It’s time to update the crisis in Venezuela. The mass printing of bolivars has led to predictable hyperinflation in recent months. It’s no surprise that President Maduro’s government hasn’t published any inflation or related data since December 2014, when the annual rate officially hit 68%.
But there are other ways to skin the proverbial cat. Venezuela-born and Miami-based financial analyst Miguel Octavio frequently travels to Caracas and always dines on a popular local favorite, arepas, at the same restaurant. The price he pays for arepas is always changing, providing key insight into general prices in the country. Since November, Octavio logged an increase from about 100 bolivars for an arepa with cheese in November 2014 to about 470 in July 2015, with the price more than doubling in the past 3 months. Because the trend is not stable, computing the current annual rate is an inexact science, but I’m estimating ~1000% based on the arepas. Conservative estimates are closer to 200%, which is no picnic. To put this into context, inflation is a problem in neighboring Uruguay and Brazil, but it’s only 8.5% and 9.6% in these countries respectively.
The economic calamity is widespread. Barclays analysts give a 98% probability to Venezuela’s default on its sovereign debt in the next 5 years. As a Bank of America economist put it, “People are literally getting rid of money faster than the government can print it.”
This type of hyperinflation is a broad result of Venezuela’s Marxist philosophy that demonizes and punishes free enterprise in favor of an arbitrary, inefficient central planning model. It is a direct result of the country’s decision to print more currency. We’re experiencing both of these evils in the US, although at a less tyrannical pace. While I don’t expect the US to go the way of Venezuela anytime soon, the trend is in the same direction. It might be a generation away, but massive debt, unfunded liabilities, and constant pressure on liberty and free enterprise—the engine of the economy—foretell trouble down the road.
For more on the situation in Venezuela, see http://www.wsj.com/articles/in-venezuela-economists-improvise-to-track-economy-1439759978.
when will the guns start firing in Venezuela?
You cover Venezuela like it has any relationship to the United States. It’s a third world country and always has been.
NOT TRUE Q. Venezuela used to be a wealthy nation. They’re loaded with oil. Look it up.
you’re dead right about venezuela. heard you on wilkow today, also right about china.