Faced With One Million Percent Inflation, Venezuela’s Socialist Government Strikes Five Zeros Off Its Currency

250px-Flag_of_Venezuela.svgWe have been following the unfolding disaster in Venezuela where the socialist dream of Hugo Chavez and his dim-witted successor Nicolas Maduro has reduced a major nation to virtual starvation.  The central planning of Maduro’s nation has destroyed the oil-based economy and triggered inflation that is projected to reach 1 million percent within the year.  Maduro however continues to follow the absurd economic model of Chavez and his chief ally, Cuba (another economic basket case).  Now in a move that will worsen an already horrific situation, Maduro has ordered five zeros to be simply erased on the inflated currency while increasing the minimum wage by over 3000 percent.  

So you solve inflation by dropping zeros and increasing minimum wages. That is obviously a cosmetic as move that will only exacerbate the situation. The new “sovereign bolivar” will replace the earlier “strong bolivar” but will be tied to the Maduro’s failed cryptocurrency, the petro.

The increase in the wages does little when you are pushing against a one million percent inflation rate — and doing nothing serious to deal with it.

Maduro is a former bus driver who is simply repeating the failed approach of Chavez who, in 2008, stripped off three zeros but did little to slow the crippling level of inflation.

52 thoughts on “Faced With One Million Percent Inflation, Venezuela’s Socialist Government Strikes Five Zeros Off Its Currency”

  1. And yet, Socialism is gaining speed in our own country. Capitalism, which has raised so many out of poverty, is viewed as villainy while Socialism, which has impoverished so many, is viewed as justice.

    How do so many suspend all reason and ignore current events to espouse Socialism? The lack of information on Socialist history is staggering. Is it the public education system’s fault or the generations that failed to pass down the knowledge at home?

    This common misconception that the Nordic System is Socialism is woefully inaccurate. It actually depends on a free market economy to fund a generous welfare system, and they don’t even have a minimum wage. Immigration requirements to such places are quite strict, with immigrants (as opposed to refugees) having to prove that they can hit the ground running with a job, and won’t be a drain on society. And when that Welfare state becomes too much of a drain, they make adjustments. They certainly have not nationalized all industry, criminalized all capitalism, and distributed equal wages for everyone regardless of where, and if, they work.

    1. Karen S — The meaning of “socialism” now in the USA is not the Marx-Engels original definition of state ownership of the means of production. I gather that it might better be described as “welfare-ism” although that isn’t quite right either.

      1. It’s exactly the same and track followed is Wilson’s import of socialism from europe to his University where he started training a whole new group of professors and sillybus (on purpose).1898 The group came from an effort by the Bolsheviks who trained agents and sent them all over Europe. For example Fabian Society. Wilson then became President in 1909 and put them into government while applying their beliefs to intentionally changing our Constitutional Republic not to mention three wars. 16th and 17th Amendments to strip the States of their powers and make much of checks and balances moot.

        Come FDR with the scientific liberal government no longer using progressives as they did at first we ended up with the mess we have now, the myth of a democracy sprang up – sorry there is no Democracy in our Constitutonal Republic.

        FDR became a dictator in WWII and kept most of that intact through Truman. Wilson and company took over the southern and northern pro slavery pro jim crow laws party and made it anti civil rights. LBJ seeing a chance for votes BUT had to get 100%of the GOP to vote with him since the majority of the Demcorats voted against civil rights. and so it went the draft the income tax more anti civil rights and then the grand push for a one party system of government and worse openly bragging about it.

        Clinton paid lip service to civil rights while Obama openly ignored them … and the DOHS Secretary prepared claimed the military was their governments worst danger.

        Hillary openly claimed to be aprogressive socialist and in turn we had enough and ran a counter revolution.

        and by the way. Progressives came second after and from International Socialists .. National Socialists came third but all came from the same source. Marx and Engels

        James Carville spilled the beans on that little mistake just as Jackboot Janet Napolitano did on helping Obama turn DOHS into Directorate of Internal State Security.

        Seems we military people refused to trainto open fire on our fellow citizens

        And you say it’s different somehow? When it is it means someone lied and those countries are really market capitalist with a conscious and China by the way is at the head of that list.

        Too late for ”sorry” we know that bi-ipartisan means cave to the left.

  2. “Socialism” is a red-herring.

    “Socialists” are communists-in-waiting.

    Ergo, socialists are communists.

    Why the subterfuge – or the same question in varied form – why trade/negotiate with China?

    “The Capitalists will sell us the rope with which we will hang them.”

    ― Vladimir Lenin

    The essence of communism is deceit.

    Socialism is communism.

  3. Chavez poked his thumb in the eye of US oil companies by kicking them out and claiming the profits of Venezuela’s oil for Venezuelans, then he magnified his “crime” by outwitting the US backed coup attempt.He didn’t agree with the US maxim of all natural resources, wherever they are, belong to the US. It’s no wonder that Venezuela is now in bad straits.

    1. They had oil but wouldn’t build a refinery. They had agriculture but wouldn’t grow food. the they ran the super market chains out and oil tankers out and told their citizens eat salt water. I’m supposed to feel sorry for that government. No For their Citizens yes but for the Socialist looters and moochers .. .to hell with them. Chavez died rich Castro died rich and their citizens are still trying to escape. Maybe we should be arming them. Maybe we shoud be following the dictates of the motto of US Army Special forces De Oppresso Liber. Liberate the oppressed instead of another group of socialist fascist dictators OR we could go whole hog and send them the DNC and Berners while excepting their citizens in echange.

    2. bettykath:

      Venezuela starving is the not the US’s fault. Please explain in detail what exactly the US government did that make their economy tank, and how Chavez and Maduro’s economic policies had absolutely no effect. Chavez blamed his critics on the US rather than address it. Kind of like Ocasio-Cortez barring the media and refusing to debate her own critics, except with less tanks. Obviously, the US would be pleased at an attempt to remove a Socialist dictator in the region, and we’ve meddled in elections and coups for over two hundred years. But Socialism’s inevitable slide into human rights abuses and starvation is not our fault. In fact, we have offered aid along with the rest of the world, but been refused. Just think, if the coup against Chavez had actually worked, the country might not have an average per capita weight loss of 40 pounds.

      Please explain what you mean by “all natural resources, wherever they are, belong to the US.” I was unaware that we had divested OPEC of all of their oil reserves, and also appropriated all the oil in Canada and around the world. Obviously, the US takes a geopolitical strategy of optimizing our citizens’ access to oil, such as maintaining good diplomatic relations with the Kingdom of Saudi Arabia, despite its dismal human rights abuses and open, rabid antisemitism. The OPEC oil embargo had devastating effects on everything, including groceries. That is far and away from seizing all global fossil fuels or considering them our sole purview. That doesn’t make sense.

      That is so strange, when here I thought we bought it on the open market just like everyone else.

      1. The war in Afghanistan was about a Caspian Sea pipeline, i.e. oil; the unprovoked invasion of Iraq was about oil; the overall destruction of the Middle East is all about oil. Oil is essential for war machinery. I could go back in history for more examples but you really should take a history course that focuses on the real reasons for US invasions and what happens to the leaders of countries who don’t accept US interests over those of their own citizens.

        1. Two kinds of sales, contract with futures and open market. One you guarantee a certain payment or a high low and regardless thats what you pay usually about 90 days later. Other than standard seasonal trends such as summer driving season plus AC’s and winter school season plus heating you will find most unexpected trends are exactly that and more often than not caused by governments.

          Then no one thought the US would ditch it’s no sales policy until the SW Texas oil fields hit pay dirt for a larger thanSaudi strike . Mexico had a large chunk of that but the unexpected was their government still not building refineries along with canada they still use Houston but no new refineries in 20- 30 years

          So we get paid in oil to do their refining and the same with Canada. Mexicos goes back across the border with a twist and Canada is picked up on their charter ship and sold somewhere in the world. They can refine or import from elsewhere other fuel.

          Now Mexico outgoing president sold of the distribution business to locals who in turn sold the stations and trucks to companies like ARCO..

          BUT the price at the pump of Mexico oil is fixed with a built in growth rate and that pays much of their annual budget. their other taxes are next to nothing.

          :Left alone it will deliver just enough fuel at just the righ times another Miracle of the Bagel.

          But let’s say the Greens take over in the US and decide to shut down the Canadian pipeline and the US Refineries. Someone would quickly builld a new set in Mexico but who knows what would be available with someone like Lizzie Borden Warren in charge. for that invest extra blankets parkas if they are not taken away and redistributed.

          Most of us would just move to Mexico.

  4. Fly over and flush. But don’t drop any turds cause they will eat them.
    Pee Party Hot!
    Pee Party cold!
    Pee from Maduro in the pot …
    Nine years old.

  5. Since I can’t find the first post I’ll follow up my promise on sources of basic economics for beginner and others.

    Two favories

    Economics In One Lesson, Henry Hazlitt

    The Capitalist Manifesto (this one has the Miracle of the Bagel) by Dr. Gary Wolfram

    Both have well thought out examples on each phase of instruction. Hazlitts chapter on Tariffs particularly instructive.

    Both available at Amazon in Kindle form or print as usual these days and other major book sellers

    At present having worked through several about six or seven others I’m on Thomas Sowells series. A brain rest after Hayek. This as a support or sort of minor to the majors in Political Science and Philosophy and various areas of History, But I’m using the Frank Zappa method these days. Some other good sources are John A
    Alllison’s two The Leadership Crisis and the Financial Crisis and the Free Market Cure.

    If you didn’t find it The Miracle of the Bagel describes why market capitalism works while central planning socialism which is not an economic system to begin with does not. Something anyone from NYC, especially the face of the new ha ha democratic party should immediately recognize – unless she also hates bagels.

  6. Protracted, macroeconomic disasters such as this usually fall directly within the responsibility of incompetents of the ruling class. Yet it is not so much the blame of the current leadership as it is through the failure of the past to strengthen the base of an economy when the opportunity fostered itself.

    http://writingcapital.tumblr.com/post/34632488868

    The above link shows several economies as measured by a graphical representation of export diversity. You will see how in the case of Angola which in many ways is structurally similar to the 94+% reliance on petroleum in Venezuela.

    If instead of taking the easy approach and defaulting to the temptation of easy hard currency through petro, policy makers chose to instead purpose a reasonable portion of the income from this toward encouraging economic diversity through the addition of additional export sectors, the economy decades later would not be as vulnerable to stagnation of its only prominent export, oil.

    If Venezuela had lowered its export proportion of petro to say fifteen percent. It certainly would not have fared as badly as it does presently.

    Yet unfortunately too many nations and governments find it too daunting a task to diversify their economy. That is the devil in petro, temptation.

    1. Worse they have no refineries and could only export crude much of which went to refineries in PR and Virgin Islands in foreign flag tankers then refined and shipped up the USA on the Hess ships for their use and others such JP series for aircraft. So it’s not just importing food but also fuel when they are sitting on lakes of the stuff. Worse all the food importers were driven out. early on.

    2. It’s doubtful that economic planning is the least bit advisable in any Latin American country. It was workable in the Far East at least for a time. See Alice Amsden on the unusual features of South Korea’s political economy.

      One thing Venezuela might have done was to dump the oil revenues in a sovereign wealth fund. Interest and dividends from such a fund could have provided an income stream for the central government while the political economy could otherwise develop on normal lines with provincial and local governments collecting what taxes they could through available technologies and planning expenditures according to revenue streams of normal dimension given available technologies. Ditto the central government, bar that the interest and dividend income would allow for lower tax rates than similarly situated countries and more margin for public works and education. One might conceivably apply capital from the sovereign wealth fund to public works, provided the allocation included not just construction costs but a dedicated endowment for maintenance. You might say that Venezuela has learned the hard way that what geographers call ‘the resource curse’ is a reality. Except that elites and public in Venezuela have a long history of not learning.

      Otherwise, you can confine public enterprise to natural monopolies and municipal amenities (not housing, though) and otherwise rely on private enterprise for the production of salable goods and services.

      The sad thing about Latin America is how wretched they’ve been at institution building. The land titles are commonly a mess, the court system is commonly too inefficient to perform a social function more elevated than employing civil servants; the police forces are commonly understaffed, ineffective, and dirty; and regulatory agencies are notorious for rapid production of verbiage whose most salient effect is to render above-ground private enterprise dependent on political contacts.

  7. When on holiday in Turkey during the late 1990s, I happened along a 1970s style gas pump having the rolling four digit mechanically driven display for price. In its intended, original design, the pump was only capable of displaying prices to 99.99 units.

    While this certainly worked at the time of manufacture, the lira hyperinflated numerous times over the decades, requiring it’s owner to write additional zeros to the right of the display.

    It showed not only the cumulative effect of inflation in the adding of a dozen or more zeros, but one could see a history of the media used to write each zero. First it was carefully painted, haphazardly painted, and onto grease-pen then felt-tipped marker. Also, it became apparent that the most recent zeros were written by the same hand, showing the devaluation becoming increasingly frequent.

    1. Had some of that in the USA during the eighties phony gas shortage. As ou said one dollar and was printed to the left of the readouts.

      Wen that was over it ‘was back to a buck or less through 1999. at least in our area. but the days of driving a car for a thousand miles on a $20 to $25 purchase were long gone (35 or so cents per gallon)

      Also gone were the mechanical one armed bandits which could be rigged from the outside to change the odds kNot true with the digital driven kind today. you see it went like this just in case you find one . Pull the handle down slow and even until you hear or feel two clicks That locked the midde and right wheel together. let the handle up slow then give a complete to the bottom pull with a smooth action. It’s now a two wheel machine and if iyou checked for a machine with some of the symbols lined up already. JACKPOT

  8. People were starving in Venezuela before socialism, but because of greedy distributors of food and other human needs. Millions of new apartments have been built, and illiteracy eradicated because of socialism. If we’d only remember the advice Marine commandant David M. Shoup (MOH recipient) gave JFK about Vietnam (but which is applicable to so many of these poor countries we meddle in):
    http://quotes.liberty-tree.ca/quote_blog/David.Shoup.Quote.9175

    1. No one starving down there in the sixties and seventies and you could buy a garafon of white rum for a couiple of US Dollars. That’s 20 liters per jug.

  9. Venezuela (and many other oil-based economies) are in free-fall because the US cut a deal with Saudi Arabia to dump their oil on the market. This was done intentionally. The Saudis are financially affected as well, but in exchange we provide them with all the weapons they want to wage their war on Yemen and Iran, its protector, which is also hurting because of our manipulation of oil prices. Eventually when these oil-based economies collapse and we are able to install compliant dictators, as we have in the past, oil will be allowed to rise again to support our puppets.
    We do our part to increase the supply of oil & gas to drive prices down by poisoning our ground water with fracking chemicals. We are literally willing to die to make our 1% even richer. They think they can build bunkers in New Zealand, but climate change is worldwide, and will kill all of us, rich or poor.

    1. Rik Reynolds,
      It’s just as likely, if not more likely, that the Saudis saw U.S. production profitable,and
      increasing, at $100+ price per bbl.
      A lot of that production, especially oil produced by expensive fracking, was shut down in the U.S. when prices plunged.
      So defending market share and discouraging competitive production ( competitive
      at higher prices), was one major objective of the Saudi higher output.
      Cheating on quotas has always been an issue within OPEC. Saudi Arabia still has the clout to encourage production quota adherence by essentially saying to its OPEC partners “if you want to cheat on quotas, watch what happens when WE flood the market”.
      I don’t think that the Saudis were very concerned about oil revenues drying up for countries like Iran and their ally, Russia.
      I think it’s a mistake to ignore all of these factors and conclude that the main reason for oil price fluctuations/ declines is because “the U.S. cut a deal” with the Saudis.

    2. Yeah, it’s all the Yanks fault.

      Do try to be less of a caricature in the future. By the way, you’re not doing these people any favors by trafficking in lies

    3. Hasn’t yet and besides what can you do about it. Well if it’s getting hotter you move north and move your plants and animals north. US north side grows rice and bananas the south gets mangos. Canada gets more wheat and grain crops further north, Mexico gets to grow year round bananas and when that trend or more accurately this part of tghe norma weather cycles change move in the other direction. Now we are in the beginning of a mini ice age ha ha . Average drop or 200-300 years one degree centigrade. The ozone holes are fixing themselves and there is no reason to make Al Bore any richer. Oh yes…..we noticed how he sold his tobacco stocks and bought into bituminous coal mining tghen shut down the cleaner anthracite reserves. I wonder what he traded them for when Hillary decided to put coal out of business or when the showflakes shut down fracking so they could keep buying from Saudi Arabia when we export oil ourselves How do you spell green? S C A M

    4. Besides the guy that started the whole thing already copped to giving false information in order to get as research grant.

  10. I wonder how active the black market is in dollars, Euros, pounds etc. transactions.
    Heck, monopoly money is probably more valuable now than Venezuelan currency.

    1. Best USD/VEF exchange rate for Aug 22, 2018 | finder.com
      https://www.finder.com/usd-vef-exchange-rate

      Live exchange rates US dollar to Venezuelan Bolívar. … more expensive due to the difference between the bank’s exchange rate and the black market rate.

      One Dollar Now Buys 103,000 Bolivars in Venezuela’s Black Market …
      https://www.bloomberg.com/…/one-dollar-now-buys-103-000-bolivars-in-venezuela-…

      Dec 1, 2017 – The rate in the black market — the place where most Venezuelans acquire dollars in the authoritarian country — weakened to 103,000 bolivars …

      Just ask google. and remember thats the new currency

    1. Paul, Denmark and Sweden don’t seem to have this problem. Is it only socialism that brought Venezuela to this?

      Perhaps Venezuela never quite had its act together. Perhaps years of inequality created systematic problems that socialism made only worse.

      And the lesson might be that inequality is a threat to capitalism. When capitalism fails to work for the masses it breeds radicals of every stripe. That’s what happened here in the U S. The Great Recession was like an earthquake that radicalized both the left and right.

      1. Peter Hill – both Denmark and Sweden have stepped back from full-blown Socialism. They both have a strong capitalistic base.

        1. PC Schulte,…
          Bernie Sanders was challenged when he mentioned Denmark as a socialist country, including a correction by the Prime Minister of Denmark, who said that Denmark has a market economy, not a socialist system.
          Demark is not generally considered to be a socialist country, but it is often lumped in with countries that are socialist.

            1. What right-wingers don’t get is you can have a strong system of public benefits but still have a market-based economy. Just because a country has universal health insurance and government-funded child care doesn’t make a country socialist.

              Socialism is government ownership of the means of production, like businesses and machinery.

              Americans like Sean Hannity frequently accuse Canada, Britain, and France of being socialist but they all have economies based on private enterprise and free trade.

              1. What right-wingers don’t get is you can have a strong system of public benefits but still have a market-based economy.

                Uh huh. The Table of Contents of the French labor code is over 80 pages long and ‘social protection’ expenditures now exceed 30% of gross domestic product.

                1. France and Britain do not have government ownership of the means of production. Britain’s NHS is socialist because the entire healthcare system is government owned, but the economy as a whole is market-based.

                2. Ours is over 70% and if you ask about NDP they refuse to answer just subtract the service charges on the national debt and don’t forget to add back in the devaluations

              2. Britain has been labor party controlled and pro socialist since the end of WWII and before. canada is pro socialist but there are different levels certainly.

                The USA with it’s pro socialist for decades progressive movement and it’s ‘fettered’ economy is one of them.

                Certain things come with that stance. One is non stop wars USA since it started has had 23 years of no wars. You see it’s a great control mechanism and a great diversion from failing economies. Now we have to get out of the only legacy Obama left us Debt and War and keep from sliding back into it. You start by ditching the socialists from government.

                That is the citizens choice as much as we are allowed to have.

                Want to hear about the ultimate result.

                Stalin 22 million dead russian civilians?

                Mao had more than that

                Hitler 17 million

                All socialists of one type or another.

                Most of if not all of the wars of the XX century could fairly be called in a group as The Century of The
                Great Socialist Wars. USA was one of them under FDR.

                I’m, just re-doing that and one fact leaps out. The party that was in control for the vast majority was the Democrat liberal progressive socialist party. Want to get embarrased. Try refuting that.

                And don’t forget LBJ’s War and don’t forget which party put War
                Power Act into law and failed to honor it thrugh as number of wars and actions while the opposition honored it twice and got Congressional approval twice.

                Who said Socialism is only on the road to Communism? Marx, Engels, Stalin, (National Socialist), Pot Pol, The Kim family in NK, The Castro’s. and don’t forget their National Socialist brethren.

                So no. Countries called that like Sweden are rarely that mostly market capitalist with a social conscience.

                And those have the bucket of blood trophy to prove it.

          1. You can have capitalism in a socialist country. But conservatives like to keep changing the definition of socialism so that it always looks bad.

            1. No, it’s always been a fuzzy term. That’s not some semantic trick Sean Hannity dreamed up.

            2. Peter Hill:

              “You can have capitalism in a socialist country.” No, Peter, no you cannot. Then it is a Capitalist country with generous welfare benefits, and not a Socialist one. Socialism requires the abolition of capitalism and various other egalitarian principles to deal with Karl Marx’s class struggle. Individual rights are given over to the government for the good of all.

              You do occasionally see Capitalist countries monkey around with a few socialist idea or a nanny state. They do this because those in power understand that pure Socialism does…not…work. The people inevitably starve. The best they can do is depend on a strong Capitalist economy to fund pet welfare projects. When spending gets so large that it cripples the economy, they either scale back, or tank. That’s what happens when you strangle the golden goose.

            3. See! They always use conservative to describe people who disagree with them. Never fails Now how many diffrent names have the progressives used since 1909? Populist, liberal, darwinians, farm-labor, mixed with Democrat, scientific government or administrators back to liberals and now back to progressives or is it Progressive Socialists or Socialists no it’s Socialist Democrats? But all of us are Always Conservatives oh yes and RINOs and DINOs

              Sorry but not much. I’m a moderate Constitutional Centrist, the Constitutution IS the center, capitalism has been around since dawn of mankind and has trouble only when it is ‘fettered’, socialism has never suceeded under any of it’s names and to quote President Clinton.Your Time Is Up.

              Or was that the cheerleader.

            1. Actually the type used today pure market capitalism is even better depending on how much it is fettered or controlled. To make it really work one has to get rid of thei problem which is people like Senator Lizzie The Axe Warren. and did you catch that GA slimey production she had on TV today?

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