Thread: Venezuela – An Economic Catastrophe In Images The Final Stage of a Crack-Up Boom

Venezuela – An Economic Catastrophe In Images

As assorted socialists continually assure us, what they have in Venezuela is luckily not 'real socialism'...

Sat, 09/01/2018 - 14:30

Authored by Pater Tenebrarum via Acting-Man.com,

The Final Stage of a Crack-Up Boom

For economists the dire downward spiral of Venezuela’s economy holds the same fascination black holes hold for physicists. Both illustrate what happens amid the most extreme conditions imaginable. It is thought that this may potentially provide clues of a more general nature. The remnants of massive imploded stars are inanimate and many light years distant; regardless of how violent conditions in their vicinity are, they cannot touch us. Unfortunately, extreme economic conditions definitely involve a great deal of human suffering.


“We are the humanist socialism that will save the world”, from Venezuelan cartoonist Weil (he always draws the dear leaders with big wads of dollars sticking out of their pockets, making them look like otherworldly birds – look for his work on the intertubes).
From the perspective of Austrian economic theory, a hyperinflation event essentially represents a highly compressed, extreme version of the boom-bust cycle referred to as a “crack-up boom” (note: the original German term coined by Ludwig von Mises was “Katastrophenhausse” – the literal translation would be “catastrophic boom”).
In a past article on forced saving we inter alia discussed the post WW I crack-up boom in the Weimar Republic, one of the most infamous hyperinflation events in history. The data available on this disaster are remarkably comprehensive and detailed and demonstrate that Austrian capital and business cycle theory indeed offers the by far most accurate explanation of the boom-bust cycle.
Recent developments in Venezuela are very similar. There is definitely a crack-up boom underway, but it differs of course in a number of details from the Weimar experience. Every slice of economic history is unique in some way after all, but the underlying economic laws driving economic history nevertheless remain universally and time-invariantly applicable.
Not too long ago our good friend Keith Weiner also mentioned Venezuela, mainly in the context of criticizing too simplistic views of the factors driving price inflation such as the quantity theory of money). Obviously the supply of money is just one of these drivers – the demand for money and the supply of and demand for goods and services are the others.
This is also why the purchasing power of money is not truly measurable, as no fixed yardstick to measure it with exists. There is no such thing as a “general level of prices” anyway – this is a logical fallacy. Keith correctly points out that in Venezuela – and this is something one can observe in almost all hyperinflation cases – it is not only money printing that has triggered the slump in purchasing power, but also a collapse in production, which has happened for more than one reason.



As assorted socialists continually assure us, what they have in Venezuela is luckily not 'real socialism'. They were definitely full of praise for “Chavismo” though when high oil prices still helped mask the crumbling of the country’s economy. Some people such as Jeremy Corbyn no longer even mention Venezuela nowadays, after frequently informing us in the past how wonderful Chavez-style socialism was.
In Venezuela production collapsed very quickly after the socialist dictatorship of Chavez (and later Maduro) weakened property rights to such an extent that no sane person was prepared to take entrepreneurial risks with their capital any longer.
The entire gamut of interventions from the imposition of price controls to outright confiscation of businesses was implemented with the aim of transforming Venezuela into a full-scale command economy. Amid heavy money printing and a concomitant slump in production and imports, the demand for money eventually collapsed as well – triggering the hyperinflation phase.
It should be pointed out that capital consumption was already quite advanced before the advent of Venezuela’s socialist rulers, as their predecessors had gradually undermined the market economy for decades. Naturally, these previous interventions were also accompanied by a lot of money printing.
All interventionist governments consider the suppression of interest rates to be a cure-all – and it can of course mask structural economic problems for quite some time, as a rule up to the point when the bulk of previously accumulated capital has been consumed.


Empty shelves in supermarkets in Caracas have been the “new normal” for more than four years now. Not only has domestic production collapsed, but imports have declined precipitously as well. Holding on to cash balances denominated in the domestic currency makes no sense and a major “flight into real values” has been underway for quite some time.

Pictures of an Economic State of Emergency

We have quite a comprehensive collection of charts pertinent to the hyper-inflationary crack-up boom in Venezuela and decided to put the most interesting ones into a post (most of the charts are fairly up-to-date, but keep in mind that things are moving very fast in late stage hyperinflation).
Recently the government decided to shave off five zeros from its currency (on August 18 to be precise), which is reminiscent of the 1000 for one reverse split applied to the IBC stock market index in Caracas a few years ago (i.e., they took off just three zeros in this case).
One similarity is already ominously obvious: the collapse of the value of the Venezuelan bolivar (VEF) has immediately accelerated in the wake of the “currency reverse split”. The stock market rally also accelerated shortly after the index was robbed of three zeros.
Presumably this is mainly a psychological effect. Anyway, we have made charts of the exchange rate in which we simply ignored the removal of the five zeros. Eventually we will adjust all past numbers, but it won’t really make a difference – the charts will look exactly the same. For starters, here is a log chart of the black market rate of the VEF vs. the USD (“black market rate” in this case simply means “market price”).

A log chart of the VEF-USD exchange rate. In 2010 VEF-USD traded just above 8 bolivares per dollar in the black market. As of today it stands at more than 8.7 million bolivares per dollar (or 87.22 using the post-split value, which compares to a VEF-USD rate of 0.0008 in 2010) – note the acceleration after the “reverse split” – on August 18, one day before the five zeros were shaved off, VEF-USD stood at around 5.9 million.
A linear chart from August 2014 to today shows how the move in the exchange rate accelerated as hyperinflation really took off and the bolivar essentially ceased to be a viable medium of exchange. Moves prior to 2017 are not really visible on this chart, but it is inter alia easier to show clearly at which point the “reverse split” was implemented. As noted above, the decline in the exchange rate accelerated even further in the wake of the decision.

A linear chart of VEF-USD from 01 August 2014 to 31 August 2018. Within just 12 days after the introduction of the “new” bolivar, it moved from 59 to 87 (or from 5.9 million to 8.7 million in “old” bolivar terms).
Professor Steven Hanke of John Hopkins University runs the “Troubled Currencies Project” for the Cato Institute – he uses exchange rates to derive an implied inflation rate for the countries concerned. Although price inflation is not really measurable, this does provide us with a rough idea of how quickly the purchasing power of these currencies is vanishing.
The most recent chart of Venezuela’s implied inflation rate we have found is as of August 19, shortly after the government introduced the “new” bolivar. Since implied inflation stands at 61,670% as of August 30, it seems actually likely to us that a typo was made in the annotation and the chart refers to the situation as of August 29 rather than August 19. In any case, it is fairly current.

Venezuela’s implied annual inflation rate via Professor Hanke – on August 30 it reached 61,760%.
The next chart shows Venezuela’s narrow money supply M1 since 2008 – unfortunately we could not find a log chart going back that far, so one can only discern the “parabolic printing phase” that began in 2016 – 2017.
We calculated that Venezuela’s money supply growth amounts to 46.68 billion percent since the early 1960s. On a log chart one would no doubt see that extremely generous money printing has been practiced for a very long time (it would probably look very similar to the log chart of the exchange rate above).

Venezuela’s narrow money supply M1 – up 46.68 billion percent since the early 1960s. Its growth rate has accelerated markedly in the past several years.
This brings us to the miraculous Caracas stock market, which has soared amid a collapse in economic output – a symptom of the “flight into real values”, as stocks represent claims on real assets.
Despite the little joke we have pinched from Kyle Bass and added to the annotation, the stock market has actually preserved purchasing power quite well in recent years. There is only one problem: once the inflation phase ends, which it must one day, the subsequent “stabilization crisis” will result in a sharp fall in the prices of the stocks that have rallied the most, as the economy’s structure of production will have to be completely rearranged.
Many investors will find it very difficult to decide when to get out and move into different sectors or different types of investments – and the class of investors as a whole won’t be able to escape the coming losses anyway. In Weimar Germany several of the biggest and most prominent winners of the crack-up boom lost their entire fortunes after hyperinflation came to a sudden halt in late 1923.

IBC Index, monthly – a gain of 4.11 billion percent since the low of 2002.
With respect to declining production, we have two more charts – one shows the slump in Venezuelan oil production compared to the surge in US oil production (note that Venezuela has the largest oil reserves in the world) and the other shows official GDP growth numbers – which are only released intermittently these days.

US vs. Venezuela crude oil production from early 2005 to April 2018

Annualized GDP growth according to official statistics – since 2016 these data are only released sporadically, and we are not sure how accurate they are.
So there you have it – the symptoms of a crack-up boom.

Nicolas Maduro, the remarkably well-fed current Dear Leader of Venezuela.


An all too familiar sight in Caracas these days: somewhat less well-fed Venezuelan citizens are hunting for food in the garbage. We are sure they will be happy to learn that it isn’t the fault of “real” socialism.


The situation is apparently not much better in rural areas – here a hungry mob is seen stoning a milk cow.

https://www.zerohedge.com/news/2018-...strophe-images

Give them nothing!

No aid, no oatmeal, no money!

They have oil...take that to feed them!

AND DO NOT ALLOW THEM TO COME HERE! WE DO NOT WANT THEM!

THEY HAVE A WHOLE OCEAN FULL OF FISH...GO GET SOME!

Michael Moore Flashback: In Praise Of Venezuela

"Oil for the People": Michael Moore is in praise of Chavez ending poverty in Venezuela...

Mon, 09/03/2018 - 14:20
Authored by Mike Shedlock via MishTalk,

"Oil for the People": Michael Moore is in praise of Chavez ending poverty in Venezuela.
I captured that Tweet as an image in case Moore deletes it.

It was retweeted 6,684 times. 1,862 fools liked it.
Michael Moore, please check this out.

Prof. Steve Hanke‏Verified account @steve_hanke

There is a scarcity of everything in #Venezuela; except suffering.

6:07 AM - 31 Aug 2018





Oil for the People Question

Mike Mish Shedlock‏ @MishGEA
Michael Moore Flashback: In Praise of Venezuela @MMFlint https://moneymaven.io/mishtalk/economics/michael-moore-flashback-in-praise-of-venezuela-1uQbfKEzi0qpmfItuE76Sg/ …



10:26 AM - 31 Aug 2018

Mike Mish Shedlock‏ @MishGEA

Michael Moore Praises Venezuela for "Giving oil to the people and ending poverty in Venezuela". 1. Moore now feels a bit stupid 2. Moore now feels very stupid 3. Moore is too stupid to feel stupid https://moneymaven.io/mishtalk/economics/michael-moore-flashback-in-praise-of-venezuela-1uQbfKEzi0qpmfItuE76Sg/ …

10:30 AM - 31 Aug 2018

https://www.zerohedge.com/news/2018-...aise-venezuela

Ken Rogoff Exposes The Regional Costs Of Venezuela's Collapse



As Venezuela’s great experiment with “Bolivarian” socialism implodes, it is creating a humanitarian and refugee crisis...

Venezuelans turn to breast milk donations as baby formula price soars...

Nation calls for massive march against USA...



As the price of baby formula in Venezuela soars, moms turn to each other for help

By Gustavo Ocando Alex
Special to the Miami Herald September 10, 2018 12:31 PM
video and photos at the page link

MARACAIBO, Venezuela Viviana Vargas was worried after her son Mathias was born in April last year. The 30-year-old Venezuelan mother wasn’t able to breastfeed him sufficiently due to stress and other problems, so the 6-pound baby was on the verge of malnutrition.
She and her husband began to look for infant formula, which is pricey and scarce in Venezuela. They found out that a 14-ounce can of powdered formula, good for a week at most, would cost about twice the monthly minimum wage at the time — about 6 million bolívares or $3 on foreign currency black markets.
“We started to go into crisis,” Vargas said. “We had to travel to Maicao [a Colombian town next to the Venezuelan border] to find the right baby formula for Mathias.”

They were lucky. They were able to scrape together the money to buy about $200 worth in several cans, enough to feed the baby at night for six months.

But Vargas wanted to give her baby the healthiest start possible without ruining the family budget. And she found it in an unexpected way. Her boss at an online food delivery company where she works as a sales executive had a sister, the mother of a 6-month-old baby, who volunteered to give Vargas breast milk.
She received frozen breast milk every 15 days, preserved in little plastic bags with the date marked in pen. “Mathias gained the proper weight in just weeks. It was incredible,” Vargas said, holding her baby, now 16 months old, in her arms.
In Venezuela, baby formula has become so expensive for families that some mothers have begun turning to other women for breast milk donations or even to nurse the babies directly.
President Nicolás Maduro’s government eliminated five zeros from the national currency in an attempt to combat wild inflation in Venezuela, but now a medium-size can of imported baby formula costs even more — 3,300 bolívares or about $33 at the black market exchange rate.
And finding formula to buy isn’t easy. It means going to a resale market because it is almost impossible to find in regular supermarkets or pharmacies.
When Luis Daniel Zavarse was a newborn, his mother in Venezuela obtained breast milk from a relative to feed him when he was hospitalized. With baby formula prices out of reach for many in Venezuela, women are turning to other women for help feeding their babies.
Photo courtesy of Zavarse family

Marianella Herrera Cuenca, a sociologist from Central University of Venezuela, heard during her visits to poor and middle-class homes about informal networks of women who were helping other mothers by supplying their children with breast milk when they couldn’t afford to purchase enough formula.
A study by Herrera Cuenca and others at the university into the lives of poor mothers in Venezuela — the results have not yet been released publicly — found that as many as three in 20 mothers are being helped to feed their babies by relatives or friends who supply breast milk.
Herrera Cuenca called it “an increasingly common practice. ... These are survival skills that have been practiced for a thousand years.”
Herrera Cuenca, who is in charge of the nutrition section of an annual life conditions survey, said many low-income families can’t afford baby formula. The latest survey found that 89 percent of Venezuelans don’t even have enough money to buy sufficient food for their families.
Venezuela is caught in a spiral of inflation so catastrophic that the International Monetary Fund predicts the rate will hit 1 million percent by the end of the year.
“We’re living in a hyperinflationary context where monthly incomes are worthless,” Herrera Cuenca said.
That translates into poor nutrition for many. She said 39 percent of Venezuelan kids in underprivileged neighborhoods are not breastfed all the way to the six-month mark — and many are then fed with the water used to cook rice or spaghetti, or with corn flour mixed with cow or goat milk, diets that could make them even more undernourished.
“Those kids have size deficiencies and develop chronic malnutrition. We’re talking about at least 500,000 children with a chronic deficit as soon as they start their lives,” she said.
Elainy Ávila, a 32-year-old architect, has donated her breast milk to six babies while being part of a support group for mothers called Lactaluz. She’s also part of an informal network in recent years that has stretched to cities like Caracas and Maracaibo, where dozens of women have been offering free-of-charge breast milk to mothers to help them feed their malnourished or sick children.
Along with helping the health of babies, the participants also know they are saving the family finances.
“To donate breast milk is to donate life by drops. In the case of Venezuela, it is a matter of life or death,” said Ávila.
Keily Quintini, 37, had fed her first daughter with formula but couldn’t pay today’s costs for the supplement when she had a second baby girl. Her neighbor helped her this time.
“Years ago, we fed Sarah, my oldest, with baby formula, but now to buy only one can is impossible. We can’t afford it,” she said.
Mervin Chávez, a pediatrician and head of the breastfeeding program at the University of Zulia, says that breast milk donors help an average of two to four infants per week at the Children’s Hospital in Maracaibo.
“Most of those kids come from poor families. They’re malnourished. All we need is just one call through our support group and we’ll have breast milk donations within the hour,” the doctor said.
Dr. Mervin Chávez, a pediatrician and head of the breastfeeding program at the University of Zulia, says that breast milk donors help an average of two to four infants per week at the Children’s Hospital in Maracaibo.
Gustavo Ocando Alex Special to the Miami Herald

Only healthy women, without diseases such as HIV and hepatitis, can donate, but there are generally at least 25 mothers willing to donate breast milk from Lactaluz alone, members of the group said.
Nelson Faría, a pediatrician who works with newborns at the Policlinica Maracaibo, said he has received recent calls from middle-class patients in despair because they can no longer afford baby formulas.
“Breast milk is necessary in Venezuela, especially in this severe crisis. It has all the greatest benefits for babies and the best thing is that it is free,” he said.
At 33, Ninette Noetzlin, a Venezuelan kindergarten teacher with a 1-year-old son, has nurtured dozens of babies she has never known.
“I have helped five babies near to my family and friends, but also every 15 days I give my pediatrician 5-pound sacks filled with little breast milk bags so he can choose the most needy of his patients so they can use it,” she said.
Mothers can be temporarily or permanently unable to breastfeed their children due to physical incapacity, health complications, diseases or drug use.
Patricia Zavarse, 38, got desperate last May when she could not breastfeed her baby, Luis Daniel, while he spent days at the Intensive Care Unit.
She couldn’t feed him because she was receiving daily doses of a drug to treat her high blood pressure. Doctors advised the parents to feed the baby with a specialized formula that was expensive and rarely on store shelves.
“We could not find it anywhere. The doctors even recommended that I and my husband say goodbye to our baby,” Zavarse said.
The solution came through a relative who was breastfeeding her 11-month-old baby. For two weeks, doctors fed the baby with milk from the relative, using a digestive tube.
“That milk helped save our baby’s life,” she said.
Luis Daniel is now a healthy 3-month-old, she said: “It was a miracle.”

When Luis Daniel Zavarse was a newborn, his mother in Venezuela obtained breast milk from a relative to feed him when he was hospitalized. With baby formula prices out of reach for many in Venezuela, women are turning to other women for help feeding their babies. Photo courtesy of Zavarse family


https://www.miamiherald.com/news/nat...217586870.html

Why do they continue to BREED while they live in poverty and have no money?

Get on birth control!

They better not even think of coming here.

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Mind OUR own business!

No money, no aid and NO oatmeal.

They CANNOT come here either!

Go home, fight your own Civil War and fix your own country!


USA IS NOT THE SOLUTION TO THE WORLD'S PROBLEMS, THEIR POVERY OR THEIR OVERBREEDING!

THEY HAVE LAND, THEY HAVE RESOURCES, THEY HAVE OIL...GO TAKE IT TO FEED YOUR OWN SELVES!

KEEP OUT!!!