Saturday, November 30, 2013

Inflation, Shortages, and Social Democracy in Venezuela

Mises Daily: Friday, November 29, 2013 by Matt McCaffrey and Carmen Dorobat
The economic turmoil in Venezuela has received increasing international media attention over the past few months. In September, the toilet paper shortage (which followed food shortages and electricity blackouts) resulted in the “temporary occupation” of the Paper Manufacturing Company, as armed troops were sent to ensure the “fair distribution” of available stocks. Similar action occurred a few days ago against electronics stores: President Nicolás Maduro accused electronics vendors of price-gouging, and jailed them with the warning that “this is just the start of what I’m going to do to protect the Venezuelan people.”
Earlier this month, in another attempt to ensure “happiness for all people,” Maduro began to hand out Christmas bonuses, in preparation for the coming elections in December. But political campaigning is not the only reason for the government’s open-handedness. The annual inflation rate in Venezuela has been rapidly rising in recent months, and has now reached a staggering 54 percent (not accounting for possible under-estimations). Although not yet officially in hyperinflation, monetary expansion is pushing Venezuela toward the brink…… seeds of disaster are sown from the beginning of government intervention in the market, although “the first stage of the inflationary process may last for many years.” But the final stages of economic collapse occur far more quickly....... the difference between the U.S. and other Western economies and Venezuela is merely one of degree, not of kind..…To Read More……

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