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It 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

by ufo 10y ago

It 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 ago
I'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 ago
  Unfortunately 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 ago
    Again, 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 ago
      If 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.
      - Dylan16807 10y ago
        Hyper inflation is defined as over 50% per month. Venezuela is very likely to hit that next year. That level of inflation destroys cashflow, as money almost stops having value before you can spend it. Printing this much money would cause less than 5% inflation per month. It would be unpleasant, but you could get a biweekly paycheck and spend it over the next few weeks without having all the value disappear. Supply chains would continue to operate without much trouble. It would be vastly superior to hyperinflation.

by ufo 10y ago

Dylan16807 10y ago

I'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 ago
Unfortunately 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 ago
  Again, 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 ago
    If 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.
    - Dylan16807 10y ago
      Hyper inflation is defined as over 50% per month. Venezuela is very likely to hit that next year. That level of inflation destroys cashflow, as money almost stops having value before you can spend it. Printing this much money would cause less than 5% inflation per month. It would be unpleasant, but you could get a biweekly paycheck and spend it over the next few weeks without having all the value disappear. Supply chains would continue to operate without much trouble. It would be vastly superior to hyperinflation.