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In Argentina we experience one of the largest inflation rates of the world.(please click the top of the inflation rate column to order by inflation rate).

This is a large problem that causes stress and uncertainty to very big numbers of people. Periodically, indeed every year, there is a fight with the government called "paritarias" (spanish) in wich we agree, to put it more simply than it really is, by how much percentage the salaries will increase.

The government inflation rates are not credible. Big parts of the population, specially those opposed to the FPV, don't believe those are the inflation rates, they say they are higher in reality.

I was thinking to myself that maybe we could implement a system wich automatically raises wages according to inflation, at least for certain workers such as public teachers, that already have very established tasks and amount of hours of work per week assigned.

Then I read this article and though this is what i was looking for!

The article describes a process exactly to what I was thinking:

Indexation is a technique to adjust income payments by means of a price index, in order to maintain the purchasing power of the public after inflation

But then I thought to myself: Actually our government, (I suspect since I'm ignorant about economics ), uses inflation, by creating money to pay it's debts (to the government officials it's salaries for example) so they are not going to want to raise the salaries at the same time as inflation, but try to wait as long as possible, because they save money. In the article says how the pain is passed from workers to the state:

When a government decides to index wages of government employees to inflation it is to transfer the risk of inflation away from government workers onto the government.

What "helping Argentina" means: Increasing happiness of it's inhabitants in general. That's my way of viewing if a certain policy decision is ought to be taken. I focusing of making the public workers happier. In that sense, then yes, automation would be better for them.

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  • $\begingroup$ Can you please read the gist of the 'brilliant' article? Otherwise this seems like clickbait. $\endgroup$ – Giskard Oct 6 '16 at 7:56
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    $\begingroup$ @denesp doesn't say "brilliant" anymore, I edited out the subjectivity. It's a wiki article, and it's neutral topic! How can it be clickbait. It is a link to have something to relate to my post, and it's very relevant. Now I put everything needed in my post. $\endgroup$ – Santropedro Oct 6 '16 at 13:23
  • $\begingroup$ I meant we would have had to click it to see what you meant. But now that you have added some content we don't have to. Great! $\endgroup$ – Giskard Oct 6 '16 at 16:28
  • $\begingroup$ It is not clear what is the question here. The question title is very vague to function as the question ("help Argentina"? in what sense? Protect the purchasing power? Of whom? etc) $\endgroup$ – Alecos Papadopoulos Oct 8 '16 at 19:02
  • $\begingroup$ @AlecosPapadopoulos I edited the post! $\endgroup$ – Santropedro Oct 11 '16 at 20:03
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It seems that you answered your own question?

If the government's estimation of inflation rates are not credible, how can the government effectively index to inflation?

In any case, the first best solution to inflation in the long run is almost entirely an independent, competent central bank that has the capacity to raise interest rates, limit the money supply, and bring inflation under control. (And have a government that doesn't interfere with the central bank.)

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