La inflation It is one of the topics to which more and more analysis and comments are dedicated in the news. It is a simple economic phenomenon to perceive, just observe the price increases in the goods and services that we buy month after month. However, their measurement is complex and the identification of all its consecuencias, it is even more complex.

The National Institute of Statistics and Censuses (INDEC) reported that the Consumer Price Index (CPI) increased in the month of June 5,4%, which implies an accumulated variation in 2022 of the 36,2% (Jan-Jun) and places the year-on-year level at 64%, the highest percentage variation in the last 30 years. The variation of this index is usually used to estimate the inflation of all prices, but it is not correct to do so. The CPI measures changes in the prices of a representative consumer basket whose choice is relatively arbitrary. While inflation occurs when all prices in the economy rise and do so in a sustained manner.

The report presented emphasizes the effects generated by inflation in society, focusing on the experiences of inflationary processes in Argentina. Why is it important to analyze inflation? In modern economies, the economic problems of what, how and for whom to produce are largely resolved in markets, where individuals use the information provided by prices to make their decisions and, consequently, allocate their resources. Therefore, if prices change constantly, the available information is confusing and can generate, among other things, inefficiencies in the allocation of available resources.

Along its history, Argentina has been characterized by numerous inflationary episodes and hyperinflationary. The report seeks to cut Argentine history into periods that share some common characteristics related to the behavior of prices, 1914-1944, 1945-1974, 1975-1991, 1992-2001 and 2002-2022.

Commenting on the last two periods, is based on the decrease in inflationary inertia in the first months of 1991, followed by 104 months with an average rate of less than 2% year-on-year, which is known as deflation. That is, for more than 8 years a historically low rate was maintained. Since 2002, inflation seems to follow an increasing trend, although periods of increased inflation and periods of decrease coexist. As the years go by, increasingly higher levels of price increases are being recorded, reaching the current value of 64% year-on-year.

The consecuencias of inflation are serious, mainly economic and borne to a greater extent by people with fewer resources. However, the consequences of this evil are not only economic, but also affect the morality and psychology of citizens. Inflation works like a tax on money balances existing (the banknotes in people's hands would be the tax base of said tax), this tax does not have the approval of the representatives of the people and the provinces, since it has not been put into consideration by the elected legislators.

The effects analyzed in the report are:

• economic costs: the loss of purchasing power, which occurs because the real cost of goods and services increases, that is, family income is less and less enough.
• Anticipated inflation: inflation expectations are reflected in higher interest rates, this raises the opportunity cost of holding money, “shoe sole cost”, “menu cost” “Olivera-Tanzi” effects.
• Unanticipated inflation: It is not included in contracts and, therefore, in forward contracts, one party always loses while another wins. In general, the creditor loses and the debtor wins.
• Costs in both anticipated and unanticipated inflation: competition to maintain customers, companies try to transfer as little as possible the increase in costs generated by inflation to the prices of their products, the "reduflation" effect.
• Macroeconomic costs: Inflation encourages current spending and punishes the saver, in episodes of high and persistent inflation it generates a decrease in investment (Gross Capital Formation) and results in lower growth rates of the economy (Gross Domestic Product).

The most profound consequences that inflationary periods can present, the so-called “hyperinflations”, generally marked by consequences of war episodes or external crises. The report presents the hyperinflationary situations in Europe: U.S.S.R., Germany, Hungary and some countries after the fall of communism; and from South America: Bolivia, Peru, Brazil, Venezuela and the case of Ecuador.

In conclusion, the most direct and economic consequence of inflation is the loss of purchasing power of the money that families have. Individuals' income deteriorates in real terms, that is, they are increasingly able to afford less. But in addition, inflation affects people's behavior and even their psychology.

The costs to the economy as a whole, from a macroeconomic perspective, are even more serious. First, global savings decrease and uncertainty about the future increases. Public policies lose credibility and the financial system is weakened. All these effects harm the royal investment and this is the most important source of for Growth of productivity. Therefore, the most important negative consequence of high and persistent inflation over time is economic stagnation.

Secondly, from the macroeconomic perspective, the damage of high inflation seems to fall more heavily on people with lower incomes. That is to say, inflation partly generated by the Central Bank's monetary issue intended to finance successive public deficits, functions as an unsanctioned and regressive tax.

Of course, the problems generated by inflation They are not exclusive to Argentina, there have been important hyperinflationary events in history. Currently, inflation is increasing in most countries in the world, however, Argentina's inflation level is above the average of comparable countries. If, for example, we take Latin America, between January-June, only Brazil (11,85), Argentina (36,2%) and Venezuela (53%) exceeded double digits year-on-year.