Let's analyze a collapsing economy. I'll show you how its collapsing, why it is collapsing, what the nation plans to do about it, and why it won't work / what they should be doing instead.
1. HOW IT IS COLLAPSING
Venezuela is in dire straights:
- The country now officially has hyper-inflation (October's monthly inflation rate is 36%).
- Their currency, the Bolivar, has plummeted in value
- Starvation is spreading; food shortages are taking hold
- The government's true authoritarian nature is revealed.
- Even the Russians have had it and loaded up Russian military bombers with repossessed arms the Venezuelan government couldn't pay for.
2. WHAT VENZUELA PLANS TO DO ABOUT IT
The BBC reported less than a week ago that the dictator, er "President," is being voted emergency totalitarian powers. The first step of any socialist regime under threat is to reveal its true nature: the use of force. Just as capitalism co-habitates with liberalism as seen in the great democracies & republics of the modern world so to does socialism, true to its core belief of using force, tend to co-habitate with totalitarianism.
Venezuela's National Assembly has paved the way to granting special powers for President Nicolas Maduro. Under the measures the leader would be able to govern by decree for 12 months.
President Nicolas Maduro first asked parliament in October to grant him special powers to fight corruption and what he called "economic sabotage". The country is facing shortages of food and essential goods, power cuts and around 54% annual inflation.
Now subsequent to that BBC article President Maduro has, in fact, been granted his Emperor Palpatine status.
But what will step 2 be? Well not to worry the Venezuelans have actually thought that far ahead. Here are some of their ideas:
- Communes are the Antidote to Venezuela’s Economic Problems
- Have the Venezuelan government get Twitter to block users who publish the true black market exchange rate for the collapsing Bolivar (currency).
- Government mandated fixed prices (price ceilings).
- It wouldn't be socialism in #3 without jailing shopkeepers who fail to comply with government dictated prices.
- Related to #3 & #4 government has taken over some shops and forced the owners to sell their goods at price levels several months back in time.
Personally I'd find #5 pretty scary if I lived in this socialist nation.
National guardsmen, some of whom had assault rifles, were positioned around outlets of an electronics chain that Maduro has ordered to lower prices or face prosecution. Thousands of people lined up at the Daka stores hoping for a bargain after the government forced the companies to charge “fair” prices.
Maduro said his seizures are the “tip of the iceberg” and that other stores would be next if they did not comply with his orders. (Source)
3. WHY IT WON'T WORK
First the price fixing: This action by the Venezuelan government caused shopkeepers to take a loss on the goods they were forced to sell. That leaves them with no funds to purchase & stock the shelves with new goods. The result today is barren store shelves across the nation:
Basic goods such as milk, rice, cooking oil and toilet paper are rarely found on supermarket shelves.
Source: Venezuela’s “economic war”, The Economist, November 16th, 2013
Next to the bigger problem: inflation and currency debasement are problems caused by government action. There is absolutely nothing the common person can do to cause either of those problems and, sadly, there's also nothing the common person can do to protect against them.
Socialist Dictator Maduro's plan to fix inflation centers around government controlled price ceilings. All this will do is force goods into the black market. Maduro doesn't think so though, these are his thoughts:
“If I’m bringing down the price of appliances by 1,000%, that has to have an impact on November’s inflation figure, right?”
~ President Maduro on national television, 11/16/2013
4. WHAT THEY SHOULD DO
Inflation is a monetary problem. Venezuela is no different. Maduro, true to his socialist roots, blames all the problems on evil capitalists, speculators & monopolies, even though the only monopolies in Venezuela are government owned ones. Except the problem isn't any of those things. Its that the government has printed a lot of money.
For years the country has barely kept its head above water due to its revenue from the government's oil monopoly. But under socialism no amount of money is ever enough. That's where an unsustainable economic structure leads. So the government has also been printing a lot of money. They have force pegged the value of their currency to the US dollar, and even though the Venezuelan government's official exchange rate hasn't changed much the true black market value of the currency has lost over 60% of its value.
No amount of price controls will ever fix the inflation in Venezuela. In order to do that the government has to spend less. Instead of printing money to pay its bills it has to reduce its spending & stop all money printing immediately. It also has to let the interest rate rise as high as people demand to lend money & to likewise allow prices to rise just as much. Otherwise inflationary pressures will continue to accumulate under government rent & price controls then eventually explode out Wiemar & Zimbabwe style.
Its also necessary for the nation to contract its money supply. Will this cause a recession? Yes. Is that a bad thing? No. It is a necessary cleansing of all the damage caused by bad socialist weegie board, helter skelter economic policy.
Instead what Venezuela is going to get is a recession PLUS hyper-inflation, or as its affectionately known: stagflation. That dreaded boogey-man that demand side economics said was impossible until Keynesian economics caused a decade of it in America in the 1970s.
SOCIALISM & ECONOMIC COLLAPSE
Boy those 2 words go hand-in-hand don't they? Its no coincidence that everywhere socialism goes crushing poverty, lack of economic growth and frequently famine & mass graves follow (Read more here).
Socialism is a failed ideology. It has failed universally everywhere it has been tried. We need look no further than the suffering in socialist East Germany compared to the prosperity in capitalist West Germany; North vs. South Korea; Vietnam vs. Hong Kong; the USSR vs. America and so on.
Socialists would prefer you not know the truth though. Their lines all go this:
Capitalism can not be transcended through capitalism itself; it must be done through socialism, true socialism, with equality and justice. I’m also convinced that it is possible to do it under democracy. Capitalism is the way of the devil and exploitation. If you really want to look at things through the eyes of Jesus Christ — who I think was the first socialist — only socialism can really create a genuine society. Those who want to go directly to hell can follow capitalism... and those of us who want to build heaven here on earth will follow socialism.
Those were the words of socialist hero Hugo Chavez. He gave Venezuela hyper-inflation, troops with machine guns taking over stores, food shortages, and the socialist paradise of countless hours of free time.... just don't spend it on the internet, remember the regime has blocked Twitter unless you use it to distribute pro-party propaganda.