We must insist that overheating a productively weakened economy with the help of “cheap” money to seduce voters is not a sustainable economic policy over time and that soap bubbles always burst.
We must insist on an economic, commercial and financial education, as well as on citizen organizations of real observation, so that the authorities (monetary and public) do not continue abusing the trust of the governed in each electoral cycle.
In this way, we will avoid falling into economic policy errors that seek to compensate for the poor work done so far by our central bank, Banxico.
Today’s persistent inflation is a monetary phenomenon, despite what anti-monetarist academics, salaried economists, and central bankers themselves say. They insist on the issue of imported or structural inflation because they are paid to say that.
Inflation controlled from the Treasury, not from Banxico
The act of “inviting” staple food companies to keep their prices fixed to reduce inflation is a very desperate measure that has future costs. The cost for these companies, some of which are publicly traded, is that they will inevitably experience greater pressure to increase their prices when the Package Against Inflation and Scarcity (PACIC) .
These food companies, especially the public ones, are not reporting great net profits, while the price of their shares has not behaved in a positive way either. Therefore, putting up with and putting up with their prices will eventually be counterproductive for the consumer. Let’s not rule out seeing more delisting of companies listed on the Stock Exchange in the near future in the face of this type of situation.
Let’s say that the PACIC is only a temporary accommodation measure, where companies will wait for better times to raise their prices. Of course, once inflation subsides, then the food companies will raise their prices, but in an accumulated way.
Diluting and postponing the price increase of some basic products until February 2023 could be worse for the economy, because at that time Banxico’s interest rate will be higher, implying a higher cost of financing, which is a less favorable scenario for price increases. Let’s say it’s a more ‘stagflationary’ scenario.
Regarding the issue of fuels, the containment of the price of gasoline is a decision totally made by the government in its capacity as a public company. The government faces a monetary cost and an opportunity cost for having fewer resources for current spending.