Bolivars

Those who quibble over a couple of points added to our inflation rate – and want to dismantle a modern tax system to please the ignorant – should look at what is happening in Venezuela. By the end of this year, the IMF forecasts, Venezuela’s inflation rate is expected to hit one million percent.

I will put that in numbers, in case the reader is not fully impressed: 1,000,000 percent.

What does this mean in daily life? Over less than a year, the beleaguered socialist government of Nicolas Maduro raised wages 34 times. That was what added fuel to the inflationary fire.

On the average, the prices of basic goods double every 26 days. As a measure of self-defense, Venezuelans dispose of their currency as soon as they get their hands on them. That adds all the more to the inflationary pressure.

Over the past weeks, neighboring countries have sent additional troops to their borders with Venezuela. This is to staunch the tide of Venezuelans fleeing their own country to seek economic sanctuary elsewhere.

A humanitarian crisis of unspeakable proportion grips what was once the wealthiest country south of the US border. Famine stalks the land. Children are malnourished. People live in fear under the heel of a tyrannical government.

It was not always like this in Venezuela. The small country has the world’s largest proven oil reserves. Flushed with oil money, the socialists took power in 1999 and began subsidizing everything in sight. To further monopolize the cash flow, the socialist government expelled “imperialist” foreign investors and nationalized the oil industry.

While oil prices were high, socialism was good. Government lavished the poor with free housing and underwrote pretty much everything else. Two million housing units were built using oil money. Fuel was virtually free. In gratitude, the voters kept returning the socialists to power.

But in 2014, global oil prices spiraled downwards. It soon became clear the government in Caracas could no longer afford socialism. But Hugo Chavez and then Nicolas Maduro kept their socialism going. Soon the country was bankrupt and needed to be heavily financed by Cuba and Russia.

Since oil prices began climbing last year, Caracas belatedly understood they could not pump out more oil to save themselves. Since they booted out foreign investors, Venezuela had not built new capacity for its oil industry. Today, with all the uncertainty in the country, no investor would touch Venezuela with a ten-foot pole.

What plagues Venezuela today is due to a failure in governance. That is something we must learn from.

Hocus-pocus

Given conditions of hyperinflation, it has come to a point where ordinary Venezuelans came to market with bags of cash to buy a small basket of goods. Under such conditions, even robbery becomes an act of futility.

As socialists are wont to do, the government of Nicolas Maduro announced a silver bullet to fight inflation. That silver bullet consists entirely of issuing a new currency called the “sovereign bolivar” to replace the old one mistakenly called the “strong bolivar.” The new currency simply lops five zeros off the face of the bill.

The new currency, Maduro announced, is anchored on a freshly conceived crypto-currency called the “petros.” This crypto-currency is, in turn, supposed to be anchored on the country’s prospective oil revenues.

In anywhere else outside Venezuela, this is called financial fraud – except, of course, it is official policy.

All the prospective revenues from the country’s decrepit oil industry are, long into the future, obligated to pay back loans from Cuba and Russia. That means the “petros” are anchored on nothing. Since the “sovereign bolivar” in anchored on the “petros”, they are anchored on nothing at all.

This is not crypto-currency. This is hocus-pocus currency.

The adoption of the new currency was supposed to take effect last Monday. Strangely, the Maduro government declared that very day a bank holiday. The confused citizens of what was once Latin America’s wealthiest nation were left roaming the streets without banks to deal with and without currency to spend.

Little wonder Venezuelans are streaming out of the country in their numbers. They see no future in their country and would rather deal with the uncertainties outside of it. But at least, outside Venezuela, there are markets that work and real currency in the pockets of their people.

The people leaving Venezuela are the most talented the nation has. They are the very people Venezuela must rely on if ever this country will start rebuilding from the chaos called socialism. Now they are abandoning a country run on an insane ideology by a moronic party.

Fiscal discipline

The chaos that is Venezuela began when they dropped “fiscal discipline” from their official vocabulary.

Today, this country must be described a failed state. Nearly all of the Americas refuse to recognize the elections that kept Maduro in power. Economic failure is now compounded by diplomatic isolation.

There is no light at the end of the tunnel dug by Hugo Chavez and continued by Maduro. Venezuela is doomed even if it is celebrated by our native socialists who see it as the model for socialism in our own country.

We will probably benefit from the lessons Venezuela holds if we send half our senators – especially those who utter mindless things about fiscal policy such as Bam Aquino, Gatchalian and Villanueva – on a field trip to Caracas. There they might enjoy the pleasure of handing over bundles of cash to buy a cup of coffee.