And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine. — Revelation 6:6
Yesterday, I commented on Venezuela’s recent currency devaluation. Now, the Mises Blog has chimed in. Basically, the results have followed what happens whenever the government induces rapid overnight inflation: people are abandoning currency because they don’t trust it anymore. So they’re all heading out to stores and trying to buy up everything they can so that they don’t get stuck with bolivares. Of course, when the people who have the most cash are buying up everything they can, the people who have less money and are really in need now face less available goods. Now, in a normally functioning economy, this would mean that the poor would be hit harder by rising prices. But the Venezuelan government, supposedly in the interests of helping the poor, is working to artificially force prices to stay low. Now, a lower price for essential things like food would, in theory, make life easier for the poor. But reality doesn’t follow simplistic theory. In reality, the result of forcing down prices in the face of shortages is that people can just keep buying and buying till the artificially cheapened goods completely run out. And then the government policy to lower prices leaves the poor with nothing, instead of just less as they would have in a free market. So now who will rescue the poor of Venezuela. Naturally, the government! The government will simply take some of the loads of money they just sucked out of the Venezuelan economy and use it to buy supplies for the hungry. And it makes the government look heroic just in time for the election.
Because all this is done by manipulation of the market rather than simple seizure of goods, the average voter may never know that they are being given to by the same hand that took away what little they had. And so the government, for disrupting trade, comes out looking heroic.
more on venezuelan currency devaluation
And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine. — Revelation 6:6
Yesterday, I commented on Venezuela’s recent currency devaluation. Now, the Mises Blog has chimed in. Basically, the results have followed what happens whenever the government induces rapid overnight inflation: people are abandoning currency because they don’t trust it anymore. So they’re all heading out to stores and trying to buy up everything they can so that they don’t get stuck with bolivares. Of course, when the people who have the most cash are buying up everything they can, the people who have less money and are really in need now face less available goods. Now, in a normally functioning economy, this would mean that the poor would be hit harder by rising prices. But the Venezuelan government, supposedly in the interests of helping the poor, is working to artificially force prices to stay low. Now, a lower price for essential things like food would, in theory, make life easier for the poor. But reality doesn’t follow simplistic theory. In reality, the result of forcing down prices in the face of shortages is that people can just keep buying and buying till the artificially cheapened goods completely run out. And then the government policy to lower prices leaves the poor with nothing, instead of just less as they would have in a free market. So now who will rescue the poor of Venezuela. Naturally, the government! The government will simply take some of the loads of money they just sucked out of the Venezuelan economy and use it to buy supplies for the hungry. And it makes the government look heroic just in time for the election.
Because all this is done by manipulation of the market rather than simple seizure of goods, the average voter may never know that they are being given to by the same hand that took away what little they had. And so the government, for disrupting trade, comes out looking heroic.
Twisted, huh?
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