Posts Tagged ‘hyperinflation’

Venezuelan Socialism Out-Grinches Itself

Monday, December 26th, 2016

The ongoing failure of socialism in Venezuela is one of those continuing stories that always threaten to turn post-worthy. This week’s Christmas season hook: the government’s Grinch-like seizure of toys:

Caracas, Venezuela (CNN)Venezuelan officials have confiscated nearly 4 million toys from a toy distributor, accusing the company of planning to sell them at inflated prices during the Christmas season.

On Saturday, the government initially said it had confiscated 4.8 million toys. It revised the figure Sunday, putting it at 3.821 million.

Critics say the consumer protection agency, which targeted the toy warehouse this week, has become “the Grinch that stole Christmas” because many families won’t be able to buy the confiscated toys for the holiday.

Agency head William Contreras disputed that, saying executives at toy distributor Kreisel-Venezuela, the largest of its kind in the country, “don’t care about our children’s right to have a merry Christmas.”

Lack of toys are not the biggest problem for children in Venezuela. Thanks to the Magic Power of Socialism™, a child’s scrapped knee can mean death. (Hat tip: Stephen Green at Instapundit.)

Last month’s death of Cuba’s communist dictator Fidel Castro shouldn’t eclipse the ongoing collapse of Venezuela, Latin America’s other failed socialist state:

Except for Nicaragua in the 1980s, Venezuela has more wholly adopted Castro’s economic and ideological model than any other Latin American nation. The late Hugo Chávez took his cues from Castro on everything from his fondness for army fatigues to his 10-hour speeches. Chávez also adopted the Castro model of seizing private property, suppressing the independent media, hounding political opponents and making cause with rogues in Damascus and Tehran.

For a while Venezuela escaped some of the inevitable consequences thanks to a flood of petrodollars. That’s over. Inflation is forecast to reach 1,640% next year. Caracas is the world’s most violent city. Hospitals have run out of basic medicines, including antibiotics, leading to skyrocketing infant mortality. There are chronic and severe shortages of electricity, food and water, as well as ordinary consumer goods like diapers or beer. Nicolás Maduro, Chávez’s handpicked successor, has put his leading political opponents in jail.

And there’s hunger. An estimated 120,000 Venezuelans flooded into neighboring Colombia to buy food when Mr. Maduro briefly opened the border in July. Desperate Venezuelans are trekking through the Amazon hinterlands to make it to Brazil. And, like Cubans, they are taking to boats, risking their lives to make it to the nearby Dutch colony of Curaçao. Where there’s socialism there are boat people.

Zero Hedge has been keeping track of the twists and turns of Venezuela’s ongoing hyperinflation:

  • First Maduro’s idiot socialist government threw in the towel and announced they were printing currency with denominations 200x larger than the previous currency.
  • The results were swift: The bolivar crashed 22% in one week.
  • Then, following the moronic lead of Narendra Modi’s India, Venezuela announced that they were pulling 100 boliver notes from circulation, ahead of larger bills being available.
  • Then they closed the borders to prevent “currency smuggling.”
  • And yet, despite all this, despite children starving to death in the street, opposition parties cannot get their act together to oppose Maduro’s socialists. (Hat tip: Instapundit.)

    As long as the government keeps failed socialist policies and printing money, the economic nightmare plaguing the people of Venezuela will continue.

    Venezuela Re-institutes Slavery

    Monday, August 1st, 2016

    On June 2, 1816, Simon Bolivar landed in Venezuela and declared all slaves in Spanish America free. In 2016, the “Bolivarian Revolution” in Venezuela reinstitued slave labor on farms:

    Venezuelan ministry last week announced Resolution No. 9855, which calls for the establishment of a “transitory labor regime” in order to relaunch the agricultural and food sector. The decree says that the government must do what is “necessary to achieve strategic levels of self-sufficiency,” and states that workers can be forcefully moved from their jobs to work in farm fields or elsewhere in the agricultural sector for periods of 60 days.

    (Hat tip: Instaundit.)

    I’m sure if you went into Houston’s Fifth Ward or Atlanta’s south side and announced “Hey, due to a food emergency, we’re going to need to put you back on the plantations. But it’s only for 60 days!” I’m sure they’d be totally understanding…

    This follows months of food riots. Animals are starving to death in Venezuela’s zoos because they can’t afford to feed them. “Danta from the Caricuao zoo died from hunger.” There you go, liberals: An animal with a name! Now we just wait for all that spontaneous outrage…

    Danta Tapir

    So what is country whose people are literally starving due to the Magic Power of Socialism™ to do? Why, institute censorship, of course! And why reform your failing socialist econmy when you can threaten to arrest international executives because their local factories can’t produce goods due to a lack of raw materials?

    Leftist leaders around the world love proclaiming “Socialism or Death!” But as Venezuela proves yet again, socialism is death…

    Life in Venezuela is Murder

    Thursday, May 12th, 2016

    In the course of this piece on Venezuela’s bankrupt socialist government using tanks against “paramilitary” opposition, I came across this tidbit of crime information:

    The homicide rate in Venezuela is surging again in 2016, the Prosecutor General’s office warned in its first quarterly report of the year last week. Venezuela suffered 18,000 homicides in 2015 according to the Prosecutor General, but NGO’s put that figure closer to 28,000 murders for last year.

    Even given that Latin American murder rates are generally higher than North America and Europe, that’s shockingly high for a nation of 30 million. In fact, both figures are more murders than for all of the United States for 2013 (the last year full FBI figures are available). And U.S. figures include such idyllic peaceful environs as Chicago, Baltimore and Detroit.

    And life for Venezuelans who aren’t outright murdered continues to get worse. “The experiment with “21st-century socialism” as introduced by the late President Hugo Chavez, a self-described champion of the poor who vowed to distribute the country’s wealth among the masses, and instead steered the nation toward the catastrophe the world is witnessing under his handpicked successor Maduro, has been a cruel failure.”

    What our country is going through is monstrously unique: It’s nothing less than the collapse of a large, wealthy, seemingly modern, seemingly democratic nation just a few hours’ flight from the United States.

    In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war. Mortality rates are skyrocketing; one public service after another is collapsing; triple-digit inflation has left more than 70 percent of the population in poverty; an unmanageable crime wave keeps people locked indoors at night; shoppers have to stand in line for hours to buy food; babies die in large numbers for lack of simple, inexpensive medicines and equipment in hospitals, as do the elderly and those suffering from chronic illnesses.

    But why? It’s not that the country lacked money. Sitting atop the world’s largest reserves of oil at the tail end of a frenzied oil boom, the government led first by Chavez and, since 2013, by Maduro, received over a trillion dollars in oil revenues over the last 17 years. It faced virtually no institutional constraints on how to spend that unprecedented bonanza. It’s true that oil prices have since fallen—a risk many people foresaw, and one that the government made no provision for—but that can hardly explain what’s happened: Venezuela’s garish implosion began well before the price of oil plummeted. Back in 2014, when oil was still trading north of $100 per barrel, Venezuelans were already facing acute shortages of basic things like bread or toiletries.

    The real culprit is chavismo, the ruling philosophy named for Chavez and carried forward by Maduro, and its truly breathtaking propensity for mismanagement (the government plowed state money arbitrarily into foolish investments); institutional destruction (as Chavez and then Maduro became more authoritarian and crippled the country’s democratic institutions); nonsense policy-making (like price and currency controls); and plain thievery (as corruption has proliferated among unaccountable officials and their friends and families).

    A case in point is the price controls, which have expanded to apply to more and more goods: food and vital medicines, yes, but also car batteries, essential medical services, deodorant, diapers, and, of course, toilet paper. The ostensible goal was to check inflation and keep goods affordable for the poor, but anyone with a basic grasp of economics could have foreseen the consequences: When prices are set below production costs, sellers can’t afford to keep the shelves stocked. Official prices are low, but it’s a mirage: The products have disappeared.

    When a state is in the process of collapse, dimensions of decay feed back on each other in an intractable cycle. Populist giveaways, for example, have fed the country’s ruinous flirtation with hyperinflation; the International Monetary Fund now projects that prices will rise by 720 percent this year and 2,200 percent in 2017. The government virtually gives away gasoline for free, even after having raised the price earlier this year. As a result of this and similar policies, the state is chronically short of funds, forced to print ever more money to finance its spending.

    Though much of it will be familiar to anyone who follows this blog, read the entire story, if only for the factory owner who got in trouble for not stocking his bathrooms with toilet paper as per union rules (because it was unavailable at government stores), only to get in even more trouble for “hoarding” when he bought it on the black market…

    Venezuela Runs Out of Money to Print Money

    Thursday, April 28th, 2016

    The Magic Power of Socialism™ has finally dragged Venezuela far enough down the slope that the economy is going to hell at an ever accelerating rate.

    First and foremost, the country is so boned that they can’t even afford to print money anymore.

    In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported. And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business.

    Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.

    Snip.

    Last month, De La Rue, the world’s largest currency maker, sent a letter to the central bank complaining that it was owed $71 million and would inform its shareholders if the money were not forthcoming. The letter was leaked to a Venezuelan news website and confirmed by Bloomberg News.

    “It’s an unprecedented case in history that a country with such high inflation cannot get new bills,” said Jose Guerra, an opposition law maker and former director of economic research at the central bank. Late last year, the central bank ordered more than 10 billion bank notes, surpassing the 7.6 billion the U.S. Federal Reserve requested this year for an economy many times the size of Venezuela’s.

    When you run out of money to print money, perhaps you should take that as a sign the express train to you socialist paradise has permanently derailed.

    As part of its ongoing economic collapse, Venezuela’s government is now going from a four-day workweek to a two day workweek. Given the bang-up job the socialists have done running the economy, I suspect that will hurt less than the shortages of food and toilet paper.

    No wonder the people are flocking to sign a recall petition to oust socialist President Nicolas Maduro. But that’s not an easy road either:

    His adversaries first need to collect nearly 200,000 signatures, representing 1% of the nation’s more than 19 million voters. The National Electoral Council, which is closely allied with the government, has 20 days to authenticate them. If that drive is successful, the opposition must then collect nearly four million signatures over three days before the end of the year to trigger an actual recall vote. To win that new election, they would have to garner more votes than the 7.5 million Mr. Maduro got in the 2013 election.

    Typically this is the point (or long past it) where a third world nation’s military would declare “enough!” and depose El Presidente themselves. So far neither armed forces leader Vladimir Padrino Lopez nor National Guard leader Nestor Reverol have shown any signs of doing so…

    (Hat tip: Ace of Spades HQ.)

    Venezuela Returns to the Dark Ages. Literally.

    Tuesday, April 19th, 2016

    Thanks to The Magic Power of Socialism™, Venezuela is getting to experience the joy of living in a postindustrial society.

    Indeed, Venezuela has returned to the dark ages. Literal dark ages, in that this petroleum-exporting country can no longer keep the lights on. That’s why they’re instituting an extra half-hour of daylight savings time to avoid turning on lights.

    A hydroelectric plant at Venezuela’s Guri Dam, which produces two-thirds of the country’s power, is being affected by a severe drought.

    Officials have warned for weeks the water level has fallen to near its minimum operating level and could soon be shut down completely.

    Unlike other countries that use hydropower as a significant energy source, such as the US, Venezuela has no sufficient reserve energy system.

    The South American nation has grappled with blackouts for years. Caracas occasionally shuts down because of citywide losses of power and some rural areas are living mostly in the dark.

    More of that genius socialist foresight at work.

    SuperGenius Socialist President Nicolas Maduro also instituted mandatory three-day weekends to save energy.

    This is what happens when socialists run out of other people’s money. They get power blackouts, yellow water and water truck hijackings, 500% inflation and chronic food shortages.

    One wonders how much longer the populace is willing to take it…

    Venezuela’s Economy Burns

    Thursday, February 4th, 2016

    While one of the two leading Democratic contenders for President openly calls for socialism, let’s check in on how one socialist paradise is doing:

    The only question now is whether Venezuela’s government or economy will completely collapse first.

    The key word there is “completely.” Both are well into their death throes. Indeed, Venezuela’s ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it’s hard to see that getting any better for them any time soon — or ever. Incumbents, after all, don’t tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It’s no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

    Inflation has gotten so bad that Venezuelans are now paying more than 1000 bolivars to the dollar on the black market. Which is why the government is flying in planeloads of money. As P. J. O’Rouke said of similar hyperinflation in Nicaragua’s own socialist paradise economy: “You have to go to Moscow University two or three times to make money worth this little.”

    But with the opposition party having defeated the socialists in parliamentary elections, they can turn things around, right? Well…

    Socialist president Nicolas Maduro has changed the law so the opposition-controlled National Assembly can’t remove the central bank governor or appoint a new one. Not only that, but Maduro has picked someone who doesn’t even believe there’s such a thing as inflation to be the country’s economic czar. “When a person goes to a shop and finds that prices have gone up,” the new minister wrote, “they are not in the presence of ‘inflation,’ ” but rather “parasitic” businesses that are trying to push up profits as much as possible. According to this — let me be clear — “theory,” printing too much money never causes inflation. And so Venezuela will continue to do so. If past hyperinflations are any guide, this will keep going until Venezuela can’t even afford to run its printing presses anymore — unless Maduro gets kicked out first.

    But for now, at least, a specter is haunting Venezuela — the specter of failed economic policies.

    Philip K. Dick once noted that reality is that which, if you ignore it, doesn’t go away. Socialists may not believe in hyperinflation, but hyperinflation very much believes in socialism…

    Venezuela Says “No Mas” To Socialism

    Tuesday, December 8th, 2015

    It turns out that 100% inflation, widespread repression and corruption and endemic shortages of basic consumer goods are not a recipe for electoral success:

    Electoral authorities in Venezuela say the opposition coalition won a key two-thirds majority in the National Assembly in legislative voting.

    The National Electoral Council has published on its website the final tally of results from Sunday’s elections showing that two previously undecided races had broken in favor of the opposition, giving them 112 out of 167 seats in the incoming National Assembly. The ruling socialist party and its allies got 55 seats.

    The supermajority gives the opposition a strong hand in trying to wrest power from President Nicolas Maduro after 17 years of socialist rule. It now has the potential votes to sack Supreme Court justices, initiate a referendum to revoke Maduro’s mandate and even convoke an assembly to rewrite Hugo Chavez’s 1999 constitution.

    Sooner or later, socialists always run out of other people’s money.

    Though Maduro is still President, there are a lot of things the new government can do to improve the lives of their citizens:

    To end food shortages, the new congress can immediately lift price controls so entrepreneurs have an incentive to produce or import. The only way to strengthen the “strong bolivar,” as the late Hugo Chávez named the currency, is to make it valuable enough for people to hold. That means lifting capital controls and ending the central bank’s multiple exchange-rate system so business can get access to dollars. On current course Venezuela will run out of international reserves and face default in 2017. Restructuring debt now with creditors would make that prospect less painful.

    Which brings us to oil. Chávez used the country’s energy wealth to buy permission in Latin America—and Massachusetts; remember Joseph Kennedy’s Citgo PR campaign—for his many human-rights violations. As long as governments in the Caribbean were getting low-priced petroleum from Venezuela, they voted with the military government in Caracas at the Organization of American States.

    Chávez and Mr. Maduro have also traded oil for security help from Cuba’s intelligence apparatus. Putting an end to these trades would retain more resources inside Venezuela and send a signal that the days of government repression are numbered. Meanwhile, rejoice that one of this hemisphere’s lost countries has a chance at revival.

    Greece’s Insoluble Problem

    Thursday, February 5th, 2015

    Greece’s left-wing Syriza party was swept into power by promising voters they could have their cake and eat it too. The problem is that not only is there no cake to eat, but Greek already owes more money than it can repay on all the cake they’ve already eaten.

    The European Central Bank announced that it will no longer accept junk-rated Greek bonds as collateral. That may be why Greece’s new finance minister is already backtracking on election promises:

    His party, Syriza, told voters it would demand a debt reduction; now Mr. [Yanis] Varoufakis says it will settle for a debt restructuring. Syriza said it would end austerity; Mr. Varoufakis now says he will run a primary budget surplus even if that means dropping other commitments in the party’s campaign manifesto.

    Will Syriza keep promises made to the EU and the ECB any more than they kept their promises to Greek voters? Of course not. Greece is addicted to excessive government spending the way a junkie is addicted to heroin. In this sense, Syriza’s willingness to shamelessly lie to both voters and Eurocrats is what makes them the embodiment of modern Greece.

    Running an actual budget surplus, as Varoufakis is almost pledging, would go a long way toward solving Greece’s problems. (My understanding is that he means Greece will have a budget surplus before debt payments are taken into account, which means they’ve really slowed down the rate at which they’re digging their own grave…) But neither Greece’s voters nor its ruling class want the nation to live within its means. As I have noted time and time again, Greece has never practiced real austerity, which is cutting government outlays to match receipts. Greece’s budget deficit was 12.2% of GDP in 2014. (If it seems like I repeat a lot of this information in many of my updates on Greece’s debt crisis, it’s because I do, mainly because MSM reports seem to omit mention of these centrally crucial facts…)

    Greece’s participation in the Euro has harmed it by distorting its economy and making its export uncompetitive. That’s a problem, but that’s not Greece’s central problem, which is a dogged unwillingness to live within its means. It’s that addiction to deficit spending that has Syriza talking of defaulting on its debts. And it’s addicted to deficit spending because the modern European cradle-to-grave welfare state is unsustainable.

    But here’s the kicker: Neither leaving the Euro nor defaulting solves Greece’s central problem, or even provides temporary relief.

    Leaving the Euro doesn’t solve the problem, because Greece’s debts will still be denominated in Euros. Creditors who hold Greek debt won’t be content to be paid in devalued drachmas, so Greece will still be on the hook for what they’ve already spent.

    Defaulting will only make their predicament worse, because then no one will be willing to lend Greece money to continue their ruinous deficit spending.

    Doing both and printing drachmas to continue spending will only result in hyperinflation. The Greeks can ask Venezuela how that’s working out for them.

    If any Greek political party pledged to undertake real reform, reign in the Greek welfare state and end deficit spending, it’s escaped my attention. I suspect Greeks will have to experience a lot more economic pain, and no small measure of ruin, before undertaking the only obvious path to fiscal stability.

    Venezuelans Now So Screwed They Can’t Afford to Get Screwed

    Wednesday, February 4th, 2015

    Thanks to the Magic Power of #Socialism™, in Venezuela a 36-pack of condoms now costs as much as an iPhone:

    Venezuelans who already must line up for hours to buy chicken, sugar, medicines and other basic products in short supply now face a new indignity: Condoms are hard to find and nearly impossible to afford….

    On the auction website MercadoLibre, used by Venezuelans to obtain scarce goods, a 36-pack of Trojans sells for 4,760 bolivars ($755 at the official exchange rate), close to the country’s minimum monthly wage of 5,600 bolivars.

    It take a special kind of socialist magic to make your people too poor to have sex.

    In other Venezuela news:

  • The Maduro government has seized a supermarket chain. I’m sure that will do wonders to make more basic goods available to people.
  • They’re also arrested pharmacy owners for “conspiring” to create long lines out their stores. Maybe Maduro thinks business owners can conjure hard currency out of their own asses.
  • Interview with opposition leader Henrique Capriles.
  • One wonders if The Road to Serfdom or Economics in One lesson have ever been translated into Spanish…

    In Which I Point To Hot Air’s Venezuela Update and Say “What He Said”

    Thursday, January 22nd, 2015

    It was about time to do another update on Venezuela’s failing socialist economy when I dropped by Hot Air and saw that Ed Morrissey had already done all the heavy lifting for me:

    “The currency in what should be the richest country in South America has collapsed, as well as its economy, under the dual weight of falling crude prices and the Chavista socialism that has been choking the country for more than a decade.”

    More:

    Venezuela’s Chavista policies have always ignored economic reality. Socialism is a fantasy economic system, especially as implemented by Hugo Chavez and Nicolas Maduro.

    The difference between Venezuela and the nanny-state petro-economy in Norway is that the latter preserves itself by respecting private property and foreign investment. From the beginning, Hugo Chavez attacked both, nationalizing oil production and criminalizing private investors as part of his “Bolivarian” revolution. When it did that, it chased off the talent needed to run oil production and the investment needed for all other kinds of goods and services. For a short period of time, their oil revenue allowed it to succeed in ignorance. When that failed, Chavez and now Maduro reacted to those predictable consequences by predictably imposing all sorts of rationing mechanisms which only decreased incentives for production and investment, especially in the legitimate economy. Now that the price of oil has collapsed, so has the official Venezuelan economy — and a populace used to a high standard of living now endures massive shortages and ever-increasing oppression to cover it up.

    Morrissey, in turn, quotes a big chunk of this Matt O’Brien piece in the Washington Post:

    Venezuela’s government is running a 14 percent of gross domestic product deficit right now, a fiscal hole so big that there’s only one way to fill it: the printing press. But that just traded one economic problem—too little money—for the opposite one. After all, paying people with newly-printed money only makes that money lose value, and prices go parabolic. It’s no wonder then that Venezuela’s inflation rate is officially 64 percent, is really something like 179 percent, and could get up to 1,000 percent, according to Bank of America, if Venezuela doesn’t change its byzantine currency controls.

    What he said. Er, both of them.