“Socialism only works in two places: Heaven where they don’t need it and hell where they already have it.” (Ronald Reagan)
Lately there is much talk about Venezuela and very little or none for good. The economic crisis, inflation and even hyperinflation are terms commented on TV and media in general regarding this country, very rich in natural resources. Recently I’ve heard that in Venezuela, inflation has reached 24,571% so far this year 2018, unfortunately this will continue the way beyond the stars and perhaps it gets to incredible figures of up to one million percent (that would derive in a civil war). Recently the dictator, who says that birds suggest the ideas to him, has contributed day by day to make it worse, to mud even more the economy of the country. Nicolas Maduro announced a “minimum wage increase” in a 106% which in few words means a new impression of the local money (this is not the same as true currency injection) that only puts more fiduciary currency (Paper with numbers) in the hands of Venezuelans it does not solve anything. It’s in fact, money for the poor without products, it only brings more inflation. It is a price war where the most affected always are those with the least purchasing power who are also the ones who usually listen to the chants of these mediocre dictators hoping for miracles. To make the long story short… That money without any real value will only accentuate the inflation and poverty that is really the true conquest of the Socialism along all these years since the last century.
What is inflation? Inflation can be defined as the rising of prices for goods and services in the economy, at the same time the purchasing power will take the opposite direction, so it will go downhill. We mean all the products and services that the people can acquire according to their income. In Cuba, during my school years, this term had a kind of obscure definition under the Castro regime, “Excess of working capital in the society”. I do not know if they are still playing with the terminology or if they actually explain what is really happening in the world. Actually inflation is a direct reflection of imbalances and deficiencies in a country’s economy and in most cases it’s caused by inadequate economic policies from the governments. Inflation can be considered low, perhaps imperceptible or moderate when it increases in a low range generally from 1% to 5%. From this figure and up it is considered simply dangerous. However, when it exceeds 10% or more, it is usually called galloping and when it gets up to the 50% and higher it’s called hyperinflation, which is where Venezuela travels in these moments. How did Venezuela, a country with gold, iron and the largest reserves of oil on the planet, get to this situation? Let’s express our statements about this crisis happening now in Venezuela.
Demand Inflation, usually occurs when society has more money to spend in their pockets and there is also Supply Inflation which takes place when there is an abundance or it could also be a shortage of certain products; for example, the production of oranges and strawberries in Florida has been highly affected by the incidence of the past hurricane, Irma, that devastated the crops of these products, causing a sudden rising of prices of the affected products. In addition the prices of fuels regularly causes an escalation of prices due to the consequent increase in the prices of transportation and electric power generation that affect all areas of the economy. On the other hand, demand inflation is conditioned to what is called “Surprise” or money quickly injected in the economy of the country. In the case of Venezuela, during the life of the dictator Hugo Chavez, the prices of the highly appreciated black gold had a huge rise, bringing along with it an economic boost, which quickly the dictator, like they always do, took advantage for his geopolitical purposes, granting subsidies and “support to the poor”, in order to splurge their excess of “good fortune”. The point is that because the government used these subsidies to increase the income in an unrealistic way, it created a fictitious way of life for the people of Venezuela, feeding populism and buying votes and support, both within and outside the country. A similar past occurred in Cuba starting with the endless loser, Fidel Castro, who sank the country in the poverty despite having received billions from the Soviet Union. Same story with different characters.
Every dog has its day… and this was not an exception for the dictator in charge of the fate of Venezuela. Please, I beg the pardon of the dogs for such a comparison. Suddenly and without any anticipation, oil prices fell sharply, surprising the government of Venezuela without available funds or currencies and involved in one scandal after another. The only way that the government could find to relieve a supply to this new demand was to print more “money” without control. Demand inflation is usually clearly “endogenous”, it is directly affected by the internal good or bad management of economic entities. All those elements came up seriously accompanied by the killing of the productive system caused by factors such as: expropriation, nationalization and / or militarization of the economy and the exodus of currencies triggered by social and political panic. What is the only solution that the little bird trills Maduro in these moments? The easiest one, to print even more money which will create new and/or more poverty. This increases and intensifies the exodus, especially those who had or still have some capital of their own. We must add that the type of inflation that hits Venezuela the most now is the inflation generated by high inflation expectations, the name expresses itself, the fear of constant inflation causes an increase in prices in geometric reasons, which is why catastrophic inflation figures are expected.
Oftentimes we have explained the inflation as another way of tax collection and we all know that the rich class manage very well how to not pay taxes “legally”. For that reason inflation is usually called “the taxes of the poor class”. Hyperinflation in Venezuela is growing at an accelerated and uncontrolled pace, therefore the only affected class at this time is the poor class since the middle class has been melted into the new poor and the rich are gone or they are the bunch of corrupts still in power. The most effective action in the country is to not accumulate, save or have any cash in the form of the local currency in your hands. There are no doubts that we are witnessing an actual factory of poverty. Any resemblance to Cuba, Mozambique, the former USSR and more is not just a coincidence. There are economic laws that are always met and they aren’t the exception.
Perhaps you never heard about the statutes and premises of the Economy in the Communism, I did. It used to be said until prostration a sort of utopia of things such as that “currency” needs would disappear, therefore the crisis would not ever exist and a similar destiny would occur to the “inflation” and “external debt” and … I think that they were right in one point, Sooner or later everything will disappear having a system with any form of socialism. Any kind of wealth, decency and values are already gone from the socialism and they are creating their own genuine product of equality: The most crude poverty.
Despite the Soccer World Cup, the entire world will be focused in Mexico in these coming days and the upcoming elections. Mexico is such a beautiful and a brave country, it has silver, a lot of oil and many natural resources in general but also has a large poverty. Above all, Mexico has an admirer of Castro aspiring to the presidency, as it usually happens, this person is very populist and as incompetent as the leaders of Cuba and Venezuela. Hopefully this article does not fit like a hand in a glove to a future Mexico. The die is cast…