Venezuela and Hyperinflation
Is This America's Future?
Here is the final gasp of Hugo Chavez’s socialist utopia. Where is the Hollywood left now? Venezuela's current president has given power to the military to control prices as the threat of hyperinflation destroys their currency. What only a few years ago seemed like endless prosperity, has turned into shortages of everything—and Venezuelans are left struggling to buy whatever food and basic goods remain on their store shelves.
This is just one more example in a very long line of failed socialist Utopian ideas that have lead to military dictatorships in the region.
There will be the inevitable claims that America (in particular, the political right) sabotaged their success. The reality is, that former president Chavez, more than a decade ago, commandeered their most profitable industries and nationalized them, turning them over to socialist cooperatives to run. He also discouraged foreign investment and relied heavily on government spending to help drive his social agenda, all of which was funded by the belief that oil prices around the world would remain high.
Chavez's takeover of the countries agricultural industry, likewise, resulted in less food production, not more, leading to an increased need to import food. Eventually, all the unproductive government spending overwhelmed the Nation's economic output, resulting in out of control inflation, harming the very people Chavez intended to help.
You could call it shortsighted. That, however, would probably be too kind. It’s more like a complete indifference to reality. But that would be nothing new for radical leftists as far back as Rousseau and as recent as our current president.
Think of the U.S. government’s expansion of the mortgage market to unqualified borrowers. By lowering interest rates and easing the standard for lenders in an effort to increase home ownership among the poor, housing prices skyrocketed. People who were only marginally employed, were suddenly rolling in dough with nothing of value to back up the rapidly inflating housing prices. And, with little but hot air as collateral, our economy went up in flames like the Hindenburg. "What about those greedy Wall Street bastards?" They just followed the incentives created by some very bad government policy.
Hugo Chavez, Bill Clinton and President Obama stand in a long line of Utopian idealists who believed that you could lift people out of poverty by giving money away. Like so many politicians before them, they were well-intended, but woefully ignorant of the probable consequences of their actions. And let’s face it, being “Woefully Ignorant" is no small amount of ignorance.
Maybe it was indifference rather the ignorance, which, in fact, would be the same thing. If this sounds familiar, it should, we're following the same path that Chavez pursued—although it’ll probably take a lot longer because we're a lot richer as a nation.
It also helps that the U.S. dollar is the world's reserve currency, meaning; everybody takes American money and wants a piece of the American consumer market. Why not! Our wealth insulates us (to a degree) from a weak dollar, the result of using low interest rates to encourage borrowing during a recession.
Who benefits most by excessively low interest rates and easy money? Wall-Street, a hell of a lot more than Main-street. But once politicians march down that path, there's very little they can do but push forward. To do otherwise would be to admit they're wrong, undermining their authority and the house of cards it's all built on.
The Chinese in an effort to grow their own markets, for instance, devalue their own currency to make their exports more desirable for American consumers. In doing so, they have become wealthy. Venezuela, by comparison, has no such cushion for error and bad economic planning has lead to the inevitable economic meltdown. This will probably end up being China's future as well. You can only micro-manage an economy of their size for so long before higher costs for production diminishes their competitiveness as a producer of low cost, high quality goods. As their labor costs rise, so, necessarily, will their prices. The result being; that Chinese made goods will be lot less desirable on the international market. It happened in Japan, it will most likely happen in China, as well.
This is just one more example in a very long line of failed socialist Utopian ideas that have lead to military dictatorships in the region.
There will be the inevitable claims that America (in particular, the political right) sabotaged their success. The reality is, that former president Chavez, more than a decade ago, commandeered their most profitable industries and nationalized them, turning them over to socialist cooperatives to run. He also discouraged foreign investment and relied heavily on government spending to help drive his social agenda, all of which was funded by the belief that oil prices around the world would remain high.
Chavez's takeover of the countries agricultural industry, likewise, resulted in less food production, not more, leading to an increased need to import food. Eventually, all the unproductive government spending overwhelmed the Nation's economic output, resulting in out of control inflation, harming the very people Chavez intended to help.
You could call it shortsighted. That, however, would probably be too kind. It’s more like a complete indifference to reality. But that would be nothing new for radical leftists as far back as Rousseau and as recent as our current president.
Think of the U.S. government’s expansion of the mortgage market to unqualified borrowers. By lowering interest rates and easing the standard for lenders in an effort to increase home ownership among the poor, housing prices skyrocketed. People who were only marginally employed, were suddenly rolling in dough with nothing of value to back up the rapidly inflating housing prices. And, with little but hot air as collateral, our economy went up in flames like the Hindenburg. "What about those greedy Wall Street bastards?" They just followed the incentives created by some very bad government policy.
Hugo Chavez, Bill Clinton and President Obama stand in a long line of Utopian idealists who believed that you could lift people out of poverty by giving money away. Like so many politicians before them, they were well-intended, but woefully ignorant of the probable consequences of their actions. And let’s face it, being “Woefully Ignorant" is no small amount of ignorance.
Maybe it was indifference rather the ignorance, which, in fact, would be the same thing. If this sounds familiar, it should, we're following the same path that Chavez pursued—although it’ll probably take a lot longer because we're a lot richer as a nation.
It also helps that the U.S. dollar is the world's reserve currency, meaning; everybody takes American money and wants a piece of the American consumer market. Why not! Our wealth insulates us (to a degree) from a weak dollar, the result of using low interest rates to encourage borrowing during a recession.
Who benefits most by excessively low interest rates and easy money? Wall-Street, a hell of a lot more than Main-street. But once politicians march down that path, there's very little they can do but push forward. To do otherwise would be to admit they're wrong, undermining their authority and the house of cards it's all built on.
The Chinese in an effort to grow their own markets, for instance, devalue their own currency to make their exports more desirable for American consumers. In doing so, they have become wealthy. Venezuela, by comparison, has no such cushion for error and bad economic planning has lead to the inevitable economic meltdown. This will probably end up being China's future as well. You can only micro-manage an economy of their size for so long before higher costs for production diminishes their competitiveness as a producer of low cost, high quality goods. As their labor costs rise, so, necessarily, will their prices. The result being; that Chinese made goods will be lot less desirable on the international market. It happened in Japan, it will most likely happen in China, as well.
The consequence will, ultimately, be the same for Americans. In fact, the process has already begun, even before Obama, although he expedited it significantly. Bush's “War on Terror” was used to justify endless war as a means of securing American interests. He set out to pacify a region of the world that has been in turmoil since, literally, the begining of recorded history. His was just the latest attempt, dating to the time of the ancient Pharaohs and before.
All of this has enormous costs, with the debts accruing to the taxpayers, representing a transference wealth from Average Americans to the banking industry and the military industrial complex. If you want to really understand the growing income disparity, look no further than your favored politicians for the blame, far more than private industry.
Why hasn't this happened in Norway or Sweden? Because they still have very healthy private industry and reasonably free markets. It is private industry that produces all of their wealth, not the government. The government just divvies up the wealth produced by individual initiative. They also have a better educated population, a limited military and a history of freedom that much of Latin America simply doesn't possess. This isn't an issue of ethnicity. It's about the long struggle for freedom politically, legally and socially that took centuries for European nations to establish. Latin America is involved in that same process today.
The truth is, that government, which is the ultimate expression of authoritarianism, merely creates more government, some of which is necessary. But, government as the primary benefactor of the people? Hardly!
Is this America’s future? It very well could be, if we continue to print endless supplies of cash like a bunch of counterfeiters on crack and attempt to sustain unsustainable industries in order to favor certain political crony’s.
Think of the Obama-Care website, which is now approaching the billion dollar mark. It should have cost maybe five to ten million, but what’s a billion here or there among Michelle Obama's friends. The taxpayers have deep pockets anyways and are on the hook for all of it. Such is the logic of people who, apparently, have no idea how any of it actually works. If they are ignorant, they are, nonetheless, well-intended. After all, who needs reasonable ideas when you have good intentions?
As always, it requires great arrogance to stare into the face of history and think “This time it’ll be different!” Why? Because this time it’s “Me” and the last dozen or so times it wasn't.” That’s how you end up with a healthcare system that nobody understands, whose real effect won’t be felt until after the next major election cycle, just long enough to reelect the same politicians who made it happen. Then, it will be too late.
In the meantime, however, lofty rhetoric will suffice to move things forward and appease the savages. But, such appeasements won't last for long, they never do.
Mark Magula
All of this has enormous costs, with the debts accruing to the taxpayers, representing a transference wealth from Average Americans to the banking industry and the military industrial complex. If you want to really understand the growing income disparity, look no further than your favored politicians for the blame, far more than private industry.
Why hasn't this happened in Norway or Sweden? Because they still have very healthy private industry and reasonably free markets. It is private industry that produces all of their wealth, not the government. The government just divvies up the wealth produced by individual initiative. They also have a better educated population, a limited military and a history of freedom that much of Latin America simply doesn't possess. This isn't an issue of ethnicity. It's about the long struggle for freedom politically, legally and socially that took centuries for European nations to establish. Latin America is involved in that same process today.
The truth is, that government, which is the ultimate expression of authoritarianism, merely creates more government, some of which is necessary. But, government as the primary benefactor of the people? Hardly!
Is this America’s future? It very well could be, if we continue to print endless supplies of cash like a bunch of counterfeiters on crack and attempt to sustain unsustainable industries in order to favor certain political crony’s.
Think of the Obama-Care website, which is now approaching the billion dollar mark. It should have cost maybe five to ten million, but what’s a billion here or there among Michelle Obama's friends. The taxpayers have deep pockets anyways and are on the hook for all of it. Such is the logic of people who, apparently, have no idea how any of it actually works. If they are ignorant, they are, nonetheless, well-intended. After all, who needs reasonable ideas when you have good intentions?
As always, it requires great arrogance to stare into the face of history and think “This time it’ll be different!” Why? Because this time it’s “Me” and the last dozen or so times it wasn't.” That’s how you end up with a healthcare system that nobody understands, whose real effect won’t be felt until after the next major election cycle, just long enough to reelect the same politicians who made it happen. Then, it will be too late.
In the meantime, however, lofty rhetoric will suffice to move things forward and appease the savages. But, such appeasements won't last for long, they never do.
Mark Magula
