Temporary President Saa said "A devaluation would mean reducing the salaries of workers." And most Argentinians seem to agree with him -- default is popular, and devaluation is not, which seems in part to have determined the government's course. But I was wondering how true this is. In a country where trade forms a relatively small part of the economy, wouldn't devaluation have a relatively small effect on inflation (and thus real wages)? And even a smaller effect on non-luxury consumption? Not that I'm for reducing wages even a small amount. But I was wondering if this widespread conviction that devaluation was bad for wage-earners -- when it seems their main problem at the moment is unemployment -- was in part the result of a successful PR campaign by richer owners of assets, and creditors, who would be hurt more. (I understand that if there was a simple devaluation, everyone who had debt in dollars would be hurt, which includes all homeowners, but I'm assuming a pesification devaluation that would hurt creditors instead.)
On the other hand, if I'm wrong, I was wondering what major factor I was leaving out of account in figuring the effect of devaluation on wages.
Michael __________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com