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Yes, printing money is the root cause of the inflation. But no, you can't just make a trivial fix like you said. Venezuela has a dysfunctional government that
by ufo 10y ago
Yes, printing money is the root cause of the inflation.
But no, you can't just make a trivial fix like you said. Venezuela has a dysfunctional government that used to be propped up by oil exports back when oil used to be a highly-priced commodity. After the crash in oil prices, the sorce of income dried up and revealed huge flaws in the country's infrastructure and government inefficiency and corruption.
- Dylan16807 10y agoPrinting no money is the default option. Dysfunction and corruption certainly make fixing everything extremely difficult, but you don't have to fix the government to stop the hyperinflation. If you cut off access to whatever printing press or computer is making the money, then there would not be hyperinflation. It being an insufficient fix does not stop it from being trivial and performing its stated goal.
- ufo 10y agoStopping the flow of money without restructuring the government would result in a total government shutdown and complete chaos. It is not an option.
- Dylan16807 10y agoRight. I was just making a point that the money supply can be reigned in without much manpower. The real idea is not to stop making money, it's to put a lid on the production speed. An armed guard that only allows 5% more production each month than the previous month. This gives the government an enormous budget that never runs out, and at the same time money will continue to hold its value on a week-to-week basis. Now tell me: Is this plan doomed because of some economic fact I'm unaware of, or is it doomed because of corruption and politicking?
- ufo 10y agoIt is doomed because Venezuela's budget is unbalanced. In the past, the budget only worked because there were large oil-export revenues from PDVSA, the state's oil company. Once that source of revenue collapsed they didn't have money anymore to spend as they did before. They should have cut the budget and fixed the many systemic imbalances in the Venezuelan government and economy but instead of that they insisted on keeping the status quo by printing money to cover the deficit and blaming the crisis on american imperialism.
- Dylan16807 10y agoI'm not trying to fix the country, I'm just suggesting a way to avoid hyperinflation. Everything that is already broken would stay broken, but without the additional burden of hyperinflation. Can the plan do that?
- ufo 10y agoUnfortunately not. Things would not stay just as broken because if the Venezuelan government stopped printing money it would stop being able to pay its debts. Unless they do substantial budget cuts (which were are so far assuming that they cannot or will not do) they would be forced to stop paying suppliers and public servants, which would result in even more chaos than there is right now.
- Dylan16807 10y agoAgain, the plan is not to stop printing money. The plan is to say "okay, print X billion this month, then X * 1.05 the next month, etc." The purchasing power of each month's printing should be flat or rising if the main driver of inflation is the amount of money printed.
- ufo 10y agoIf you are still printing money and increasing the supply of money in the economy you will still have hyperinflation. Your plan is kind of assuming that every month they destroy all the existing money before printing more money, which is not something that you can do.