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Argentinian Economic Crisis Essay
The Reasons Behind the New Argentinian Economic Crisis Paper
An economic crisis is ignited by a single event that creates a crisis of faith amongst investors and the public. The single event can range from the collapse of the top financial institutions, the depreciation of the national currency, the rise in interest rates, an increase in the national debt, amongst others. For Argentina, the possibility of an economic collapse came in the form of a currency scare that emerged at the beginning of 2018, setting the stage for systematic occurrences that clearly indicate that the country is experiencing a new economic crisis. This article explores the key reasons for the economic challenges in Argentina’s economy.
Since 2018 started, the Argentinian peso’s value has fallen by more than 30 percent against the American dollar. The loss of value in the national currency is a vivid indication of inflation. It not only places the Argentinian economy in a worse off position internationally but also makes everyday life expensive for the Argentinians. The prices of services and goods will continue increasing sending many citizens into poverty (Amaro, 2018). Unfortunately, this is not the first time that the value of the Argentinian peso has dropped. The nation has been burdened by numerous economic collapses through its long history that have all been marked by domestic currency problems and mismanagement.
The second reason for the economic crisis in Argentina is the macroeconomic solutions provided by the government. Most administrations increase public spending to help out the general population, but the move leads to higher inflation levels. The Argentinian economy started showing signs of deterioration when Cristina Fernández de Kirchner was in power. President Kirchner increased public spending, heavily subsidized items and utilities, and nationalized companies (Gallas, 2018). The reforms may have benefited the low-income persons and households in the society, but they greatly disincentivized the private sector (Drehmann & Juselius, 2014). The increased public spending also created practical challenges like giving rise .................GET A PLAGIARISM FREE COPY