Few in Venezuela Want Bolívars, but No One Can Spare a Dime

[Bacchus4.0]

http://www.nytimes.com/2015/10/19/world/americas/few-in-venezuela-want-bolivars-but-no-one-can-spare-a-dime.html?ref=topics&_r=0#
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That astonishing disparity makes for a sticker-shock economy in which it can be hard to be sure what anything is really worth, and in which the black-market dollar increasingly dictates prices.

A movie ticket costs about 380 bolívars. Calculated at the government rate, that is $60. At the black-market rate, it is just 54 cents. Want a large popcorn and soda with that? Depending on how you calculate it, that is either $1.15 or $128.


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Mr. Maduro blames an “economic war” waged by his enemies, foreign and domestic, for the problems. But most economists say the problems are caused by the fall in oil prices and the government’s policies, including strict controls on prices and foreign exchange for imports.

As the crisis has unfolded, Mr. Maduro has hesitated to make changes even top officials say are needed, like raising the price of gasoline, which is so heavily subsidized that it is virtually free — perhaps because he is fearful of a backlash before the elections.

[DetlefK]

1. From the article: Maduro refuses to issue high-denomination bills.

“You want to understand why there’s a lot of money and there’s no money?” Ruth de Krivoy, a former Central Bank president, asked with a rueful laugh. She said the main problem was that the government had failed to respond to rapidly rising prices by issuing larger-denomination bills, like a 1,000- or 10,000-bolívar note. So people need many more bills to buy the same goods they bought a year ago.

Also, as people resort to the black market to buy more goods that cannot be found in stores, transactions that could once be made with debit or credit cards are now conducted with cash. That creates logistical problems, as banks must move around huge amounts of paper money and A.T.M.s empty out more quickly.



No money, no circulation. No circulation, no trade. No trade, the economy shrinks. The economy shrinks, leading to inflation, leading to an even greater need for high-denomination bills.

[Bacchus4.0]

2. They don't do anything about it though. The ineptitude of the chavistas is mind boggling nt

[DetlefK]

3. They have painted themselves into a corner: They can't do anything.

1. The policies are great and there is no need to change them.
2. If they change the policies anyways and things get better, people will ask why it took so long to change the policies. And they will ask whether the policies are great at all.

[Bacchus4.0]

5. Thats what happens when you let a dead man continue to run your country nt

[DetlefK]

4. Fun Fact: Ancient Rome tried the same policies for 4 years and it was a disaster.

In 301 AD, Ancient Rome briefly tried price-control in response to an inflation-crisis. As a result the economy tanked and the black-market grew massively.
The economic downturn was blamed on profiteers and greedy merchants.
The crisis eventually ended when people agreed to simply ignore the law by 305 AD.
https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices

[Bacchus4.0]

6. 1700 years later and Venezuela is a disaster nt