The Spending Binge in Comparative Perspective


Correction: As several commenters pointed out, this chart is badly misleading in this form, as it doesn’t adjust for inflation. A corrected version can be seen here. 

We know the government always likes to pump lots of extra money out into the streets ahead of elections. But how’s the 2012 binge compare to the binges before recent elections?

The latest figures we have for Monetary Liquidity (M2 – for non-nerds, the total number of bolivars sloshing around in the economy) are from the week of August 24th – seven weeks before the election. At that point, liquidity was 51% higher than it had been 45 weeks earlier (that is, 52 weeks before the election.)

Only the 2006 liquidity splurge comes close: even so, 7 weeks ahead of the 2006 presidential election, liquidity was just 43% higher than it had been 45 weeks earlier. As for 2007, when we defeated the government in the Constitutional Reform Referendum, liquidity had grown just 18% that year at a comparable stage in the race.


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  1. To our benefit, it seems to me that the ability for the cash to trickle down has decreased more rapidly than their ability to increase spending. I have no other proof of this other than my own meandering experience. It seems to me that in the past Oficialismo spent a lot more in the streets. It seems to me that this time around the Chavez campaign has been more media focused than street focused.

    Caracas has chavistas tarantines playing jingles manned by 2 or 3 people and pretty much ignored by every passerby. This is true from petare to chacao, to downtown, to catia. I wonder what’s is the situation in other areas of the country.

    I mean, mitines used to be pervasive in Chavez campaigns. There have been very few of them during this one. On the other hand, the ads are way better produced. Billboards on the campaign seem also to be less.

    • The last tarantin I saw was pumping out irritating jingles at earsplitting volume, and no one was paying the bored PSUV types under the toldo any attention at all. BUT right across the street was a brand-new PDVAL truck doing a roaring trade in cheap food. Subtle, eh?

      • Perhaps. But that’s the type of things I remember seeing in the past a lot more. Those PDVAL trucks (and the checks to fix the house, and the appliances, etc.) somehow are diminished this time around.

    • Could it be that all that cash is being allocated, but by the time it trickles down, it has been siphoned off into so many pockets, that it doesn’t actually by the votes it is supposed to? Chavez isn’t out and about to make sure the money is getting to its target.

      • It doesn’t quite work that way – once created Cash doesn’t just get spent once. Maybe some boligarch gets Bs.500,000 from the expansion, but if he spends it on a new house that money flows to the construction industry, and the guys in the construction industry they need to buy food, and haircuts, and insurance policies of their own…etc…etc…etc…

        • But it could end up in the cayman islands as a retirement fund given the uncertainty on Chavez’s ability to remain in power (either by popularity or health).

          Also if there aren’t any good or services available to buy, then the money just translates into inflation, right?

        • Francisco,

          Yes, but if it doesn’t get DIRECTLY to the voter whose vote is supposed to be bought, the voter doesn’t associate the largesse with the politician who wants his vote.

          • That’s not right. This isn’t about vote-buying, this is about Nature of the Times voting. People’s personal financial circumstances can’t improve in the short-run when the monetary base expands. And people whose financial circumstances are improving are more likely to vote for the incumbent to some extent (though, as we’ve seen, not to as large as extent as the opposite.)

  2. you’re not writing an academic article dude! Just divide the weekly M2 the corresponding monthly CPI. Unless you want to piece-wise interpolate the CPI and get a weekly CPI.

  3. Keep in mind that most of the growth in M2 during this last year occurred in september-december 2011, while the growth in M2 in 2006 was constant through the year. M2 during 2012 has increased 20% – high, but paltry compared to 67% in 2006.

    It may be because the government is mindful that an explosive growth in M2 nowadays would be pushing inflation higher (especially given the supply constraints in Venezuela these days). Or maybe they forgot how to spend. Who knows.

    • I owe you a hat tip, LGG – it was your comment a few weeks back that planted the seed of curiosity that led to this post.

      Of course, this is just a fairly crappy initial approximation, If you want to make a better chart – say, over the 26 weeks before an election, and in real terms, make it and send it! I’ll put it up for sure.

      Cuz remember, I’m not an economist, I just play one on TV…

  4. Good graph. Inflation adjustment might help, but the notable increase is still there. Yes, in a developed economy there is a multiplier effect (as much as 5 in the U. S. for M1), but in Venezuela there probably isn’t much, especially for M2. The reason is, empirically, that much, if not most, of the money doesn’t trickle down to the masses: It’s ripped off to buy high-end real estate, fancy cars, and, yes it does emigrate out of the Country via Cadivi, black market, etc. And, those at the top in the Consejos Comunales receiving crumbs are frequently keeping them for themselves, especially in the face of Chavez possibly losing the election.


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