Original art by @modográfico

According to Venezuela’s National Assembly, consumer price inflation rose to 57% in November from 45% in October – having blown past the classic 50% threshold, the country is officially in hyperinflation.

In hyperinflation, prices rise at a high and accelerating rate, fueled by unbridled central bank money printing and the population’s unwillingness to hold the currency. Latin America hadn’t seen hyperinflation in 25 years and skeptics balked at the thought that it was even possible for an oil exporter, but alas, Venezuela defied expectations once again.

The government essentially doubled the monetary base in November, a jaw-dropping record increase. All the new money was used to finance public sector year-end bonuses, Sunday’s municipal “elections” and the ordinary fiscal deficit. As a result, 12-month inflation rose over 1,700%, another all-time-high. To put things in perspective, daily inflation surpassed annual inflation in much of Europe.

Runaway inflation and the economic crisis are already fraying the fabric of Venezuelan society. Households, rich and poor, are cutting back on food because it’s too expensive, especially proteins, resulting in involuntary weight loss for three quarters for the population. Roughly half of university students have dropped out to look for a job because their parents can no longer sustain them. Malaria and other eradicated diseases are back with a vengeance. Shockingly, Venezuelans crossing into Colombia by land now outnumber North African immigrants to Europe.

For more than a decade, Presidents Chávez and Maduro wiped out the domestic private sector and racked up $150bn plus in external debt.

But bleak as it is, life in Venezuela will only get worse. Like the national oil company’s production collapse and the external debt default and restructuring saga, hyperinflation is just taking off. Without a complete overhaul, misery in Venezuela will deepen as Zimbabwe-style price increases become the norm and inflation accelerates to ten or twenty thousand percent per annum. Hunger will grow as prices outpace salaries and Venezuela’s $5 monthly minimum wage falls closer and closer to zero. 2018 will be the fifth consecutive year of economic recession.

Hyperinflation will cripple Venezuela’s dysfunctional economy. As production nosedives and tax revenue falls, for instance, the fiscal deficit will rise, increasing the speed at which the central bank prints money to cover it. This is gasoline to hyperinflation, which will make the economy and tax revenue fall even more in a toxic feedback loop. The government may hike the minimum wage to any level they like in response to rising prices, but it wont work. Real wages can’t rise if fewer goods and services are being produced.

The three things the bolívar is meant to do – store value, measure value, and be a useful exchange token – it’s failing at, making it more likely that citizens abandon the currency. Absurdly, ATMs only allow Bs. 10 thousand in withdrawals (10 U.S. cents) when groceries can be thirty times that, and even when shops take debit/credit cards, transactions can take minutes to go through the faulty interbank network, causing long lines. The bolivar’s purchasing power melts away in weeks thanks to galloping inflation, making nominal statistics like the government’s 36 trillion bolivar 2018 budget meaningless. As the currency’s problems worsen, the economy may eventually dollarize de facto or simply break down into barter.

Hunger will grow as prices outpace salaries and Venezuela’s $5 monthly minimum wage falls closer and closer to zero.

On this historic day, it’s important to remember that hyperinflation and Venezuela’s economic collapse were entirely self-inflicted. For more than a decade, Presidents Chávez and Maduro wiped out the domestic private sector with excessive controls and expropriations. They didn’t save a penny and racked up $150bn plus in external debt. What for? To finance consumption, not investment, even as oil prices were at an unprecedented $100 per barrel. They couldn’t stand congressional oversight or accountability so spending took off outside the budget. Behind the scenes, Chávez gutted the central bank’s independence, most seriously in a 2009 reform that allowed direct lending to state-owned enterprises.

Then, when oil prices suddenly crashed in 2014 and Venezuela’s export revenues dried up, the regime slashed imports by 80% over the four years to keep paying the debt and inadvertently threw the economy into a tailspin. GDP fell some 35% and the budget deficit bulged as if the country was at war, making the government completely reliant on the central bank printing press for deficit financing. Now domestic industry is in tatters and the country can’t make up for it with imports, so people are just dying for lack of food and medicine. Meanwhile, hyperinflation is taking off as the government floods the country in new bolívares to pay its bills.

With a likely Maduro “reelection” in 2018 and no talk of economic reforms, Venezuela’s outlook is dire. It’s deluded to think that the criminals that made Venezuela unlivable despite a trillion dollar oil bonanza might somehow stop hyperinflation, stabilize free-falling oil production or otherwise improve living standards. It’s deluded to think that they even want to. As long as Maduro is in charge, Venezuela will continue to walk the path of North Korea and Yemen until it’s global pariah and destitute wasteland.

49 COMMENTS

      • Its easy to wish for civil war from the sidelines. I wish that the VZ citizenry would rise up. I would even know how I would start it off… if I lived there.

        But, I am sitting thousands of miles away in my office, munching on a bologna sandwich and slurping up some soup, and my biggest concern right now is if Amazon delivered the package i am expecting today to the front porch or the side door. First World problems.

        My First World, arm-chair John Wayne bravado doesn’t translate to what is going on in Venezuela right now. I talk a big game… but could I pick up the gun?

        • “Its easy to wish for civil war from the sidelines”
          So in other words if one isn’t living the day to day shite Chavismo is putting the country through one hasn’t a right to speak? If lived for many years in Venezuela, on paper still own a nice house (but Chavistas are living in it for free). So even though I managed to get my wife and son outa there and am very comfortable back here in Spain I have been wishing for a civil war very rightfully so imho mate.

        • You’ve posted this similar sentiment before. But falling back on the “armchair General” argument just doesn’t cut it.

          We know you ain’t fighting, and I ain’t fighting, but are YOUR kids dying?

          Fucking Christ.

          • If you have read my comments before, you would know exactly my sentiments, as I have said that if I were living in Venezuela and had nothing to lose (as more and more Venezuelans are falling into that category) I would be picking up a gun. And for what its worth, I have served in the military (52d Aviation Regiment, Flying Dragons, Fort Wainwright) and have been put into a position where I would have had to pull a trigger and extinguish a human life. It’s not like it is in the movies.

            The point being, saying I’d pick up a gun and actually picking up a gun are two different beasts. Much the same way that the Chavistas SAY they have paid their debt holders, and the debt holders wondering where their payments are.

            Lots of back bench bravado in this forum, I’d say.

          • But Guapo, we know this. Yes, posting on a website about fighting isn’t the same as actually fighting.

            But you seem to eliminate it as a viable option, and in a way, validating Venezuelan cowardice.

            The world over, people have fought tyrannical regimes, died, and triumphed. Your argument seems to be that somehow VZ merits an exemption to this basic nature of man.

            It’s not back bench bravado to promote action, even from those of us afar. I mean, come on;

            The people are fucking doing NOTHING! They can’t learn a thing or two from the French and other resistance against the Nazis? Can’t place a bomb here and there? Snipe off a SNIBEN guy now and then? Sabotage Chavista operations, even in subtle ways?

            It’s pathetic.

          • I agree 100%. The Venezuelans need to fight for their own country.

            The only (rhetorical) point I was attempting to make is that saying one ought to take up arms (over Thanksgiving, I had a house full of “brave Venezuelans” who fled Venezuela) and actually doing so are two different things.

            I have a minor in Chinese history, and the Chinese philosopher Laozi once said, “a journey of a thousand miles begins with a single step”. If liberty minded Venezuelans want to overthrow these despots, they need to start taking that first step. Boycotting the rigged vote? Laughable! Banging pots and throwing rocks and burning tires at the barricades ain’t going to cut it either. Patriots are going to have to put their lives on the line. The colectivos and PNB aren’t afraid to use violence. Reciprocity.

            When the colectivos are afraid to come out of their barrios, and the PNB refuses to show up for work… that’s when you know you are being effective.

          • As a 21 year old who had to escape to Colombia as to not starve and stuff, I have to say i would come back if I there was any sort of organized movement or somebody was arming us, and i know a lot of people back there who would also give their lives in order to be able to at least try to do something, trust me, we already did with only some flags and shields.

            Thinking that the venezuelan people did nothing against the goverment is one of the most enfuriating things in the regular discourse of both Venezuelans and foreigners; WE TRIED FOR OVER 3 MONTHS and then we got fucked over by our so called leaders who ALWAYS fall for the bait.

            I would love not to have to ask any other country to do some real handy work in Venezuela but sadly “la determinacion del pueblo” in the PC and Gun Free 21st century just doesn’t let us.

            Also I know this would give rise to a lot of very unstable armed elements that would complicate a lot, but nothing can be worse than this.

    • This will come to pass given. Chavismo no se va por las buenas. Where would they go? Cuba, jail, the tomb? They will fight it out. The problem is that actor with the most capacity for violence is the military and they have been built, over Chavimo’s tenure, to the image of Chavismo, brutal, prideful, communist.

      The military run the food distribution and now run the oil industry. They are failing and they too will realize that there is NOTHING they can do. At some point they will realize that they need to get help from international banking institutions like IMF. They may be ignorant, but you mustn’t be too smart to realize that you are in a hole and there is only one way out.

      The pride and the ignorance of the military will drag hyperinflation longer than need be.

  1. FWIW – I notice that the DT exchange rate hit 108000 early this week, but now is back down to 95000. Thats a 13% drop in a couple of days. Anomaly?

    • It’s just random market fluctuations. The trend for the FX rate is double exponential growth. I.e. regular exponential growth where the exponent is itself also rising in time. While underlying conditions don’t change (they haven’t, they won’t), the FX rate can only go up.

    • That drop is a common sight every December, usually related to the fact that many Colombians cross the border to buy christmas presents in Bs. Therefore demand of Bs momentarily increases and it revalues a lil bit. Note that I’m not an economist and there are probably other complex factors that I ignore.

  2. Remember when a Chavista “economist” declared that inflation was a right wing slogan that didn’t actually exist in Venezuela?

    • I believe it was that quack, Serrano, from Podemos in Spain that said inflation was not a monetary phenomenon. Great guy to take advice from if you care not what the results may be.

    • Know personally someone who heard this explanation about how inflation didnt exist verbatin from the mouth of the then president of the BCV……..!! Its not an urban legend , there are high profile Chavista officials who believe this ….

      bcv

      • Bill,

        This is what is so alarming. The central bank is run by quacks, and now 96% of Venezuela’s income, PDVSA is run by a military, a quack again.

        Es que no saben lo que no saben.

  3. Of the many reasons many Venezuelan’s opposed Chavismo is its bunk communist ideology and corrupt culture that would destroy the economy to the fabric. So the opposition was proven right, it came to pass.

    So it begs the question, why did the opposition fail to sell the voter this inevitable prophecy? If I remember correctly, Macchiavelli divides subjects to the prince in stomachs and brains, moreover, he tells the prince that it is the stomachs that he can trust, while the brains, deep down, think they can do the prince’s job better, hence they are eternal rivals.

    So therein is the tragedy of Venezuela. The oil boom allowed Chavez to bring the stomachs to his base, and now those stomachs are distended with starvation.

    If anyone argues that Chavez was not wicked, then his pride makes him equally evil. After all pride is the worse sin.

  4. From Lapatilla
    “The regional government of Roraima, Brazilian Amazon state on the border with Venezuela, declared the state of “social emergency ” to try to address the crisis caused by the high number of Venezuelan immigrants has received in recent months, official sources reported today.”

    It has been reported that Venezuelan exodus into Colombia is higher than refugees going into Europe.

    The regional “leaders” that condemned Trump when he mentioned military options, will eventually be begging the US to intervene in the unfolding refugee crisis that will effect the region. The politician in them made them play to their own electorate instead of supporting action to end this humanitarian catastrophe.

    It would have been much better if they had simply said that they hoped US intervention could be avoided. Instead they empowered this regime to act with impunity in the assurance that they were safe from US military action.

    These “leaders” betrayed the people of Venezuela and empowered the dictatorship.

    • John, in case you didn’t see it, here’s the update email addy from the fellow who wants to participate in the seed program: rdzhou.ratech@gmail.com. He posted in that thread from several days ago but not sure if you’ve seen it.

      Also, with luck, I’ll be sending an email within a day or so with some specific recommendations on seed for the locals. A sack of onions has now reached 3,000,000 bs………..just incredible.

      • Hi MRubio

        I wrote to rdzhou.ratech@gmail.com and I received an undeliverable e-mail notice. I posted a message on the thread that he left his e-mail and I did not receive an answer.

        If you do get online, try to search Amazon for open pollinated seeds. Many of the products are survival packages with as many as 55 different varieties of heritage / open pollinated seeds. A cooperative effort among some of the farmers would allow one growing season to produce all of the seeds they would ever need.

        Some packages like this may work out well.

        https://www.amazon.com/Heirloom-Varieties-Pollinated-Non-Hybrid-Gardeners/dp/B07577BVWH/ref=sr_1_2_sspa?ie=UTF8&qid=1512693096&sr=8-2-spons&keywords=open+pollinated+vegetable+seeds&psc=1

        Having different people plant the different varieties of tomatoes, squash etc., will prevent any cross pollinating and produce good seed. The only thing that they may all want is corn and I could look for a couple of bulk packages of that.

        I also want your opinion about onions. If I remember correctly, it takes 2 seasons to get seeds. It may be better to simply look for some bulk seeds. It may also be possible to plant some of the onions that are being sold as food to produce seed pods.

        Any advice that you or your people have regarding sourcing seeds is also welcome.
        Let me know how many people will be interested in obtaining seeds. It will give me some idea of how much is needed.

        I have Amazon Prime and I will just have the orders sent to the shipper in Miami and have Maria work her magic. This will help get things to you in time for January planting. If I can get the orders sent to her by the first of the year, you would have them within 2 weeks if all goes well.

    • John
      Renacuajo67 talks above about the pride and ignorance with Chavistas and the military.
      I have seen the same thing here with CCs and some of the bizarre comments witnessed here.
      Having seen the contempt and disdain shown by both Regional players and the majority of vocal Venezuelans, i can only conclude that the Americans should run a mile from Venezuela. Not a drop of American blood is worth spilling here.
      Initially i supported military intervention, but not any more.
      I think people here should man up to the shithole they created. The Trump begging should be off the menu, i mean we are use to scarcity now!

        • Dialogue confers two voices.
          There is only one in Venezuelan politics and its called socialism, practiced and preached by both sides.
          This country is on a merry go round that it will never get off. There will never be any change here, that is clearly evident.
          Lorenzo Mendoza for President and fuck the political parties.

        • Not necessarily. Maybe they take out the military in half a day, but we have thousands of armed colectivos who could indefinetly exploit the US army’s weakness: irregular warfare.

          Look at the middle east.

        • Don’t think for a second that there won’t be some elements of resistance to a US led invasion, and that there wouldn’t be any casualties. I was in Panama in ’89 and we had over 300 wounded and 25 dead in “a cakewalk.” Those are peoples sons and husbands and fathers who died. Dead guys with names like Mike and Freddy and Ronny and Bill and Hank.

          The problem isn’t the initial victory. The problem is the political shitstorm that comes afterwards.

          The liberating army thus becomes the occupying army, and as recent history proves, US troops are viewed in a positive light by some very radical elements. Not to mention the Leftist bed-wetters in the United States who will be having a field day about “another US war”.

          I wouldn’t waste ONE US soldiers life on Venezuela. Venezuela isn’t worth it.

          • Agree, and remember who was hiding the bogeyman in Panama….The Vatican Embassy. So much for Catholicism and the Papacy.

          • There was relatively zero political fallout from Panama.

            Yes, the civilian casualties were horrendous, but in war, shit happens.

            And sorry, but 25 dead, 300 U.S. wounded is at the extreme low end of losses. I’m sure that was way UNDER what our planners predicted.

  5. Ironic that the fallout from the humanitarian crisis that the Chavistas swear is a right-wing plot is now causing surrounding countries to declare “social emergencies.” Hard to write this one off to “meddling.”

  6. I think we’re entering the end-game phase right now. I don’t know how it ends but my woman and I have made some decisions that we think will help protect us for at least another year or so.

    The step-son is looking at property across the border in Colombia to move his family and business and has said he wants to take us along. It’s a nice offer but we’re still too independent and enjoying our life here in the east. I’m not convinced I’ll feel the same mid-year next year.

  7. “….path of North Korea and Yemen.” Not really; it is the path of Zimbabwe. But Mugabe is now (belatedly) looking positively statesmanlike compared with Maduro

  8. “Hyperinflation”?

    Whatever that is, it’s no problem in Kleptozuela:

    It’s been proven for decades now that exorbitant inflation, coupled with laughable minimum salary raises and constant currency cataclysms mysteriously do no seem to affect a lot of people most of the time.

    Not all – but many people – somehow continue to get by, when a “canasta alimenticia”, an arepa or a pair of jeans supposedly cost about 3 months of hard work . Go figure..

    How do they do it? How does the average Kleptozuelan family get by on such an impossible economy where 3 cans of tuna cost one week’s paycheck? You guessed it: GUISO, GUISO y mas GUISO.

    Everywhere, everyday, at all levels. Almost every single Venezuelan is involved on numerous crooked “deals” of countless sorts. Our Tropical Kleptocracy doesn’t condemn THEFT at all levels, on the contrary, it encourages it. And just about everyone of the 30 million people left participates, is somehow complicit, when not outright culpable of the massive “desfalco”, at all levels of that rotten society. The “pueblo” itself, not just the “Gobielno”.. Millions and Millions of Thieves.. “hiperinflasion?? granguevonaaa,, loco”.

    Hyperinflation? LOL… “que ej esa vaina, pana?”.. HyperGuisation, chamo, no le parej bola”.

    • What you aren’t taking into account is that most Venezuelans own their home and pretty much every other service is subsidized by the regimen.

      If you own your house, cars, gasoline is basically free, all utilities are basically free, what do you really pay?

      As long as you can acquire food and water, you will survive.

  9. As long as you can acquire food and water, you will survive…
    ——-

    So long as you don’t get sick. Or need to eat. The dollars are gone to import food and most every other item to avoid merely camping in your house like Java Man. Chavismo thrived on patronism, on giving stuff away. Listen to Rubio … the stuff is vanishing by the minute and what’s left costs more than the normal chamo can begin to afford. There was always the question of sustainability per the something-for-nothing model since the real world never works like that. And the real world is closing fast on the bus driver.

  10. What could possibly go wrong when a constitution allows to run for the highest office people without relevant experience nor education ?

    Bus driver as President and Economist as Taxi drivers !!
    Rough ex-convict military cupster that hasn’t even run a city nor a business get handed an entire country, excellent !!

    We really deserve this and more until much needed constitutional changes regarding elections.

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