Venezuelan President Nicolás Maduro doesn’t understand inflation, apparently. Whenever the leader is asked why his country’s inflation rate is soaring at over 49 percent, he delegates a government official to give the typical response: because of speculators, saboteurs, and America, that’s why!Like many leftist regimes before it, Venezuela spends heavily on social welfare, stifles private industry and fixes its exchange rate so as to not reflect the true value of its currency. Meanwhile, the Central Bank pumps more currency into circulation to artificially maintain the rate of inflation. Unfortunately, that doesn’t seem to be working anymore. The AP:
Venezuela’s Central Bank says prices have risen nearly 50 percent since last September as the country struggles to rein in a quickening rate of inflation and widespread shortages….Officials say speculators are to blame for soaring prices and shortages.
This has eerie echoes of past Latin American socialist regimes, most notably Chile’s Salvador Allende. The Allende regime’s overzealous agenda of redistribution, wage increases and fiscal stimulus drove the country deep into debt and drove inflation to a peak of 86 percent before Chile defaulted on its loans (at which point inflation rose above 600 percent). Earlier this year Venezuela devalued its currency, the fifth time it has done so since 2003. As is often the case with distorted currencies, a prominent black market for dollars has emerged.While Hugo Chavez mostly evaded blame for his country’s problems, Maduro doesn’t enjoy the same uncanny adoration as his predecessor. Currency manipulation and the official runaround can’t obscure the ugly facts of economic ruin, and the Venezuelan people are learning some unpleasant truths about the path their country has chosen.[Nicolas Maduro photo courtesy of Wikimedia Commons]