Tulio writes:
When Chavez died, inflation was over 30%. How can an economy being doing well when 30% of your savings(if you have any) are being wiped every year?
First of all, wages have kept pace with inflation so no common people are getting their savings wiped out by inflation. That argument is no good. In a sense, the inflation doesn’t matter as wages are keeping up with prices so a Bolivar buys as much as it ever did.
As far as the parasitic rentier class who make money from annuities and land, the inflation may have hit them much harder. There is nothing the rentier class hates more than inflation.
Venezuela has had sky high inflation for decades. This was an ongoing problem for decades before Chavez showed up. But the Chavez government was the first Venezuelan government that actually tried to do something about via price and currency controls. And under Chavez, inflation was actually lower than it was under the previous regimes.
Right now, most of the inflation is because caused by the business community, the capitalists. Keep in mind that almost 100% of the Venezuelan business community hates the Chavistas. They have been trying to bring him down ever since he got in. But most Venezuelans hate the Venezuelan business class because of how they treated the poor majority for over a century before Chavez got in.
The Venezuelan business community has failed to win in almost 20 elections because nobody wants them in, and they are furious. They are determined to get rid of the Chavistas one way or another. So they are waging an economic war on Venezuela, which is almost exactly like what the CIA and the Chilean business community did to Allende. An economic war waged waged on Chile from 1970-1973. Remember Satan Kissinger saying saying, “We are going to make the Chilean economy scream.”
The problem is that there are shortages of many items. There should never be shortages of much of anything under a capitalist economy, and the Venezuelan economy is still run by the capitalists. Most of the things you buy in Venezuela, you buy them from a capitalist. Obviously, if there were serious shortages, that’s a great way to make money, right? All the Venezuelan capitalists have to do is import or manufacture more of whatever is in short supply, right? Simple.
In fact, the government has been yelling at them to do that for a long time now. The shortages of items are being caused directly by the Venezuelan business community. Quite simply, they are refusing to import or manufacture these items in short supply. So it’s all their fault. Why are they acting so economically irrational? Because their goal right now is not to make money. Their goal is to overthrow the Chavistas come Hell or high water. Hence they are deliberately creating these shortages in order to create an economic crisis that will get rid of the regime.
The government gives the Venezuelan business community dollars with which to import these items that are in short supply, as Venezuela doesn’t make many things in country. The Venezuelan business community then uses these dollars not to buy items in shortage, but to invest in speculative schemes overseas, often in Miami. In other words, the Venezuelan business community is refusing to buy these products in order to end the shortages.
These artificially created shortages are having some benefits for the capitalists. The shortage of course are causing some price rises. The government has tried to combat this by instituting price controls. But this is not working because the Venezuelan business community is now diverting vast amounts of products that should be sold in stores to the black market.
In the context of these artificially created shortages, of course a black market for goods has sprung up. The capitalists are making bank selling these items in shortage on the black market for big money, much more than they would sell for in the stores. In addition, the Venezuelan business community is shipping many items out of the country to Colombia, apparently because they can sell things for more in Colombia than in Venezuela.
Of the dollars that the state gives the capitalists to import products to relieve shortages, many products are imported to Venezuela. However, the capitalists are diverting fully 1/3 of all of the items they import to the black market or Colombia to get more money. The government is trying to stop it, but there is little they can do.
In addition, the Venezuelan business community is engaging in massive hoarding of these items in short supply. The news reported on a toilet paper shortage a while back. Soon whole warehouses full of toilet paper were found that were being hidden away by the capitalists. Vast warehouses full of just about every item in shortage have been found, all being hoarded by the capitalists to create artificial shortages.
Also the government gives the capitalists dollars to import things, as I noted. But the capitalists can sell those dollars for black market dollars which go for 20X the official exchange rate. So many of the dollars being given to import things are simply being diverted off to the black market via massive underground currency trading. The huge difference between the black market and official dollars is of course causing economic problems itself with currency. This is why Venezuela devalued its currency a wild back. They had to because of the black market in dollars.
The Chavistas are doing everything they can to try fight inflation and alleviate the shortages, but in part, the inflation problem is systemic and longstanding going back decades before the Chavistas took power. Google Dutch Disease.
And in part the inflation is being caused deliberately by the Venezuelan business community itself via the artificial shortages they are deliberately creating, the resulting black market and whatnot.
There is really nothing the Chavistas can do here with a hostile business community determined to destroy the economy. I can’t think of a single thing that they could do right now that would begin to address any of these problems. As long as the business community wages war on the economy, there is not much of anything they state can do. The Chavistas can’t win. They are screwed.
