
Venezuela on Brink of Hyperinflation - Kinnard
http://www.economist.com/news/americas/21659764-government-prints-money-hyperinflation-looms-crackers-caracas
======
themeekforgotpw
The United States has been working on a coup for Maduro, since its coup of
Chavez hasn't worked out for it. This time it would really like to install
Leonardo Lopez as he's willing to privatize Venezuelan oil to US companies.
The US has been encouraging and organizing protests, gatherings and projecting
anti-Maduro sentiment and news into the country.
([https://wikileaks.org/gifiles/releasedate/2012-06-18-08-canv...](https://wikileaks.org/gifiles/releasedate/2012-06-18-08-canvas-
how-a-us-funded-group-trains-opposition.html))

It's possible that if their economy (amid new US sanctions) collapse that this
could trigger the regime change we've been eyeing and the energy security
we've been wanting to establish there.

We do have to be careful about CALEC and UNASUR, however. South American
countries have been ever moving closer to isolating the US from its
multilateral diplomatic plans and are regularly condemning the US for its
interference, funding of death squads, war on drugs, and unilateral sanctions
of various South American countries. If we take Venezuela we need to make sure
that we don't isolate the rest of the continent.

~~~
Bonsanto
I live in Venezuela and item's prices are raising horrible, let me tell you
something I am electrical engineer and computer engineer, and my salary is
only 10.3$/month, ridiculous, but his is how socialism works everyone are
equalized but to poverty. To buy a car in Venezuela you need to save money for
50 years without buying food supplies, to buy a house it takes 200 years, to
buy dollars you need to be a friend of Maduro, my most bright colleagues have
left the country so I am.

~~~
loblollyboy
seems to work just fine in scandinavia

~~~
xienze
It always works until it doesn't. Sweden will have a particularly tough time
in coming years.

~~~
nextos
Why?

~~~
cb18
_Sweden will have a particularly tough time in coming years._

 _Why?_

Sweden is already in pretty bad shape due to immigration. But a large part of
the govt, and dominant information channels are intent on concealing that fact
as much as possible for some reason, hard for some people to admit they were
wrong I guess.

Shockingly enough, Sweden leads the world in rape and school arson.

Informative report on the horrible rape numbers:
[https://www.youtube.com/watch?v=UCGedOGCrnQ](https://www.youtube.com/watch?v=UCGedOGCrnQ)

 _Last year the cost for fires in Sweden’s schools ended at about SEK one
billion. 457 schools burned in 2009. About half of the fires were caused by
arson. However, compared with 2008 fires in schools has decreased, that year
512 schools burned, also then half of them caused by arson._

[http://www.stockholmnews.com/more.aspx?NID=5029](http://www.stockholmnews.com/more.aspx?NID=5029)

(Saying in both years that only _half_ of that already large number were
caused by arson seems a little suspect, that seems like a high rate for
schools to be combusting from other factors. Well, maybe they are counting
chemistry lab mishaps and the like, and the bulk of the cost is coming from
schools actually being burned down in arson attacks.)

 _“I don’t know why anybody would want to burn our school,” Ms. Bromster said.
“I can’t understand it. Maybe they are not so happy with life.”

The riots are not unprecedented here. In 2008 and 2010, immigrants clashed
with the police in the southern port city of Malmo. But the past week’s arson
attacks in Stockholm, the capital, and the spectacle of teenagers hurling
stones at firefighters have left many Swedes wondering what went wrong in a
society that has invested so heavily in helping the underprivileged._

[http://www.nytimes.com/2013/05/27/world/europe/swedens-
riots...](http://www.nytimes.com/2013/05/27/world/europe/swedens-riots-put-
its-identity-in-question.html?_r=0)

~~~
nextos
I had heard of this when living in DK, but never thought it had gone so bad.

------
nabla9
How to create hyperinflation in two easy steps:

1\. Build massive external debt in _foreigin_ currency.

2\. Have fixed exchange rate.

Its very hard to create hyperinflation using bad fiscal policy alone if you
are not in debt in foreign currency and have floating exchange rates. Floating
currency will balance exports and imports and printing money to pay debt in
your own currency works.

~~~
gassius
(words from Venezuelan living in Venezuela)

Actually, external debt in foreing currency is not an important factor in
what's happenig. Even with the oil price collapse in the last 12 months,
Venezuela current account balance is positive, and it's debt to GDP ratio is a
lot more manageable that US or EU (although of course that depends on which
exchange rate you calculate the GDP).

The hyperinflation (which we are not on the brink of, we are already living
through) is caused, IMHO, by three primary reasons (each one is composed or
caused by several others). 1- The total dependency of external supply, well in
finished goods or inputs for production. Last reliable numbers put us in order
of 90% of everything we consume is either imported or requires imported
material to produce. 2- The lack of enough cash to import either consumers
goods or prime materials to produce 3- The irresponsible printing of inorganic
Bolivares.

Any short of resetting the economy, which may or may not include dollarization
(or eurozation), is useless at this point, but once we are done with that, it
will take maybe 3 years or less to sort this mess.

~~~
dev360
Question for you - to what extent does the Venezuelan gov. interfere and
control the means of production and distribution of everyday household
products?

When I lived in Miami, we were fed incessant articles and anecdotes from
Venezuelan emigrants about how the government meddled with the allocation of
basic household goods.

~~~
gassius
Right now, interferes a lot, but as far as control goes, nobody is controlling
anything.

Since middle of last year, they started meddling with how supermarkets sells
to customers, for example, you can go to a supermarket only two days a week to
buy "price regulated products" which are every simple thing like pasta, milk,
flour, meat, cleansing products, soap, shampoo etc. Also they are trying to
implement a biometric system so you can buy only certain number of such
products once you are validated with your fingerprints. But of course they
have botcheted that as well, so now you are fingerprinted but on the 2 days a
week your are allowed to go, is a nightmare.

Probably the most of Venezuelan expats in Miami are antichavistas, but I tell
you one thing, nothing like this happened while Chavez was alive. OTOH, it
seems obvious that the problems of today are rooted in some of Chavez's
policies.

------
tomp
I wonder why there's inflation in Venezuela, and not e.g. in the EU or the US.
In particular, how is the printing of money by Venezuela different from the
printing that goes on in the West (Quantitative Easing).

I guess the only difference is that in the West, the money goes mostly to the
banks, which distribute it to the companies or invest it in the stock market
and real estate. Consequently, the rich get richer and the poor don't see any
of this money.

But I can't see why the situation in Venezuela would be any different. I can't
imagine the printed money reaches poor people - I mean, the recipients are
most likely big companies and people close to the governments, the elite,
exactly the same as in the US.

~~~
rukittenme
The Fed doesn't "give" money to anyone. They buy treasury bonds from the US
government.

~~~
tomp
You mean, instead of giving the government money directly, there's an extra
step whereby the government issues bonds and the central bank buys them?

~~~
dageshi
Yes, eventually the central bank will be repaid the dollars it spent, the
money spent and injected into the economy will be withdrawn as QE winds down.

Assuming QE ever ends of course.

~~~
pas
US QE has ended as far as I know.
([https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_...](https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_QE2.2C_and_QE3))

The purchased assets (treasury bonds and so on) are idling on the Fed's
balance sheet. Eventually as bonds mature the Fed just cancels the newly-
created-debt it used to buy the bond, and the asset just disappears from the
balance sheet.

------
z92
Add with it today's stock market collapse around the globe and we are possibly
entering another recession.

Indexes are down 7% in Dubai/Saudi and 3% in USA.

~~~
Kinnard
What do you mean when you say prices are down? CPI, some other indicator(s)?

~~~
z92
Indexes. Corrected.

------
lukeschlather
Here's an article from late may that disingenuously claims that the inflation
rate is at 500% year over year.

[http://www.xe.com/currency/vef-venezuelan-
bolivar](http://www.xe.com/currency/vef-venezuelan-bolivar)

So I guess the situation improved in June/July?

~~~
gassius
(words from Venezuelan living in Venezuela)

Easily, year to year (aug-14 to aug-15) is around 300%, maybe 400%.

Of course that depends on which items you calculate it. Maybe some industrial
supply is been less affected (if you can find those) and of course any
inflation number is artificially affected by the free gasoline, which not even
in this catastrophic situation has been adjusted.

But if you are like me, a middle class salary dependant professional, anything
you usually spend has been increased in 300-400%. A breakfast in a bakery
(panaderia) on aug-14 was around 100 Bs, now is between 400 and 500 Bs. On
aug-14 I averaged a weekly visit to the supermarket around 4.000 Bs, now is
12.000-15.000 Bs. I tire for your car was around 3.000 Bs, now is 20.000 Bs
(and you can't find them). And so on...

Of courses salaries has been, in most cases, or freezed or marginally
adjusted, so you can see where this is heading.

------
sillygeese
_Brink_ , you say?

