Tracking Socialist Venezuela’s Death Spiral: 4,000 Percent Inflation

Photo: AP Images

The New American

by Bob Adelmann
11/22/2017

Excerpt:

It took 41,000 bolivars of the Venezuelan currency to purchase a single American dollar on November 1. Three weeks later it took 84,000 bolivars. Back on January 1 Venezuelans could trade just 3,100 bolivars to purchase a dollar. Patrick Gillespie, writing for CNNMoney, did the calculation: Inflation in Venezuela is running at a rate of 4,000 percent a year.

Which explains why Venezuelans are increasingly turning to barter in order to survive. A loaf of bread can be traded for a handful of beans because each has intrinsic value and can’t be degraded through a printing press.

It’s also symptomatic of the end stages of every socialist enterprise which is allowed to run its course. First is the desire on the part of politicians to buy votes and support of the people by promising to give them things they didn’t earn. In Hugo Chávez’s case it was easy: the country’s massive oil reserves were being sold on the world market at great profit to PdVSA, the once privately-held oil company. It was nationalized in 1976 and its workers replaced by Chávez in 2006. Those workers were given a choice: support Chávez or lose their jobs. Chávez’s energy minister was explicit: “PdVSA’s workers are with this revolution, and those who aren’t should go somewhere else. Go to Miami!”

PdVSA became the primary funding source for Chavez’s red revolution: the huge expansion of the welfare state without requiring the people themselves to pay for it.

When oil prices headed south, so did PdVSA’s revenues. Off by 40 percent, Chávez had two choices: cut back on the welfare state, or print the money to continue to pay for it.

When Chávez died of colon cancer in 2013 at age 59, his protégé Nicolas Maduro took over and continued Chavez’s socialist experiment. He borrowed against the country’s oil reserves — some $150 billion against an economy that generated just $250 billion a year — and expanded the money supply to continue to fund it.

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