Wednesday, June 11, 2014

Argentina Makes Basic Economic Error...Again

The Kirchner regime in Ar-hen-teena isn't quite done wrecking the economy down there, they've still got more tricks up their sleeves.  The latest, interest rate caps.
Argentine banks fell in New York trading after the central bank capped consumer interest rates yesterday, potentially damping profits for lenders.  
Grupo Financiero Galicia SA’s American depositary receipts sank 7.2 percent to $13.97 at 1:55 p.m. in New York, the biggest decline since January, while Banco Macro SA retreated 5.2 percent and BBVA Banco Frances SA lost 5.1 percent. The benchmark Argentine Merval fell 0.2 percent.  
After calls from Argentina’s Economy Minister Axel Kicillof and Cabinet Chief Jorge Capitanich to end “usury” by lenders, the central bank led by Juan Carlos Fabrega decided to regulate rates on personal loans and credit cards. The government is trying to reactivate lending amid sluggish growth in South America’s second-largest economy
Wait.  You reactiveate lending by making lending less profitable?  Who knew?

This is an old gambit - price controls - and we know how it will end, in shortages.  Given that we are talking about shortages of consumer credit, this is about the most contractionary thing Kirchner & Co. could do.  Don't these people know anything?  Sadly, more economic pain is on the horizon.  No sympathy though, Argentinians seem to like this sort of thing, they keep voting these losers in after all.


Post a Comment

<< Home