Venezuela's projected inflation rate for 2018: One million per cent

There are 20 replies in this Thread. The last Post () by Carlos.

  • Opinion column from the Washington Post

    Venezuela’s inflation will hit 1 million percent. Thanks, socialism.

    by Megan McArdle Columnist

    July 27, 2018


    According to the International Monetary Fund, by the end of the year, the annual inflation rate in Venezuela will reach 1 million percent.

    A number like that is hard to grasp. Simply put, a candy bar that cost $1 today would cost $10,000 at the end of a year. Anyone in that position would understandably rush to spend the money right now, on anything that might possibly hold its value. Everyone else would too. The entire economy becomes a giant game of monetary “hot potato.” Saving or planning becomes a sucker’s game.

    Venezuela is not exactly a struggling undeveloped country; it has the world’s largest proven oil reserves. How the heck did this happen?

    There are two answers, one technical and one political.

    The technical answer is that hyperinflations occur because the government wants to spend much more money than it is collecting in taxes — so much more that no one is willing to lend it the money to cover the deficit. Instead, the government uses the central bank to finance the deficit. That puts more money in the economy, but since it’s chasing the same number of goods and services, prices rise to soak up all the extra cash. Unless the government manages to close its budget deficit, it must print even more money to buy the same amount of stuff . . .

    Rinse and repeat a few times, and the inflation rate starts running into many zeros. The end generally arrives in one of two unpleasant ways: The government decides to stop the madness and implement a strenuous reform program, or the currency becomes so utterly devalued that churning out more of it is pointless. By the end of its hyperinflation, Zimbabwe was printing bank notes that ran into the trillions.

    But it’s not a secret that this is where hyperinflation ends. Why did Venezuela embark on the road to destruction? And why does the government stay on it while the citizenry slowly starves?

    In a word, socialism. After his election as president in 1998, Hugo Chávez pursued an increasingly aggressive socialist agenda, one that continued under his 2013 successor, Nicolás Maduro. Chávez nationalized foreign oil fields, along with other significant portions of the economy, and diverted investment funds from PDVSA, the state-owned oil company, into vastly expanded social spending.

    Unfortunately, Venezuela’s heavy, sour crude oil was unusually hard to get out of the ground. Continual investment was needed to keep it flowing. So was the expertise of the banished foreign owners and the PDVSA engineers Chávez had purged for opposing this scheme. Production plunged; the only thing that kept Venezuela from disaster was a decade-long oil boom that offset falling production with rising prices.

    Then came the 2008 financial crisis that crushed global demand for oil, followed by the onrush of U.S. shale oil, driving prices down further. And no one would loan money to Venezuela that couldn’t be repaid in oil. Meanwhile, unwilling to admit that socialism had failed, Venezuela made a fateful turn to the central bank.

    Now, one could say that this is not an indictment of socialism so much as the particular Venezuelan implementation of it. But it’s striking how the precarious economics of socialism, including hyperinflations, are tied to petroleum. Many of the notable hyperinflations in history were tied to the collapse of the Soviet Union. And the story of the Soviet collapse is also a story about oil.

    Central planning had wrecked the Soviets’ grain production by the 1960s, and collectivized industry didn’t produce anything that the rest of the world wanted to buy, leaving the Soviets unable to obtain hard currency to import grain. Oil sales propped up the Soviets until the mid-1980s , when prices crashed as new sources of oil came online (sound familiar?). The Soviet leadership was forced to liberalize to rescue the economy. The U.S.S.R.’s collapse soon followed.

    Socialism, in other words, often seems to end up curiously synonymous with “petrostate.” The new breed of socialists cites Norway as a model, but saying “we should be like Norway” is equivalent to saying “we should be a very small country on top of a very large oil field.”

    Without brute commodity extraction, you need capitalist markets to generate a surplus to distribute, which is why Denmark’s and Sweden’s economies have more in common with the U.S. system than with the platform of the Democratic Socialists of America. And as both Venezuela and the Soviet Union show, even oil may not be enough to save socialism from itself.

  • Update to Bloomberg’s Cafe con Leche Index:


    The Cost of a Cup of Coffee in Caracas Just Hit 2,000,000 Bolivars.


    “Just days after the International Monetary Fund issued an eye-catching forecast -- inflation of 1,000,000 percent in Venezuela this year -- the data on the ground suggests that even that number may turn out to be too low.

    The price of a cup of coffee measured in Bloomberg’s Cafe Con Leche Index soared to 2,000,000 bolivars this week from 1,400,000 bolivars the week before. Back in late April, the price was 190,000 bolivars. That three-month increase equates to an annualized rate of 1,227,638 percent. (The trailing 12-month inflation rate, while still out of control, comes in much lower for now: 86,857 percent.)

    In its report this week, the IMF compared Venezuela’s economic crisis to some of the worst in history, including that of Germany in the 1920s and Zimbabwe a decade ago.”


    Full story:


    https://www.google.com/amp/s/w…looking-low-for-venezuela

  • Yes, it was a narrow escape. Only about 2.5 points in fact (678.774 votes) which was a very narrow margin, with many eyes now turning to October 2019, when hopefully Macri and co will have got their act together and prevent another disastrous populist government getting back in - otherwise it's chau baby, hello Venezuela.

  • I have met several Argentinians who are pissed that so many Venezuelans fleeing their country are coming to Buenos Aires. 'Can't they go somewhere else?', they asked.


    It amazes me how people who are descendant of immigrants who fled their own countries because of war and/or famine (so is the case of Europeans in the early '900) can be so judging and snob toward the others.

  • I couldn’t agree more, serafina . How can people be so selfish? This is the same attitude we are experiencing among certain factions in the US, regarding refugees fleeing gang violence and seeking safe asylum in our country.


    Even worse than the uncaring coldness towards fellow humans is the fact that the very most inhumane of these people like to call themselves “Christians.”

  • I usually tell them that I am also an immigrant to this country, and it is just out of sheer luck that I came here on my own will and escaping no life-threatening danger back home. And they say 'But you cannot compare yourself to Venezuelans'. Indeed, I had less reasons than them to come to Argentina.


    Or maybe it is because I am Italian and they have Italian ancestry. Short memory folks, short memory.

  • I usually tell them that I am also an immigrant to this country, and it is just out of sheer luck that I came here on my own will and escaping no life-threatening danger back home. And they say 'But you cannot compare yourself to Venezuelans'. Indeed, I had less reasons than them to come to Argentina.

    In fact, these people who say "you cannot compare yourself to Venezuelans", are making a compliment to you. Coming from Italy nowadays, a First world country, means that you have a superior education and well to do background. Therefore, to not take offense for that.

  • In fact, these people who say "you cannot compare yourself to Venezuelans", are making a compliment to you. Coming from Italy nowadays, a First world country, means that you have a superior education and well to do background. Therefore, to not take offense for that.

    Sorry Carlos, but I have to take issue with that statement.

    Coming from a so called first world country such as Italy or the UK does not signify that the person necessarily has a superior education and much less, a 'well to do background', as you put it.

    There are millions of well educated Argentines here and all over the world and that statement is just one reflection of how so many Argentines put themselves down all the time. Give yourself as break why don't you?

    It never ceases to amaze me that so many Argentines have the impression of 'the grass is always greener' and that any immigrant from Europe, North America or Australasia will, by default be put on a pedestal as a paragon of all that is good and virtuous.

    But back on topic, I personally find it indefensible that Argentines should moan about refugees (for that is what they are) from Venezuela, but instead should be proud of their nation and what it has to offer those who have chosen (or simply been forced by circumstances) to escape here due to the ravages of life in their own country.

  • I think that Venezuelans are very mixed, some are highly educated, with a university degree. They are fleeing a dictatorship, they do not have a choice.
    I can see many offer university classes on tusclases.com.ar. When we were selling kitchen wares, we sold a bunch to a Venezuelan family. We made them a great price. They were really in need of anything, even 4 different forks were good for them.
    One cannot but show solidarity to people who find themselves in dire straits for causes out of their control.



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  • I did not mean that Venezuelans are inferior. I just remarked that you have perhaps, understated, a simple compliment.

    I heard that Venezuelans are doing their best in Argentina. They find quickly jobs, and compared with the present state of Venezuela, Argentina seems to be a paradise for them.

  • I know about 5 Venezuelans who live here. Every one is working and trying to make a success of their lives.


    Last week in Montevideo , I met another couple , both working hard to send cash back to their families.


    Pretty impressive,

  • I know about 5 Venezuelans who live here. Every one is working and trying to make a success of their lives.


    Last week in Montevideo , I met another couple , both working hard to send cash back to their families.


    Pretty impressive,

    Even with our devaluated peso, the money that they can send, (fortunately) is a lot.

    I ws informed that they send average 50 dollars per month. Here is almost nothing. There is a great relief fopr their relatives.

  • I did not mean that Venezuelans are inferior. I just remarked that you have perhaps, understated, a simple compliment.
    I heard that Venezuelans are doing their best in Argentina. They find quickly jobs, and compared with the present state of Venezuela, Argentina seems to be a paradise for them.


    Though it played in my favor, it sounded very racist. There is no merit in being of a certain country or ethnicity. I could as well have been born in Venezuela.
    The Argentine inferiority complex to Europeans is appalling to me. After all, they used to give more money to immigrants coming from Anglo Saxon countries at the end of ‘900, so they made clear who their considered more welcomed than others.
    For the record, to Italians they gave 1/4th than what they gave to Germans!



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  • I’m curious, meetdilip - what is the current unemployment rate in India, and what kinds of jobs might be taken by the the Sri Lanka, Bangladesh and Nepal immigrants?


    In the US, it unemployment is low enough that farmers, restaurants, hotels, landscapers and other businesses cannot find people to fill their jobs. Immigrants would not be taking jobs away from locals there, thus xenophobes’ arguments lose effectiveness.


    Argentina’s unemployment rate, of course, is higher. It would be interesting to analyze which jobs the Venezuelan immigrants would be taking, and to what extent Argentines citizens’ employment would actually be threatened.

  • Nepal has a friendly status. Nepal citizens are free to come and live in India. It is just like they are Indian citizens. Normally, these countries does not have a good education system. Most of the jobs sought by those immigrants are not high level posts. 130 crore people live in India. That is 1/6 th of the world's population. Therefore it is hard to find jobs here. Things have improved lately.