
Venezuela's Inflation to Reach 1M Percent - JumpCrisscross
https://www.bloomberg.com/news/articles/2018-07-23/venezuela-s-inflation-to-reach-1-million-percent-imf-forecasts
======
ArtWomb
HKS's Ricardo Hausmann, one of the leading scholars of Venezuela's economic
history, lays out the case for military intervention by a coalition of the
willing made up of allies from North America, Latin America, the Caribbean,
and Europe:

D-Day Venezuela

[https://panampost.com/editor/2018/01/02/d-day-
venezuela/](https://panampost.com/editor/2018/01/02/d-day-venezuela/)

I believe current US policy in South America misses a vital and timely
opportunity. US policy should gear toward infrastructure projects throughout
the Western Hemisphere. Akin to China's $2T Belt and Road Initiative
throughout Central Asia and Africa. Just today Indian PM Modi and China's Xi
Jinping are holding an historic joint visit to Rwanda, where they will
announce new trade agreements.

Instead we see the same old strategy: sanctions in the hope of pro-democratic
regime change, that only hurt the very people themselves.

~~~
gremlinsinc
We need not get involved. Regime change and policing the world isn't our
responsibility. As bad as it is, we need our military to focus on us and our
borders alone, we need to stop meddling in foreign affairs that don't affect
us here at home.

~~~
swarnie_
> Regime change and policing the world isn't our responsibility

I find this to be a really odd statement as its been the USA strategy for
almost 70 years.

Does this mean the general sentiment and overall strategy is changing at long
last?

~~~
kamaal
>>Does this mean the general sentiment and overall strategy is changing at
long last?

Times change. 70 years back there were only 2 major powers. Europe was
recovering from the world wars, although bulk of their human capital was
intact, lets face it, Europe more or less lost the leadership of the world.

Also at the same time, many big geographical areas and ancient cultures got
their freedom from European colonial powers.

So it was in US's interest to prevent new competition from coming up on all
fronts- Military, Economy, Education, Human resources etc etc. So they had to
keep everyone in check. This works as long you keep producing top notch human
capital forever. You can't do that, as its quite literally impossible. Then
when you lose things one bit at a time, you also have to face the grim reality
that you are better off minding your own business.

Its not easy to stop the whole worlds progress, to preserve your own. At least
not forever.

------
realusername
At this point 1M% or 200k% inflation is pretty much the same, the currency
just stopped working completely.

~~~
JumpCrisscross
> _1M% or 200k% inflation is pretty much the same_

To the average person and in the short run, yes. More broadly, given Caracas'
hard currency antics, it is a measure on the reallocation of assets from the
broader economy to Maduro's cronies. (State products, _e.g._ food and petrol,
are purchased with local currency. Cronies buy hard currency at a fixed price
and resell it at the inflated price. This mechanism moves real wealth into
their hands.)

~~~
nojvek
Venezuela, one of the world’s oil rich nations got the back hand of the
resource curse. It pains me to see how much their citizens suffer.

US and EU have their problems and aren’t perfect, but makes me appreciate how
far we’ve come as a functional civilization.

------
nutjob2
So between the time you decide to go for coffee, and you get there (15 min),
the price has gone up by 28.5%.

~~~
grecy
I was recently in Zimbabwe (yes, I was given a $100 trillion bank note) and
everyone there told great stories about when you went into the store you would
give the cash over straight away, because by the time you got back from
picking out stuff off the shelves the money you had would be worthless.

It was fascinating to spend 6 weeks there and really understand what that kind
of falling currency does it a place and it's people.

~~~
slazaro
Honest questions: How do costumers and shopkeepers know the current value of
the currency? Do they constantly check on phones/etc to figure out the price?
And how do shopkeepers decide on the specific amount they will charge? Do they
have a fixed price they want to sell in a more stable currency like USD and
convert on the fly?

~~~
grecy
It never ceases to amaze me how people on the street simply know this stuff.
Word gets around, rumors leak out.

I was told whenever the government printed a new bill, the street accepted
it's value at $5USD (no matter what the numbers on the front said), and
therefore everything that came before it went down appropriately. So let's say
yesterday the biggest note was $1billion, and then today they print a
$10billion note and release it - the street says it's $5USD, so your $1billion
note is now worth only 1/10 of what it was yesterday, simply because a new one
exists.

How long until they release a $20billion note? (or will it be $50billion?)
nobody knows - except the corrupt govt officials who are profiting off the
whole thing both ways.

I was told it was common to go to the Mozambique border and see guys
exchanging notes that officially didn't even exist yet - the corruption ran so
deep the govt. officials would release a $50billion note, but behind the
scenes they were already printing and selling $100billion (and maybe even $200
billion) notes to friends and family and business associates to line their own
pockets.

Then of course there were the times they would officially announce they were
removing 3 (or 6) zeros from everything. So that $100 billion (100 000 000
000) note that was $5 USD is now officially only $100 000, but it's still
supposedly worth $5 USD. Then next week they put out a $200 000 note, and what
was worth $5 USD last week is now only worth $2.50USD, but it gives them a
chance to get rid of a whole bunch of zeros, because, really, what good are a
bunch of zeros anyway?

Yes, it really was that nuts. Utter insanity. I stayed with a family who took
out a desk draw utterly stuffed with bills ranging from a few hundred million
dollars up to the magical $100 trillion bill (the world's single largest bill
ever printed). It's monopoly money now, and they even laughed about how it was
back then too.

For my first weeks in the country I tried as hard as I could to wrap my head
around the whole thing, and wondered endlessly how it all functioned. It felt
like MASH or the book Catch 22 - so absurd it simply couldn't be real. But it
was.

And while they now have "bond notes" which are supposedly locked to the $USD,
I was able to sell mine on the street for ~30% more than face value, and even
more if I dived into their digital currency - virtually all of zim runs on a
digital currency now (called EcoCash) - I suspect it has one of the highest
uptakes of digital currency on the planet because everything else is
dysfunctional.

These days there really is an app for that (in reply to lower comment)

~~~
lscore720
Wow. I've never read a first-hand experience of someone in the thick of it.
Incredible, thanks for sharing.

------
baybal2
How currencies collapse:

1\. In debt pumped economies (the majority of world countries these days,) the
value of major assets and debt put into them exceeds the money in circulation
big time.

2\. People pop their piggy banks, sell cars, flats, company stocks just to get
some food. Price of these very major assets plunge, and the holders of tbils,
bonds, and etc (rich people) begin to panic.

3\. When even rich people's money can't buy food and basic necessities, many
of them run away from the country with what things they have left, pushing
currency further down.

4\. Whomever is left in the country is left with a lot of paper, and no food.

------
cal5k
It makes me angry to see how such rampant government ineptness can completely
destroy a once-thriving economy in a decade. Worse still is Maduro’s continued
insistence that it’s a conspiracy against Venezuela rather than idiotic policy
which is to blame.

~~~
nabla9
People chose populism in 1999. This is the end of this path.

Populism has the message that the elites are corrupt and we can solve issues
by just selecting the right people to lead us.

Populism assumes that there is a such thing as "will of the people" and the
job of the government is to simply implement this will.

~~~
samdoidge
Why conflate this with populism? This is the result of poor economic policies.

~~~
JumpCrisscross
> _Why conflate this with populism? This is the result of poor economic
> policies._

The poor policies resulted from first an elite ignoring the poor and then the
poor deciding they wanted majority rule. Majority rule devolved into anti-
intellectualism and reduced respect for property rights, which in turn led to
falling production. Populism isn't the root cause, but it's damn close.

(This story rhymes with the fall of the Roman Republic.)

~~~
tcbawo
Is it populism or disrespect for property rights? What company would make a
major investment after nationalization of industry? It seems you could be
'populist' by promoting education and investments to bring up the poor without
destroying a country.

------
WindowsFon4life
A complete lack of reference to the elephant in the room. Chavez was always
very clear on his approach, and his 100% embracing of the S-word. Yet not
referenced at all here.

~~~
alecco
And several major S-leaning populist candidates in the West openly supported
Venezuela until very recently.

------
tzfld
Still much lower than in Hungary after WW2, 41.9 quadrillion percent.

~~~
isostatic
"When the pengő was replaced in August 1946 by the forint, the total value of
all Hungarian banknotes in circulation amounted to 1/1,000 of one US dollar"

All notes, in the whole country, were worth 1/10th of a cent.

~~~
toadworrier
Which of course means it is not literally true, beause the paper those notes
are written on is worth a lot more.

------
alltakendamned
How do people deal with this in real life? I mean, is there a way to safeguard
savings in such a scenario, or have enough money for day to day purchases like
food ?

~~~
zorked
I grew up in Brazil in the 80's. There was hyper inflation, though not quite
up to the 1M percent level that Venezuela is facing. (1M percent is a
collapse, something else entirely)

Coping mechanisms:

\- Money in saving accounts gets instantly shifted into more stable financial
assets so the "returns" are approximately the inflation rate.

\- Banks get really good at working fast. We had same-day nation-wide cross-
bank settlement of checks.

\- "Proxy" stable semi-currencies are used. The government would post several
daily indexes like UFIR, TR, which could be used to refer to approximately
stable values over a period of time. (one of those indexes, URV, eventually
became the currency that is used today.)

\- Products don't have prices stamped on them. For example, monthly magazines
would have alphabetic codes that could be converted to their actual cost by
looking at a table which was updated every few days. (You can see the remains
of this system in used book stores where books are sometimes still stamped
with small zodiac signs, though the tables are no longer updated)

The basic flow of life is: get paid, _immediately move money to a bank account
or you are dead_, get used to the idea that value denominations increment over
time. In practice you are constantly thinking in terms of indexes rather than
the "real" monetary value.

~~~
toadworrier
> _immediately move money to a bank account or you are dead_

So the "bank account" you are refering to is (or is a practically automatic
gateway too) one of those "more stable financial assets" you mention above.

The fact that the banks can be trusted to do that is a sign of some kind of
orderliness. I wonder if such an option exists in Venezuela right now.

~~~
zorked
Oh, for sure. Inflation was the result of the government failing to manage its
debt. Institutions, businesses and the law still existed. Even the mechanisms
for coping with hyperinflation were market innovations (like incredibly fast
banking in a gigantic third world country in the 80s, or the financial
instruments backing savings accounts). I'm not sure that Venezuela has any of
that at the moment.

------
oh-kumudo
So their government is basically bankrupted and have 0 credibility, in literal
sense. What could it do to save itself, except being overthrown by its people?

~~~
alecco
The government armed supporters creating a massive paramilitary force.

This will end in a civil war.

------
economistrator
They are suffering from meta inflation.

------
Bromskloss
How about a gold standard?

------
vermontdevil
Good long article on Venezuela and the history of oil

[https://foreignpolicy.com/2018/07/16/how-venezuela-struck-
it...](https://foreignpolicy.com/2018/07/16/how-venezuela-struck-it-poor-oil-
energy-chavez/)

~~~
okket
Discussion from yesterday
[https://news.ycombinator.com/item?id=17590637](https://news.ycombinator.com/item?id=17590637)
(22 comments)

------
gtt
Honest question: Why don't they just adopt bitcoin and stop this madness?

~~~
nutjob2
"Venezuela’s inflation will skyrocket to 1 million percent by the end of the
year as the government continues to print money to cover a growing budget
hole, the International Monetary Fund predicted on Monday."

If you're not talking about the government, who obviously like printing money,
then the issue is that people are paid in the local currency and have no
choice and shops may be forced to accept it. The black market has long ago
dealt in USD. Bitcoin doesn't help anyone since people don't have enough money
to eat, let alone buy computers or mobile phones. Also Bitcoin is not a hard,
ie stable, currency.

~~~
dantudor
USDT is stable and much easier to move across the border into the country than
USD itself

~~~
jmanderley
Even if we assume Tether to remain stable, that doesn't solve the fundamental
problem of even getting someone to buy local currency in exchange for fake
Dollars.

------
dingo_bat
When will a superpower (China or USA) step in and end this miserable spiral?
An effective military action and instalment of a puppet government, followed
by a free reign to multinational oil companies should swiftly end the miseries
being endured by the Venezuelan populace.

~~~
phyller
And the moment that happens every single bad thing in Venezuela for the past
15 years and the future 1,000 years will be their fault. The entire world
would condemn the USA as imperialists and there would be protests in the
streets. Europeans would scoff at American brutality. And 5 more Chavezs with
their socialist revolutions would be born, raging against US hegemony. That's
what Chavez did in the first place, he was "protecting Venezuela from the
imperialist USA". All the problems caused by his socialist revolution were
actually because of US interference. There are still people today, here in
this board, that believe that.

~~~
andrepd
Name one (developing) country that was improved by US interventionism. I can
name a dozen that were destroyed, ransacked by US businesses, genocides
committed, etc.

~~~
phyller
I was arguing against US intervention. But since you asked... Mali. When i was
there the local pharmacist had a picture of president Ford, of all people, up.
Turns out the US had run a program to eradicate a particularly nasty parasite
in the region. They'd also built the road, the irrigation canals that allowed
them to grow rice, and the bridge that connected them to the other markets.
I'm American and i don't know this stuff, gauranteed this is not being
reported in the foreign press.

Kenya is one of the more stable countries as far as Africa goes. When i was
there i was surprised to learn from the local newspaper that the majority of
their governments entire budget is foreign aid, much from the US. They use
that money to pay Chinese (not American) companies to build infrastructure.

My Iraqi friends, particularly a friend from Mosul, criticized the US.
Apparently the problem wasnt that the US came (Hussein was largely feared and
hated, and abused his people), but that they didn't take enough control, and
so left a power vacuum which was filled by criminals (which would probably
happen in Venezuela). However more recently the downfall of ISIS can be
credited to US intervention.

My Libyan friends were frustrated by the US lack of intervention, though a
little help was provided. It's amazing how oppressed people don't have a
voice. I didn't know they hated Gaddafi until the revolution happened, then
they were so incredibly passionate.

South Korea. Or do you think North Korea is better?

Every country in Europe. Especially Eastern Germany. But you deliberately
exclude them. However a few eastern European countries had some US airstrikes
to stop genocide, which actually seemed to work pretty well.

Pretty much every developing country that has been peaceful and stable has
received large amounts of monetary, economic, or other aid from the US.

How do you quantify bad things that didn't happen? I would posit that since
the end of WW2, the entire world on average has been more peaceful and
prosperous than any other time in history. Billions pulled out of poverty. The
vast majority of people living their entire lives without experiencing war.

But again, for both the US and Venezuela's sake, I think it is important the
Venezuelans fix this.

