9 ms·

Venezuela on Brink of Hyperinflation

40 points by Kinnard 11y ago

deleted 11y ago
[deleted]
themeekforgotpw 11y ago
The United States has been working on a coup for Maduro, since its coup of Chavez hasn't worked out for it. This time it would really like to install Leonardo Lopez as he's willing to privatize Venezuelan oil to US companies. The US has been encouraging and organizing protests, gatherings and projecting anti-Maduro sentiment and news into the country. (https://wikileaks.org/gifiles/releasedate/2012-06-18-08-canvas-how-a-us-funded-group-trains-opposition.html https://wikileaks.org/gifiles/releasedate/2012-06-18-08-canv...) It's possible that if their economy (amid new US sanctions) collapse that this could trigger the regime change we've been eyeing and the energy security we've been wanting to establish there. We do have to be careful about CALEC and UNASUR, however. South American countries have been ever moving closer to isolating the US from its multilateral diplomatic plans and are regularly condemning the US for its interference, funding of death squads, war on drugs, and unilateral sanctions of various South American countries. If we take Venezuela we need to make sure that we don't isolate the rest of the continent.
- Kinnard 11y ago
  Wow
- Bonsanto 11y ago
  I live in Venezuela and item's prices are raising horrible, let me tell you something I am electrical engineer and computer engineer, and my salary is only 10.3$/month, ridiculous, but his is how socialism works everyone are equalized but to poverty. To buy a car in Venezuela you need to save money for 50 years without buying food supplies, to buy a house it takes 200 years, to buy dollars you need to be a friend of Maduro, my most bright colleagues have left the country so I am.
  - pitiburi 11y ago
    I am not in Venezuela, but I work with some guys there. Your "10.3$/month" is a blatant, and pretty absurd lie. If this account created a few minutes ago is going to be used to spread lies, please use it somewhere else, not in HN. We don't need you.
    - kordless 11y ago
      > We don't need you. Don't speak for me. Given at least half of us have no idea what 10.3$/month is, why don't one of you enlighten us and let us draw our own conclusions?
      - chvid 11y ago
        My guess is the poster is referring to the monthly wage of a professional in Venezuela in USD by the black market rate which probably is fairly indicative of the purchasing power. And yes. Venezuela is a touchy subject since its nasty regime sadly is idolized by many left-winged intellectuals in the west.
      - bmelton 11y ago
        So, I'll freely concede that I'm ignorant on the issue, but Bonsanto made an extraordinary claim below (that government forbids buying non-Venezuelan currency) that despite my initial idea, turns out to appear truthful. So, According to this somewhat recent article by Bloomberg[1], "A school teacher with 25 years of experience made 9,786 bolivars a month in 2014. That's about $35 a month at the current black market exchange rate, which won't even buy a used television." It's hard to tell what the actual exchange rate of the bolivar is to the dollar, because apparently Venezuela fixes the exchange rate, so while it's been steady on paper, it appears that in practice, its actual exchange rate is approximately 100 times less than the official exchange rate. The official rate indicates that 1 bolivar == .16 US dollar, but other sources indicate that the effective, actual rate in Venezuela is more like 1 boliver == .0036 US dollars (or, because my simple math skills are horrible, 100 bolivar == 36 US cents.) If that's the case, and I'm not missing something crazy, it doesn't seem far-fetched to me at all that an electrical engineer would be earning the American equivalent of $10.3 US dollars per month, depending on how you define the exchange rate. [1] - http://www.bloomberg.com/news/articles/2015-03-06/monthly-salary-of-20-shows-why-venezuelans-wait-in-food-lines http://www.bloomberg.com/news/articles/2015-03-06/monthly-sa...
- dageshi 11y ago
  The US is literally producing more oil domestically than it can refine, it's got more cheap domestic oil than it knows what to do with... I don't discount American involvement but I'm not sure that oil is the great driving factor it may have been historically, the Americans are producing enough of their own.
  - themeekforgotpw 11y ago
    The long term strategy of the US is to provide energy security to Europe between tar sands, crude, gas and oil. It has multilateral plans with Canada and Mexico to build North-South pipelines to achieve this. Recently the conflict over oil off the shore of Guyana and the documents I linked to above (where it is STATED that the coup is motivated by oil) show recent actions by the US that contradict you. And further it is not merely about TAKING the oil (though it is). Venezuela uses its energy economy to unilaterally fix political outcomes. Think their shipping of oil to Cuba despite US sanctions. The US wants control of that oil.
    - gassius 11y ago
      ... and the current inept Venezuelan Government is making all it can to help US convey it's plans, apparently
- sillygeese 11y ago
  > If we take Venezuela we need to make sure that we don't isolate the rest of the continent. So you don't see a problem with "you" "taking" Venezuela, as long as the consequences aren't too bad for "you"? Nevermind that other countries are not supposed to be your colonies and nevermind that you, as in, ordinary citizens, won't even benefit from the US "taking" Venezuela.
nabla9 11y ago
How to create hyperinflation in two easy steps: 1. Build massive external debt in _foreigin_ currency. 2. Have fixed exchange rate. Its very hard to create hyperinflation using bad fiscal policy alone if you are not in debt in foreign currency and have floating exchange rates. Floating currency will balance exports and imports and printing money to pay debt in your own currency works.
- Kinnard 11y ago
  How would you say cryptocurrency or gold play into this?
  - nabla9 11y ago
    Gold and cryptocurrencies work just like using the currency from some other country. Their exchange value don't reflect the economy that is using it and country can't have independent monetary policy.
    - Bonsanto 11y ago
      In Venezuela is illegal to buy any KIND of currency, without the government approval. You can find the dollar price here -> dolartoday.com You will find how poor all venezuelans are :(
    - Bonsanto 11y ago
      In Venezuela is illegal to buy any KIND of currency, without the government approval. You can find the dollar price here -> dolartoday.com You will find how poor all venezuelans are :(
- gassius 11y ago
  (words from Venezuelan living in Venezuela) Actually, external debt in foreing currency is not an important factor in what's happenig. Even with the oil price collapse in the last 12 months, Venezuela current account balance is positive, and it's debt to GDP ratio is a lot more manageable that US or EU (although of course that depends on which exchange rate you calculate the GDP). The hyperinflation (which we are not on the brink of, we are already living through) is caused, IMHO, by three primary reasons (each one is composed or caused by several others). 1- The total dependency of external supply, well in finished goods or inputs for production. Last reliable numbers put us in order of 90% of everything we consume is either imported or requires imported material to produce. 2- The lack of enough cash to import either consumers goods or prime materials to produce 3- The irresponsible printing of inorganic Bolivares. Any short of resetting the economy, which may or may not include dollarization (or eurozation), is useless at this point, but once we are done with that, it will take maybe 3 years or less to sort this mess.
sillygeese 11y ago
Brink, you say?
tomp 11y ago
I wonder why there's inflation in Venezuela, and not e.g. in the EU or the US. In particular, how is the printing of money by Venezuela different from the printing that goes on in the West (Quantitative Easing). I guess the only difference is that in the West, the money goes mostly to the banks, which distribute it to the companies or invest it in the stock market and real estate. Consequently, the rich get richer and the poor don't see any of this money. But I can't see why the situation in Venezuela would be any different. I can't imagine the printed money reaches poor people - I mean, the recipients are most likely big companies and people close to the governments, the elite, exactly the same as in the US.
- dragontamer 11y ago
  > I wonder why there's inflation in Venezuela, and not e.g. in the EU or the US. In particular, how is the printing of money by Venezuela different from the printing that goes on in the West (Quantitative Easing). Because we do it better than Venezuela. And honestly, that's all that there is to it. Injecting money into an economy is not necessarily a bad thing... depending on your goals. For example, China is lowering the price of its Yuan (not necessarily through QE, but through similar means). This has the effect of encouraging factories to be built in China and arguably creates a net-gain. Venezuela however is not playing anywhere close to the same game as the other world powers. They are printing money because they are out of money, and that is simply a bad situation to be in.
- rukittenme 11y ago
  The Fed doesn't "give" money to anyone. They buy treasury bonds from the US government.
  - tomp 11y ago
    You mean, instead of giving the government money directly, there's an extra step whereby the government issues bonds and the central bank buys them?
    - rukittenme 11y ago
kuni-toko-tachi 11y ago
Hard to believe that another communist utopia is on the brink of failure.
- jbeja 11y ago
  Utopia? What the fuck are you talking about.
z92 11y ago
Add with it today's stock market collapse around the globe and we are possibly entering another recession. Indexes are down 7% in Dubai/Saudi and 3% in USA.
- Kinnard 11y ago
  What do you mean when you say prices are down? CPI, some other indicator(s)?
  - z92 11y ago
    Indexes. Corrected.
- PublicEnemy111 11y ago
  This is most likely a correction, not a recession. There will be recession in markets that depend on China -- the commodity exporters like Brazil, Russia, Venezuela, etc. The US economy is actually doing quite well. Stocks are not overvalued, commodities are cheap, jobless rate is going down, and housing is at 2004 levels. Fundamentals suggest the bull market could last at least a few more years, yet cash levels are at their highest since 2009. This correct is a great buying opportunity for anyone who has stood out of the market for the past few years.
- deleted 11y ago
  [deleted]
lukeschlather 11y ago
Here's an article from late may that disingenuously claims that the inflation rate is at 500% year over year. http://www.xe.com/currency/vef-venezuelan-bolivar http://www.xe.com/currency/vef-venezuelan-bolivar So I guess the situation improved in June/July?
- gassius 11y ago
  (words from Venezuelan living in Venezuela) Easily, year to year (aug-14 to aug-15) is around 300%, maybe 400%. Of course that depends on which items you calculate it. Maybe some industrial supply is been less affected (if you can find those) and of course any inflation number is artificially affected by the free gasoline, which not even in this catastrophic situation has been adjusted. But if you are like me, a middle class salary dependant professional, anything you usually spend has been increased in 300-400%. A breakfast in a bakery (panaderia) on aug-14 was around 100 Bs, now is between 400 and 500 Bs. On aug-14 I averaged a weekly visit to the supermarket around 4.000 Bs, now is 12.000-15.000 Bs. I tire for your car was around 3.000 Bs, now is 20.000 Bs (and you can't find them). And so on... Of courses salaries has been, in most cases, or freezed or marginally adjusted, so you can see where this is heading.

40 points by Kinnard 11y ago

deleted 11y ago

[deleted]

The United States has been working on a coup for Maduro, since its coup of Chavez hasn't worked out for it. This time it would really like to install Leonardo Lopez as he's willing to privatize Venezuelan oil to US companies. The US has been encouraging and organizing protests, gatherings and projecting anti-Maduro sentiment and news into the country. (https://wikileaks.org/gifiles/releasedate/2012-06-18-08-canvas-how-a-us-funded-group-trains-opposition.html https://wikileaks.org/gifiles/releasedate/2012-06-18-08-canv...) It's possible that if their economy (amid new US sanctions) collapse that this could trigger the regime change we've been eyeing and the energy security we've been wanting to establish there. We do have to be careful about CALEC and UNASUR, however. South American countries have been ever moving closer to isolating the US from its multilateral diplomatic plans and are regularly condemning the US for its interference, funding of death squads, war on drugs, and unilateral sanctions of various South American countries. If we take Venezuela we need to make sure that we don't isolate the rest of the continent.

Kinnard 11y ago
Wow
Bonsanto 11y ago
I live in Venezuela and item's prices are raising horrible, let me tell you something I am electrical engineer and computer engineer, and my salary is only 10.3$/month, ridiculous, but his is how socialism works everyone are equalized but to poverty. To buy a car in Venezuela you need to save money for 50 years without buying food supplies, to buy a house it takes 200 years, to buy dollars you need to be a friend of Maduro, my most bright colleagues have left the country so I am.
- pitiburi 11y ago
  I am not in Venezuela, but I work with some guys there. Your "10.3$/month" is a blatant, and pretty absurd lie. If this account created a few minutes ago is going to be used to spread lies, please use it somewhere else, not in HN. We don't need you.
  - kordless 11y ago
    > We don't need you. Don't speak for me. Given at least half of us have no idea what 10.3$/month is, why don't one of you enlighten us and let us draw our own conclusions?
    - chvid 11y ago
      My guess is the poster is referring to the monthly wage of a professional in Venezuela in USD by the black market rate which probably is fairly indicative of the purchasing power. And yes. Venezuela is a touchy subject since its nasty regime sadly is idolized by many left-winged intellectuals in the west.
    - bmelton 11y ago
      So, I'll freely concede that I'm ignorant on the issue, but Bonsanto made an extraordinary claim below (that government forbids buying non-Venezuelan currency) that despite my initial idea, turns out to appear truthful. So, According to this somewhat recent article by Bloomberg[1], "A school teacher with 25 years of experience made 9,786 bolivars a month in 2014. That's about $35 a month at the current black market exchange rate, which won't even buy a used television." It's hard to tell what the actual exchange rate of the bolivar is to the dollar, because apparently Venezuela fixes the exchange rate, so while it's been steady on paper, it appears that in practice, its actual exchange rate is approximately 100 times less than the official exchange rate. The official rate indicates that 1 bolivar == .16 US dollar, but other sources indicate that the effective, actual rate in Venezuela is more like 1 boliver == .0036 US dollars (or, because my simple math skills are horrible, 100 bolivar == 36 US cents.) If that's the case, and I'm not missing something crazy, it doesn't seem far-fetched to me at all that an electrical engineer would be earning the American equivalent of $10.3 US dollars per month, depending on how you define the exchange rate. [1] - http://www.bloomberg.com/news/articles/2015-03-06/monthly-salary-of-20-shows-why-venezuelans-wait-in-food-lines http://www.bloomberg.com/news/articles/2015-03-06/monthly-sa...
dageshi 11y ago
The US is literally producing more oil domestically than it can refine, it's got more cheap domestic oil than it knows what to do with... I don't discount American involvement but I'm not sure that oil is the great driving factor it may have been historically, the Americans are producing enough of their own.
- themeekforgotpw 11y ago
  The long term strategy of the US is to provide energy security to Europe between tar sands, crude, gas and oil. It has multilateral plans with Canada and Mexico to build North-South pipelines to achieve this. Recently the conflict over oil off the shore of Guyana and the documents I linked to above (where it is STATED that the coup is motivated by oil) show recent actions by the US that contradict you. And further it is not merely about TAKING the oil (though it is). Venezuela uses its energy economy to unilaterally fix political outcomes. Think their shipping of oil to Cuba despite US sanctions. The US wants control of that oil.
  - gassius 11y ago
    ... and the current inept Venezuelan Government is making all it can to help US convey it's plans, apparently
sillygeese 11y ago
> If we take Venezuela we need to make sure that we don't isolate the rest of the continent. So you don't see a problem with "you" "taking" Venezuela, as long as the consequences aren't too bad for "you"? Nevermind that other countries are not supposed to be your colonies and nevermind that you, as in, ordinary citizens, won't even benefit from the US "taking" Venezuela.

nabla9 11y ago

How to create hyperinflation in two easy steps: 1. Build massive external debt in _foreigin_ currency. 2. Have fixed exchange rate. Its very hard to create hyperinflation using bad fiscal policy alone if you are not in debt in foreign currency and have floating exchange rates. Floating currency will balance exports and imports and printing money to pay debt in your own currency works.

Kinnard 11y ago
How would you say cryptocurrency or gold play into this?
- nabla9 11y ago
  Gold and cryptocurrencies work just like using the currency from some other country. Their exchange value don't reflect the economy that is using it and country can't have independent monetary policy.
  - Bonsanto 11y ago
    In Venezuela is illegal to buy any KIND of currency, without the government approval. You can find the dollar price here -> dolartoday.com You will find how poor all venezuelans are :(
  - Bonsanto 11y ago
    In Venezuela is illegal to buy any KIND of currency, without the government approval. You can find the dollar price here -> dolartoday.com You will find how poor all venezuelans are :(
gassius 11y ago
(words from Venezuelan living in Venezuela) Actually, external debt in foreing currency is not an important factor in what's happenig. Even with the oil price collapse in the last 12 months, Venezuela current account balance is positive, and it's debt to GDP ratio is a lot more manageable that US or EU (although of course that depends on which exchange rate you calculate the GDP). The hyperinflation (which we are not on the brink of, we are already living through) is caused, IMHO, by three primary reasons (each one is composed or caused by several others). 1- The total dependency of external supply, well in finished goods or inputs for production. Last reliable numbers put us in order of 90% of everything we consume is either imported or requires imported material to produce. 2- The lack of enough cash to import either consumers goods or prime materials to produce 3- The irresponsible printing of inorganic Bolivares. Any short of resetting the economy, which may or may not include dollarization (or eurozation), is useless at this point, but once we are done with that, it will take maybe 3 years or less to sort this mess.

sillygeese 11y ago

Brink, you say?

tomp 11y ago

I wonder why there's inflation in Venezuela, and not e.g. in the EU or the US. In particular, how is the printing of money by Venezuela different from the printing that goes on in the West (Quantitative Easing). I guess the only difference is that in the West, the money goes mostly to the banks, which distribute it to the companies or invest it in the stock market and real estate. Consequently, the rich get richer and the poor don't see any of this money. But I can't see why the situation in Venezuela would be any different. I can't imagine the printed money reaches poor people - I mean, the recipients are most likely big companies and people close to the governments, the elite, exactly the same as in the US.

dragontamer 11y ago
> I wonder why there's inflation in Venezuela, and not e.g. in the EU or the US. In particular, how is the printing of money by Venezuela different from the printing that goes on in the West (Quantitative Easing). Because we do it better than Venezuela. And honestly, that's all that there is to it. Injecting money into an economy is not necessarily a bad thing... depending on your goals. For example, China is lowering the price of its Yuan (not necessarily through QE, but through similar means). This has the effect of encouraging factories to be built in China and arguably creates a net-gain. Venezuela however is not playing anywhere close to the same game as the other world powers. They are printing money because they are out of money, and that is simply a bad situation to be in.
rukittenme 11y ago
The Fed doesn't "give" money to anyone. They buy treasury bonds from the US government.
- tomp 11y ago
  You mean, instead of giving the government money directly, there's an extra step whereby the government issues bonds and the central bank buys them?
  - rukittenme 11y ago

kuni-toko-tachi 11y ago

Hard to believe that another communist utopia is on the brink of failure.

jbeja 11y ago
Utopia? What the fuck are you talking about.

z92 11y ago

Add with it today's stock market collapse around the globe and we are possibly entering another recession. Indexes are down 7% in Dubai/Saudi and 3% in USA.

Kinnard 11y ago
What do you mean when you say prices are down? CPI, some other indicator(s)?
- z92 11y ago
  Indexes. Corrected.
PublicEnemy111 11y ago
This is most likely a correction, not a recession. There will be recession in markets that depend on China -- the commodity exporters like Brazil, Russia, Venezuela, etc. The US economy is actually doing quite well. Stocks are not overvalued, commodities are cheap, jobless rate is going down, and housing is at 2004 levels. Fundamentals suggest the bull market could last at least a few more years, yet cash levels are at their highest since 2009. This correct is a great buying opportunity for anyone who has stood out of the market for the past few years.
deleted 11y ago
[deleted]

lukeschlather 11y ago

Here's an article from late may that disingenuously claims that the inflation rate is at 500% year over year. http://www.xe.com/currency/vef-venezuelan-bolivar http://www.xe.com/currency/vef-venezuelan-bolivar So I guess the situation improved in June/July?

gassius 11y ago
(words from Venezuelan living in Venezuela) Easily, year to year (aug-14 to aug-15) is around 300%, maybe 400%. Of course that depends on which items you calculate it. Maybe some industrial supply is been less affected (if you can find those) and of course any inflation number is artificially affected by the free gasoline, which not even in this catastrophic situation has been adjusted. But if you are like me, a middle class salary dependant professional, anything you usually spend has been increased in 300-400%. A breakfast in a bakery (panaderia) on aug-14 was around 100 Bs, now is between 400 and 500 Bs. On aug-14 I averaged a weekly visit to the supermarket around 4.000 Bs, now is 12.000-15.000 Bs. I tire for your car was around 3.000 Bs, now is 20.000 Bs (and you can't find them). And so on... Of courses salaries has been, in most cases, or freezed or marginally adjusted, so you can see where this is heading.