Posted 10 months ago on Nov. 24, 2013, 1:12 p.m. EST by TechJunkie
from Miami Beach, FL
This content is user submitted and not an official statement
The value of Venezuela's currency, the Bolivar, has been plummeting:
The implied annual inflation rate in Venezuela is actually now in the triple digits, coming in at a whopping 283%, as shown in the chart below.
The implied monthly inflation rate is now at 54% per month, above the hyperinflation threshold of 50% per month. Venezuela is now the world's 60th example of hyperinflation.
Like any socialist regime, the Venezuelan government's solution to this problem is to simply outlaw inflation. To make inflation illegal.
How do you make inflation illegal? They're using an increasing number of tactics. First, they have an "official" exchange rate between the dollar and the Bolivar, and it's illegal to exchange dollars for Bolivars at a rate based on the true value of the Bolivar. Part of the enforcement of the government's currency-exchange controls is to try to prevent people from learning the true value of the Bolivar, known as the "black-market" exchange rate. Last week, for example, they demanded that Twitter block tweeters who announce the black-market rate. People were using the URL shortener bit.ly to bypass the government's Internet censorship, so they blocked all of bit.ly last week. (Google Translate URL for that last citation for y'all who don't hablasteis Español.) (Also take a look at this, if you want to see into the mind of a "Freedom Fries!" chauvinist in Venezuela. [Google Translate])
But trying to maintain the fiction that there is no inflation isn't working. Venezuela's economy is crumbling, and the country is not self-sufficient in most areas of agriculture. They have to import two-thirds of their food needs, and more than half of their consumer goods. Those imports must be purchased in dollars, not Bolivars with a fictional value that only applies within Venezuela. That means that for any business to stay afloat, they have to price goods based on their value in dollars. So the prices on consumer goods in Bolivars appears to be skyrocketing, because the value of the Bolivar is plummeting.
The Venezuelan government's response has been to blame the business owners for "usury", for pricing goods based on their actual cost. For not maintaining the fiction that there is no inflation. Instead of attempting to address their inflation, they're burying their heads in the sand and pretending that there really is no inflation. They're trying to control prices, just like during the New Deal, and the gasoline crisis in the 70s. Fixing prices at below market prices prevents the market from doing its job, and the result is always shortages. In the last year, Venezuela has had shortages of butter, sugar, flour, toilet paper, nearly every consumer good. The government's response has been rationing. The people's response has been natural: hoarding. Just like with gasoline in the 70s in the US. The country is plagued by crippling blackouts due to a crumbling infrastructure, that further inhibit economic growth. Especially for the technology sector, like my engineer.
They need a scapegoat, so they're blaming the "hoarders". And increasingly they're also also scapegoating business owners for waging an "economic war" against the government. On Tuesday, President Maduro was granted decree powers to fight this war. We had a War On Drugs and a War On Terror. Venezuela is fighting a war against its own economy. The country now has no parliament and no supreme court to put checks on the insane economic policy.
Last weekend, to buy votes ahead of the upcoming local elections, President Maduro ordered the largest electronics retail chain in Venezuela to lower its prices to reflect the fictional official exchange rate. The government sent troops to enforce "fair" prices. He told the people to "leave nothing on the shelves".
We will guarantee everyone has a plasma television. -- Veneuelan President Nicholas Maduro
This was the result:
After that, the government expanded its economic war, targeting textiles, shoe stores, toy stores, hardware stores and automobiles. Soon after that, Maduro announced a legal limit on the profit that a business can make, of 30%. The limit is based on the fictional value of the Bolivar that does not account for inflation, and so that means that doing business is now illegal in Venezuela.
Obviously, nobody is going to import electronics after what happened last week. Nobody is going to import shoes. Toys. Textiles. Hardware. Automobiles. Venezuela will soon be like Cuba, where people still drive cars that were built in the 1950s. Fidel Castro also waged an economic war against its own private sector. We all know how that turned out.
But wait -- the benevolent socialist regime is looking out for the people. Everybody deserves a plasma TV, right? Venezuela is entering into a joint venture with Samsung to build television factories in Venezuela. They're going to also need to build a lot of shoe factories, toy factories, hardware factories, textile mills, automobile factories, and more. Very quickly. But the government's cash reserves are down to $1.2 billion in liquid cash. So they're selling gold to Goldman Sachs, who will pay in dollars.
You can't simply outlaw inflation. We're going to see exactly why soon, as Venezuela slips into an economic depression. And we're also seeing a lesson on the Occupy-Wall-Street fallacy of scapegoating the "Bourgeoisie" for a country's economic problems.