This is what happens when the President controls the Central Bank: Good for a big laugh, before Argentina becomes the next Zimbabwe!

From the Merco Press:

The president of Argentina’s Central Bank (BCRA), Mercedes Marcó del Pont, stressed the importance of the recently approved bank’s charter reform and denied that printing currency leads to the creation of an inflationary state “since inflation is rooted in other causes”.

What are these other causes?

The banker added that “it is totally false to say that printing more money generates inflation, price increases are generated by other phenomena like supply and external sector’s behaviour”.

And the best part:

“We discard that financing the public sector is inflationary because according to that statement the increase in prices are caused by an excess of demand, something we do not see in Argentina. In our country the means of payment are adjusted to the growth of demand and tensions with prices must be looked on the supply side and the external sector”.

Professor Sargent. Please go to Argentina and “set them straight”, like when in January 1986 you wrote “An open letter to the Brazilian Finance Minister”, telling him what would happen if he continued with his policies. (Reprinted in Thomas J Sargent “Rational Expectations and Inflation, Second Edition 1993, pps 251-255)

Update: The Economist has a good report:

FOR the past 20 years a plaque has adorned the lobby of Argentina’s Central Bank, proclaiming its “primary and fundamental mission to preserve the value of the currency”. This week the plaque was removed after the country’s Congress approved a government bill that gives the bank a new, wordier mandate: “to promote, to the extent of its ability and in the framework of policies established by the national government, monetary stability, financial stability, jobs and economic growth with social fairness”.

Put more simply, the bank has lost the last shred of its legal independence and become the piggy bank of President Cristina Fernández’s government. It can now be required to transfer to the treasury cash equal to 20% of government revenues plus 12% of the money supply; to use its reserves (of $47 billion) at will to pay government debts; and to play a more active role in regulating banks and in steering credit to favoured industries.