Why is there hyperinflation in Venezuela?

Management in Action Hyperinflation is not solved by removing the zeros or forcing the PETROS, but attacking the cause (the model) and saving the trust. All the rest is straw "
L. V Leòn

Venezuela was a country whose prices were stable from 1950 to 1983. Since" Black Friday ", when the Bolivar was suddenly devalued, prices began to increase by 2 digits a year, already in 2013, Venezuela had an annual inflation of 56%, the highest in the world by then, and two years later it reached 180.9%. Central Bank does not publish this index since 2016, but independent firms estimate that inflation is expected to remain above 2,000% by 2018.

Already in November last year, the National Assembly measured the price increase above 50%, placing the Venezuelan economy in a situation of hyperinflation, accompanying Zimbabwe as the only economies that have suffered from this phenomenon in the twenty-first century. [19659005] Prices in Venezuela were dizzying, one way to illustrate the loss of their monetary is to see the changing power of purchase. At the time of its entry into circulation in 2008, with a ticket of 100 bolivars fuertes, 12 boxes of eggs (360 units) could be bought. In early 2017, the 100 bill was not enough to buy an egg.

Inflation is the generalized increase in prices of goods and services during a period in a country. The consumer can buy fewer products with the same amount of money when inflation increases. People are getting poorer and the quality of life is deteriorating

Hyperinflation is an unusual type of inflation that implies a general rise in prices to very high levels. Money tends to lose the ability to fulfill its three functions: to be a unit of account, a means of exchange and a store of value. Money is functional when it fulfills the three objectives. It becomes dysfunctional when it does not comply. when you can not do any of it.
I appreciate you. Money is functional when it fulfills the three objectives. He becomes dysfunctional when he can not meet any.

Soaring prices can leave a country engulfed in a short period of time. In the ranking of the most affected, the undisputed leader is Venezuela, which is expected to exceed 2,000% of annual inflation. In Venezuela, local money quickly lost its value

After wars, deep economic crises or when banknotes become useless papers, inflation in the world reached unthinkable extremes.

Latin America is enough to remember what happened in the 70s and 80s of the twentieth century when many countries could not pay their external debts, people were impoverished, the salary It was not even enough to cover their basic needs and inflation galloped. These are the characteristics of socialist Venezuela

Today, things are different. The global trend shows that inflation has ceased to be a ghost, although there are still exceptions (like Venezuela).

According to the projections of the International Monetary Fund (IMF) for this year, the 10 countries with the highest inflation. in the world, eight are Africans and two come from Latin America. South Sudan (111%) is at the top of the world list after Venezuela (1,113%). The countries of Africa are South Sudan, the Democratic Republic of Congo (50%), Libya (35%), Egypt (29%), Angola (23%), Yemen (23%), Sudan (21%) and Burundi (20%). Latin Americans are Venezuela (1,113%) and Argentina 22%

. 2nd) Spain (-0.01%); 3rd) Germany (0.09%); India (0.35%) and the United Kingdom (0.51%).
The authorities of these advanced economies are concerned that inflation is very low and, furthermore, that interest rates are very low. So low, that some economists fear that it will reach a point where the central banks remain without margin to continue cutting them.

Although the global trend is pointing down, some countries in crisis remain the exception. "In advanced economies, the targets set by central banks are generally between 1% and 3% .In emerging economies, inflation tends to be a little higher, but less than 10%, although in the countries emerging from the crisis, they can go further, "says Thierry Geiger, head of the analytical and quantitative department of the World Economic Forum (WEF).

Emerging countries are facing a different situation, given inflationary pressures are at relatively normal levels, and in the case of Latin America, the situation – in general – seems to be under control, except for the two countries on the 'blacklist' of Venezuela and the United States. Argentina

Venezuela enters a field of hyperinflation The IMF forecasts that it will reach 2,349% in 2018, which would further aggravate the current shortage of products, amidst the circumstances where to many people have problems getting food and medicine.

"An economic crisis of this magnitude the result of extremely precarious economic management, which usually involves a combination of disastrous fiscal and monetary policies, the printing of banknotes, ruinous subsidies, severe restrictions on the movement of goods and capital or a greater shock ". In the case of Venezuela, the government seems reluctant to carry out drastic measures or even recognize that there is a crisis, which obviously contributes to making matters worse. "

Faced with these diagnoses, the current Venezuelan socialist regime generally argues that it is the victim of an" economic war "and a" blockade "of the United States of America, accusing the Opposition. [19659005] Steve H. Hanke, professor of applied economics at Johns Hopkins University, specializes in the measurement of inflation in different countries.From his point of view, the situation is even more complex. "I measure the evolution of prices every day and according to my research, inflation for this year in Venezuela will be 2,594%," says Hanke to BBC Mundo

. Remains of Latin American countries, inflation has not become a serious problem and the trend has evolved into moderation.

At the same time, various estimates predict that the region will show a gradual rebound in the economy this year and next year, despite the lowering of the price commodities that have marked regional performance in recent years.

Overcoming hyperinflation implies a change in the monetary and political regime. On this last point, those who caused the crisis today are unable to solve it. Venezuela must forget the socialism of the 21st century and move quickly to restore property rights and move from one state of affairs to another with a social purpose and open as much space as possible to the initiative of the people to produce without restrictions.

To reduce hyperinflation, we must also change the monetary regime. This is to anchor the exchange rate against the dollar and that the BCV, to issue money, must do so on the basis and maintain at least 80% of the monetary base in foreign currency assets and in gold and the remaining 20% ​​in credit to the bank. A conversion of one million strong bolivars would be made for each new bolivar. This would be preceded by measures leading to the elimination of the fiscal deficit, conditioned by the lifting of exchange control, so that "at the beginning the exchange rate is at its market level and PDVSA does not have any effect. It does not have to finance itself with the printing of money. BCV, an increase in the price of gasoline and other services now with basic deficits and an international financial program with funds from multilateral organizations and foreign banks.

One question: After hyperinflation, can an economic depression come with the financial ruin and prevalence of usurers (these not only impose huge interests, but also holdings of companies that will apply for loans? with the intention of avoiding closure). This is reminiscent of the "Great American Recession" (which fills their pockets with shady business, "bachaquerismos" – of alcohol, etc.- and criminal actions, all of which gave the end of the anciero lung that allowed it to kneel others). If so, one may ask: Can hyperinflation be caused intentionally by people with a lot of power and an unhealthy spirit?