Let’s suppose that half the employers in the US simply closed up their shops and shipped all their money overseas to sit in investments. They had plenty enough money to live off of anyway. If you asked them what they were doing, they would tell you that they are refusing to invest in the California economy because they hate the liberal California government.
Well, in a nutshell, that’s part of what happened in Venezuela. A country cannot just sit there while everyone with any money at all ships it out of the country instead of investing it in their homeland. Obviously that’s not going to work. So Chavez put in capital controls to try to stem the capital flight.
It worked but then it created a whole host of other problems. And even with the laws against it, Venezuela has continued to see $50 billion/year flow right out of the economy, generally right to Houston or Miami.
In recent months, all capital controls were eliminated and the exchange rate was finally allowed to float after all this time. Inflation collapsed but so did the economy and it was already racing downhill anyway.
How do you cure runaway inflation? Real easy. You reduce demand. How to you do that? You make it so wages are so low and goods so high that hardly anyone is buying anything anymore. Since inflation runs on supply and demand as its cause and effect, generally you reduce demand and prices tend to drop. You increase demand and they tend to go up. It’s Economics 101.
Nice little doomsday comment here from one of our commenters:
Francis Meville: Anyway, the US are heading towards another worse Vietnam. Venezuela will turn socialist as they can no longer afford to live in a liberal economy. What Venezuela is experiencing right now is not socialism but mass lay off by capital, like half the Californian population living on the streets because the cost of living is way too high.
And most American media tell the yokels all that happens because California is run by the radical Left just one notch below Venezuela as a harbinger of the plagues to befall everybody if were don’t vote more and more reactionary politicians with the decades passing.
You know that California has nothing socialist, so what is happening in Venezuela has as little relationship with the evil they pretend.
This time Trump has committed some kind of hubris America will never recover from. Trump imagines he can arrive in Caracas aboard an aircraft carrier and by helicopter to proclaim like an angel Guaido as the legitimate president of Venezuela and then depart at the head of a ticker-tape parade of triumph.
It is disappointing relatively to the slowdown or cessation of projects that government had instituted for its people mostly due to high-tech American hybrid wars techniques, but it is not a catastrophe.
Maduro is not the economic genius it would have taken in face of such a foe, but he is being pushed back down to his own level of top competence as per Peter’s principle: class war and union action, where he could tower even over Uncle Ho. Good night America!