Venezuela Inflation Rates

[Raoul Duke]

So I seen this earlier...

View attachment 21019

This is how much money you would need to Venezuela to buy that chicken.

14m bolivars for a chicken: Venezuela hyperinflation explained

So I went and punched that into a historical calculator and seen that in 2008 that same amount of money was worth 6.8 million USD.

View attachment 21020

Can someone explain how it would get so far out of control and how this actually plays out with a persons actual wealth?

 

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[GoGetter24]

Yeah, all of a sudden people want to re-define socialism to mean any high tax country, so they can pick any country they want as an example.

High taxes are socialist, but it's not as bad as central planning. The spartans knew that. Let the slaves farm, disarm them, and then rob them of 50% at point of sword. Don't get in their way: leave the production to the slaves, and the killing to the masters.

That's pure psycho. Interfering with the slave's production is dumbass psycho.

 

[LittleWolfie]

Yeah, all of a sudden people want to re-define socialism to mean any high tax country, so they can pick any country they want as an example.

That's weird. and stupid

This.

What is called "socialist" in Europe, can you compare with "liberal" in the US, while "liberal" is considered more conservative here, although there are still many differences.

.

To me liberal is about things like gay marriages and has little bearing on the economics(except perhaps for chapels)

This.

Those are still far from what you call a socialist state like Venezuela.

OK, given that Venezuela claimed it be explicitly modelled dafter Norway (with their oil reserve) what's interesting question to ask is where did they go wrong?

 

[Captain_Picard]

Ever heard of internet cafes? You don't need a computer and electricity inside your house to buy Bitcoin. There's also local bitcoins to buy locally.

And what are you talking about when you say you need a 6 month training course? You can literally buy Bitcoin and use it in less than an hour. I don't think you know what you're talking about about.

And to answer the original question yes Bitcoin has solved the problem for the ones that knew about it. Venezuela was one of the reasons why Bitcoin skyrocketed to 20k last year. Even regular folks were buying bitcoins in paper wallets with Pepe the Frog on it to throw off the police who tried to confiscate their possessions.

Some good points here.

 

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[Roli]

This.

What is called "socialist" in Europe, can you compare with "liberal" in the US, while "liberal" is considered more conservative here, although there are still many differences.
Socialist political parties have been everywhere in power in Western European countries, with a capitalist fundament that is. Those are still far from what you call a socialist state like Venezuela.

They value high private ownership and trade freedom, at the same time they move to protect workers through unionisation and government support. The tax burden lies mainly in supporting a free health service and a welfare support structure.

However they don't see these things as conflicting with capitalism, rather they are aware of the potential perils of corporatism.

Below copied from Wiki Nordic Model: Nordic model - Wikipedia

"The Nordic Model – Embracing globalization and sharing risks" characterises the system as follows:[13]

• An elaborate social safety net, in addition to public services such as free education and universal healthcare[13] in a largely tax-funded system.[14]
• Strong property rights, contract enforcement, and overall ease of doing business.[15]
• Public pension plans.[13]
• Free trade combined with collective risk sharing (social programs, labour market institutions) which has provided a form of protection against the risks associated with economic openness.[13]
• Little product market regulation. Nordic countries rank very high in product market freedom according to OECD rankings.[13]
• Low levels of corruption.[13] In Transparency International's 2015 Corruption Perceptions Index, Denmark, Finland, Sweden, and Norway were ranked among the top 10 least corrupt of the 167 countries evaluated.[16]
• High percentage of workers belonging to a labour union.[17] In 2013, labour union density was 86% in Iceland, 69% in Finland, 68% in Sweden, 67% in Denmark and 52% in Norway. In comparison, labour union density was 14% in Mexico and 11% in the United States.[18] The lower union density in Norway is mainly explained by the absence of a Ghent system since 1938. In contrast, Denmark, Finland and Sweden all have union-run unemployment funds.[19]

• A partnership between employers, trade unions and the government, whereby these social partners negotiate the terms to regulating the workplace among themselves, rather than the terms being imposed by law.[20][21] Sweden has decentralised wage co-ordination while Finland is ranked the least flexible.[13] The changing economic conditions have given rise to fear among workers as well as resistance by trade unions in regards to reforms.[13] At the same time, reforms and favourable economic development seem to have reduced unemployment, which has traditionally been higher. Denmark's Social Democrats managed to push through reforms in 1994 and 1996 (see flexicurity).
• The United Nations World Happiness Reports show that the happiest nations are concentrated in Northern Europe. The Nordics ranked highest on the metrics of real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make life choices, generosity and freedom from corruption.[22] The Nordic countries place in the top 10 of the World Happiness Report 2018, with Finland and Norway taking the top spots.[23]
• The Nordic countries received the highest ranking for protecting workers rights on the International Trade Union Confederation's 2014 Global Rights Index, with Denmark being the only nation to receive a perfect score.[24]
• Sweden at 56.6% of GDP, Denmark at 51.7% and Finland at 48.6% reflect very high public spending.[25] One key reason for public spending is the large number of public employees. These employees work in various fields including education, healthcare, and for the government itself. They often have greater job security and make up around a third of the workforce (more than 38% in Denmark). Public spending in social transfers such as unemployment benefits and early-retirement programmes is high. In 2001, the wage-based unemployment benefits were around 90% of wage in Denmark and 80% in Sweden, compared to 75% in the Netherlands and 60% in Germany. The unemployed were also able to receive benefits several years before reductions, compared to quick benefit reduction in other countries.
• Public expenditure for health and education is significantly higher in Denmark, Sweden, and Norway in comparison to the OECD average.[26]
• Overall tax burdens (as a percentage of GDP) are high: Sweden (44.1%), Denmark (45.9%) and Finland (44.1%).[27] The Nordic countries have relatively flat tax rates, meaning that even those with medium and low incomes are taxed at relatively high levels.[28][29]

 

[LittleWolfie]

Below copied from Wiki Nordic Model: Nordic model - Wikipedia

From the same page further down.

Economic systemEdit
The Nordic model is underpinned by a free market capitalist economic system that features high degrees of private ownership[6]with the exception of Norway, which includes a large number of state-owned enterprises and state ownership in publicly listed firms.[31]

How do you define Norway's state ownership of enterprises and it's wine monopoly? State capitalism?

 

[AgainstAllOdds]

I was enjoying this thread for a bit.

 

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[splok]

How do you define Norway's state ownership of enterprises and it's wine monopoly? State capitalism?

Norway invests its revenue into publicly traded corporations and into building profitable businesses. It's built a $1T+ wealth fund that owns appx. 1.3% of all publicly traded stock on earth.
This pension fund is now worth $1,000,000,000,000

Venezuela nationalized and seized control of its industries, sending its economy into a downward spiral.
List of nationalizations by country - Wikipedia

Clearly the same flavor of socialism.

 

[MidwestLandlord]

Can someone explain how it would get so far out of control and how this actually plays out with a persons actual wealth?

I promise not to mention socialism lol.

1) more money is created through government debt or consumer/commercial debt*

2) more money in circulation (money that can be spent), leads to increase in demand for goods and services

3) supply of goods and services remains the same or drops

4) basic law of supply and demand: If demand is up, and supply remains the same or drops, prices tend to rise

5) increase in demand hits highly elastic markets the hardest and fastest (real estate is a non-elastic market, automobiles are a high-elastic market. Elastic = how quickly the market prices react to changes in supply and demand)

6) rising prices causes the government to print more money to make it's payments

7) more money causes even greater demand

8) greater demand causes ever rising prices

9) rising prices causes people/businesses to spend money more quickly, to avoid paying more tomorrow

Edit to be more clear: as demand increases, and prices rise, at some point supply will drop as manufacturers and such start having trouble making their own payments. Basic law of supply and demand: If supply drops, but demand stays the same or rises, prices tend to rise. So...as inflation takes off, and demand is high, we get the double-whammy of supply dropping, which only helps to accelerate rising prices, i.e inflation.

10) faster spending = more money available = increasing demand = rising prices

11) rising prices = can buy less with the same money = inflation.

Add irrational government policies into the mix, and yeah...hyper-inflation.

Effects on your assets? See step #9 above. Buy today, or spend way more tomorrow (which is a reduction in the spending power of your money)

Cash

At the current rate of inflation in Venezuela, a $1 item today will cost $10,000 in a year.

So $1,000,000 a year from now, would have the same buying power as $100 today.

Precious Metals

Theoretically, $100 in gold would be worth $1,000,000 (of useless money though)

Real Estate

Theoretically, every $100 in real estate would be worth $1,000,000 (of useless money...again)

Notes/Debt

Principal on debt doesn't rise with inflation. If someone owes $100,000 on a house, and suddenly they are getting paid $1,000 an hour because inflation, debt becomes worthless FAST.

Good if you owe the money (except a loaf of bread costs $10,000), but bad for the entity holding the note.

Suddenly the government is bailing out banks that are insolvent by printing more money....

Now apply this to all forms of credit. Credit cards, NET invoices, homes, cars, etc.

AND, here's the big one, apply this to items paid in arrears, paid in advance, or under contract. Water bill, insurance, property tax, vehicle registration, cable bill, cellphone, etc

Now utility companies, municipalities, cellphone service providers, and insurance companies are insolvent because their revenue doesn't quickly adjust for inflation (non-elastic)

I could go on...

*commercial lending increases money supply by creating additional demand deposits.

I borrow $100,000 to buy a house. The bank pays the seller that $100,000

The seller later deposits that $100,000 into his bank.

$100,000 debt
+$100,000 deposit
--------------------------
= $200,000

 

[GoGetter24]

Can someone explain how it would get so far out of control

Incentives. The government only cares about control & power. As that starts to drop, it uses one form of power to try and continue it's power: e.g. printing money to pay for it's troops and weapons.

The original reason for the original chaos is that they're trying to manage the country with a completely dysfunctional philosophy, and their brainwashed people semi support them, and none of their neighbours are willing in this day and age to just invade and conquer them to restore civilization.

and how this actually plays out with a persons actual wealth?

Commodities, forex: up.
Stocks: mild down
Cash: wiped out
Bonds: completely wiped out
Real estate: fine as long as thugs don't remove you from your house

 

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[Roli]

How do you define Norway's state ownership of enterprises and it's wine monopoly? State capitalism?

Socialist (capitalist) Hegemony bordering, on anarcho-capitalism.

 

[lewj24]

unpopular opinion: All of this will happen to the US Dollar in the next few years. Prove me wrong.

Oh and inflation wouldn't be a problem if there was still a gold standard.

 

[Roli]

Oh and inflation wouldn't be a problem if there was still a gold standard.

It wouldn't, however there would be less money in the world, which is why the gold standard was dropped in the first place (as there was not enough gold to cover all the 'promises').

 

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[lewj24]

It wouldn't, however there would be less money in the world, which is why the gold standard was dropped in the first place (as there was not enough gold to cover all the 'promises').

There would be less money but more wealth.

I don't understand the 'promises' thing. If you are saying the USA had more debt than they could handle I don't agree. The US National debt is 10 times higher now than it was when they took us of the gold standard (when adjusted for inflation). Otherwise I don't know what you mean by 'promises.'

 

[Longinus]

There would be less money but more wealth.

I always wondered about that.

If there would be less money but more wealth, money would have more value in time, right?

So all you have to do is to keep all the money you have under your pillow and it will raise in value. So money will become scarce. Is this really an advantage?

Not saying printing money is a good idea, but I would like to understand what the alternatives are.

 

[lewj24]

If there would be less money but more wealth, money would have more value in time, right?

So all you have to do is to keep all the money you have under your pillow and it will raise in value. So money will become scarce. Is this really an advantage?

Money would definitely have more value in time compared to the inflation we currently have every year. There used to be periods of inflation and deflation. Now we only have inflation.

Saying money would become scarce is a misunderstanding. There's always bills. Rent, food, kids, cars, etc. People will also always spend extra money on luxury, things like TV's, Computers, Clothes, etc. And for those who want to save money they would put it in the bank to earn interest and when money is in the bank the bank takes your money and puts it back into circulation through investments.

Few people would bury all of there money and take it completely out of circulation. I would say that the people who do do that don't have enough money for that to have any impact.

 

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[Niptuck MD]

when you have idiots in government (i.e maduro, zimbabwe shithead leader etc) that are notoriously corrupt and couldnt give a rats a$$ about their country"s economic development this is what happens.

 

[Niptuck MD]

This has led to a whole swathe of young women sterilising themselves, because they can not afford to feed any babies they may have.

WOW! wouldnt this be nice in many overpopulated countries as well!

 

[GoGetter24]

unpopular opinion: All of this will happen to the US Dollar in the next few years. Prove me wrong.

Proof: Schiff and Co. have been saying that stuff since they were kids, and no such thing has come even close to happening. This is the closest they got:
Carter bonds - Wikipedia

 

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[Roli]

There would be less money but more wealth.

No, less money = less wealth. There would be less debt and fewer people able to get debt, great for slowlaners, not so good for potential fastlaners.

I don't understand the 'promises' thing

The gold standard was essentially an agreement between banks and the federal bank.

The federal bank promised to pay 'the bearer the sum of...' in gold; or at least that was the theory.

So if you as a bank had $10,000,000 and you went along to the federal (national) bank and asked for it (under certain circumstances), they were obliged to pay you ten million dollars worth of gold.

However this created two problems, the first was that eventually there were more promissory notes (money) than there was gold.

Secondly a country adopting the gold standard could only print as much money as it could get its hands on gold. Gold is a finite resource ergo there is only so much money you can print.

Hence Jimmy Carter in the United States decided to 'fractionally reserve' the dollar. This allowed the federal bank to print money based on the amount of cash that smaller banks were loaning to people.

This is the main reason national debts are huge and will never drop to zero. Because for every dollar in your pocket, ten more are printed on the back of the debt created by those dollars.

This is why a lot of people like cryptocurrency because (most of them) have a finite amount that will ever be created and thus cannot be artificially inflated, and in fact are deflated as people lose passwords and therefore access to their funds.

The US National debt is 10 times higher now than it was when they took us of the gold standard (when adjusted for inflation).

As mentioned above, this is because there is more money in circulation that is created via debt.

 

[lewj24]

No, less money = less wealth.

This makes no sense. So does more money = more wealth? Obviously not. Look at the Zimbabwe trillion dollars on the first page of this thread. They aren't richer because of more money.

The gold standard was essentially an agreement between banks and the federal bank.

Not at all. The gold standard was created by people. Not the Fed. Back in the day before money existed people bartered sheep for crops. They started realizing it was easier just to trade small valuable pieces of metal for these things. They then started realizing it is better to store your gold in a bank and pass a note of ownership around for the goods. This is how paper money started. Nobody would have given you their hard earned sheep for a random piece of paper. But if it was a paper receipt showing ownership to gold in a bank then you've got a deal. It is all about value. Fiat currency is valueless.

 

[LittleWolfie]

Clearly the same flavor of socialism.

One flavour of socialism is better than the other is still a socialist position. However one country can be modelled after another and still diverge laer, e.g. SIno-soviet Split, France/Turkey USA/Saudi Arabia. Beside Hyperinflation has occurred in capitalist regimes(e.g. weimar republic|)


It seems like foreign denominated debt is the main one, Norway could print more Krona (and compensate with higher interest rates) to pay off it's debt. Where as if you have to print more currency to pay off debts, you then find your currency is weaker buying less and less, so you have to buy more and so on.

I promise not to mention socialism lol.

1) more money is created through government debt or consumer/commercial debt*

or to pay off existing foreign denominated debt when the currency rises Francs/Gold for the Germans pre-ww1. USD/EUR for Venezuela. That cna prime the pump and start the whole cycle

2) more money in circulation (money that can be spent), leads to increase in demand for goods and services

Principal on debt doesn't rise with inflation. If someone owes $100,000 on a house, and suddenly they are getting paid $1,000 an hour because inflation, debt becomes worthless FAST.

Good if you owe the money (except a loaf of bread costs $10,000), but bad for the entity holding the note.

Suddenly the government is bailing out banks that are insolvent by printing more money....

Now apply this to all forms of credit. Credit cards, NET invoices, homes, cars, etc.

Isn't this the whole point of itnreset rates and variable APR loans? If inflation goes u, interest rates go up to (*internally) compensate, so lenders get the same back in real terms (either more, less valuable $ or fewer more valuable $) unless they are lending in a foreign currency.

unpopular opinion: All of this will happen to the US Dollar in the next few years. Prove me wrong.

Well how much non USD debt does the US have? Like Norway It can't default if the foreign denominated debt is 0.

The Brexit bill being in €, could be the straw in the UK's back, since they can;t then QE their way out of the problem,and any attempt could kickstart hyperinflation.

 

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[splok]

One flavour of socialism is better than the other is still a socialist position.

You're literally saying that stealing and investing are just different flavors of income generation... Ok so fine, we can all (countries included) chose to steal or invest (with Norway/Venezuela being a great example of the long term implications of each). Is there a point other than to argue about what you think the definition of socialist is?

 

[LittleWolfie]

You're literally saying that stealing and investing are just different flavors of income generation..

Well, if an individual or company steals 10k they have 10k more incoming money. This matches with the economic rent idea of the geolibertarians(we would call them socalist here though.) One can argue Norway stole the wine industry when they nationalised it.

Ok so fine, we can all (countries included) chose to steal or invest (with Norway/Venezuela being a great example of the long term implications of each). Is there a point other than to argue about what you think the definition of socialist is?

Several, given Venezuela wanted to be Norway and and ended up like Venezuela gives great instruction for any political group who wants to be more like Norway (as does comparing the various nordics) for instance could one imagine a hypothetical scenario in which Venezuela successfully becomes Norway like?

It's interesting to note the US is already socialist by the UK, definition so to hear an argument against it sounds strange. It helps a lot when working in an international context(such as this forum) to qualify words that have a lot of contextual meaning that others won't pick up. Otherwise you end up arguing past each other rather than understanding and having a conversation. It's also hilarious that someone would need to post "I promise not to mention socalism" that's like promising not to mention profit in an economics discussion. What Would be the point?(except maybe in silicon valley!)

Norway/Venezuela comparisons could provide data on a signalling risk to look for in other markets. E.g. Rep.Georgia risk decreasing, Poland increasing. This could be useful for the people there, those investing there, pension funds in the area etc.

 

[Roli]

This makes no sense. So does more money = more wealth? Obviously not. Look at the Zimbabwe trillion dollars on the first page of this thread. They aren't richer because of more money.

I didn't think I'd have to put the obvious caveat there of; inflation notwithstanding.

Hence there being X (can't be bothered to look it up) millionaires in 1950 and X plus whatever by 1980. The reason being more people able to get finance = more people buying stuff = more people selling stuff = more wealth

Not at all. The gold standard was created by people. Not the Fed. .

It was actually created by money lenders, early forms of banks. However the point is moot because I never suggested it was created by the Fed. I stated that it represented an agreement between the Fed (along with all national banks of countries that were on the gold standard,) and the rest of the highstreet/merchant banks et al. Which is a 100% true statement.

I feel we've come as far as we can in this little exchange.

 

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[W. Sabria]

given Venezuela wanted to be Norway and ended up like Venezuela

Wow. What a clown, this guy. I've been listening to your rants throughout this thread and it's one IBS discharge after another.

The Venezuelan economy is in freefall as a direct result of the criminal enterprise that is running the country. Maduro's (and his cronies) narco-government has stolen basic human rights, property (and even food) from its people; silencing independent media outlets and incarcerating opposition leaders. This is not a Scandinavian pet project gone wrong, this is communism at its finest. But to be clear, the record inflation and lack of food and medicine are NOT from mismanagement and government incompetence. It is all part of a despotic plan to run the country to the ground; making the entire population fully-dependent on the government for subsistence and thus rendering complete control in all aspects of everyday life.

It's the Soviet/Cuban model currently being exported throughout the region. Venezuela is already lost. Nicaragua is next.

Viva la revolución, @LittleWolfie. I hear Caracas is beautiful this time of year.
Send us a postcard.

 

[LittleWolfie]

If you think this is me ranting, you have some serious perception troubles. If you have no prejudice you won't mind examining and discussing the facts to see what you can learn.


The Venezuelan economy is in freefall as a direct result of the criminal ; silencing independent media outlets and incarcerating opposition leaders. This is not a Scandinavian pet project gone wrong, this is communism at its finest. But to be clear, the record inflation and lack of food and medicine are NOT from mismanagement and government incompetence.

It's the Soviet/Cuban model currently being exported throughout the region. Venezuela is already lost.

That's interesting given the Cuban model has relatively low inflation by V standards (7%) Norway went up to 6%, iirc. Cuba has effectively zero usd end due to laws against it. There's also serious economists discussing if Cuba has basically bootstrapped up to the top of the third (well second)world or should count as the bottom of the first world(below china) now

I guess by @w.sabia definition, the teapot dome scandal was usa communism at it's finest. Since they were stealing resources. Note that Mexico is facing similar problems.

I suspect Venezuela's political central bank is a major compounding factor, you can't just print money for politicians pet projects without devaluing. This and foreign denominated debt explains the petro. The idea of an algorithmic central bank could end hyperinflation algorithmically, if hard currency is brought in for crypto-fiat debt "minted" by the algorithm then it makes sense.

Much more than the stupid redenomination attempts. In fact it's more like trying to move venezuka in line with Norway (Since in theory the crypto could prevent the theft in the first place)

 

[CommonCents]

whats the current spread between official rate and street rate? people used to make a lot of money in arbitrage. not sure if you can get access to money at official rates. used to be when you had an airline ticket and traveled. just charge venezuelans a fee for them to ship you their credit card and get a cash advance for them

 

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[Brad S]

Anyone have any thoughts on whether the original bolivar will ever regain some of its value?

I bought some awhile back very cheaply on the off chance it would ever rebound with the "reversion to mean" law.

Sent from my SM-G950U using Tapatalk

Anyone?
Where's all the currency traders?

Sent from my SM-G950U using Tapatalk

 

[Dramolion]

Anyone have any thoughts on whether the original bolivar will ever regain some of its value?

I bought some awhile back very cheaply on the off chance it would ever rebound with the "reversion to mean" law.

No it will not "bounce back" Venezuela has long since lost track of whatever the "mean" was.
Sometimes the market overreacts(to bad news of the economy), and a while later gets rectified, problem is, if value goes down for a longer period, a little "overreaction" becomes a normal reaction that doesn't need rectification and a snowball-effect happens.
Sure, rectifications can and will happen, (and i bet plenty have happened) however they won't snowball the value back to anything it was before.(mostly because underlying economic reasons, not psychology)