left for the day. Now it is teeming with people around the clock.

Grocery stores have opened. Three new schools have opened up in four years. Briefcase-carrying stockbrokers now share sidewalk space with kids in strollers. A string of new apartment towers has been built along West Street, a short distance from the trade center site.

The area isn't finished growing, either. Near the foot of the Brooklyn Bridge, work was recently completed on the tallest apartment tower in the Western Hemisphere, a 76-story, 900-unit skyscraper designed by the architect Frank Gehry.

Growth downtown has far exceeded the rate elsewhere in the city. The 2010 census put the city's population at 8.18 million, up 2.1 percent from 2000.

People have been lured to Manhattan's southern tip by a number of things. Battery Park City, the planned community created on landfill at the edge of the Hudson River in the 1980s, is cut off from the car traffic that surges through the rest of Manhattan and is ringed by playgrounds and esplanades with exhilarating views of the harbor.

Before the attacks it was a work in progress, with a large section still unbuilt. Over the past decade, though, it has matured and filled up, finally becoming the community its designers envisioned in the 1970s.

Several of the area's public schools have a solid reputation. The area still isn't on par with other parts of the city when it comes to amenities like street parking or places to buy fresh vegetables, but things have been improving.

New Battery Park City resident Theresa Purcell said its isolation — it is one of the few places in the city that really feels as if it is on an island — is one of the things that attracted her.

"It is like a hidden little community," she said. "You are in the big, bad city," but still a "little world away."

Across much of the area, there are few remaining signs of the damage done by the terror attacks. Even the tumult of construction at the trade center site barely interrupts the daily flow of residents, office workers and tourists through the neighborhood.

"People should be proud of the fact that we rebuilt this neighborhood," Menin said. New Yorkers could have abandoned their experiment in downtown living after 9/11, but it didn't happen. "I think just the opposite happened. It proved our resilience." ( Associated Press )

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Sad Dads May Lead to Crying Infants

Sad Dads May Lead to Crying Infants More factors should be considered than depression among moms, experts say. Don't automatically blame mom: A crying, colicky baby can be just as much the result of dad's state of mind, Dutch researchers report.

Other studies have found that depression among mothers can be related to excessive crying or colic, a common problem with newborns, but the researchers said that little was known about whether fathers' emotions and behavior also have an effect.

"Up to now, almost all attention went to the prenatal effects of maternal depression on child development, leading to the development of detection and treatment programs that focused on mental well-being of mothers," said lead researcher Dr. Mijke P. van den Berg, a psychiatrist at the Erasmus Medical Center in Rotterdam.

"This study showed the importance of taking paternal factors and well-being during pregnancy into account, next to maternal," she said.

The report is published in the July issue of Pediatrics.

To see how parental depression was related to excessive crying, van den Berg's team gathered data on symptoms of depression among parents of 4,426 infants who were 2 months old. Excessive crying was defined as crying for more than three hours a day on more than three days in the past week.

Overall, just 2.5 percent of the infants in the study fit the excessive crying criteria. But, the researchers found a 30 percent higher risk for depression among parents whose infant cried excessively.

"This finding could not be attributed to co-existing depressive symptoms of the mother, which is already known to be a risk factor for excessive infant crying," van den Berg said. It could be related to genetics, a depressed father or, indirectly, through factors such as marital, family or economic stress, she said.

In fact, a dad with symptoms of depression was twice as likely to have an infant who cried excessively as was a dad who was not depressed, the study found.

"Fathers do matter, so take care for the mental well-being of fathers during pregnancy," van den Berg said.

Dr. Jon Shaw, a professor and director of child and adolescent psychiatry at the University of Miami Miller of School of Medicine, said that the study shows how depression can lead to infant's excessive crying.

"This study demonstrates in a paradoxical way the importance of fathers, in that fathers' measurable depression during pregnancy is a risk factor for excessive infant crying at 2 months of age," Shaw said.

"This seems to be related perhaps to the enduring effects of fathers' depression on the family ambience, the parental relationship, child parenting and, perhaps as the authors suggest, there may be a genetic factor involved," he said. (HealthDay News)

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