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Venezuela On The Verge Of Revolution As Hyperinflated Currency Crashes To New Record Low
Venezuela On The Verge Of Revolution As Hyperinflated Currency Crashes To New Record Low
James Holbrooks points out that the people are starving. The government has gone full-on authoritarian, and now desperate human beings are dying in the streets. From an Associated Press report on Friday:
“Authorities in Venezuela say 12 people were killed overnight following looting and violence in the South American nation’s capital amid a spiraling political crisis.”
“Most of the deaths took place in El Valle, where opposition leaders say 13 people were hit with an electrical current while trying to loot a bakery protected by an electric fence.”
These are people without options, forced to turn to thievery to stay alive. And they died because of it.
On April 6, The Economist reported that over the past year, 74 percent of Venezuelans lost an average of 20 pounds. Venezuela, incidentally, has topped Bloomberg’s Economic Misery Index for the past three years.
The country began its slide downward into chaos with the election of President Nicolas Maduro, who immediately began implementing socialist programs and has since taken extreme measures to secure his position.
At the end of March, for instance, Maduro effectively shut down Venezuela’s congress — his primary political opposition — and gave those legislative duties to his puppet Supreme Court.
The latest news coming out of the South American nation — aside from the deaths of people trying to steal bread to live — is that General Motors, whose Venezuelan production facility was overtaken by local authorities, has now ceased all operations in the country.
To put that in perspective, consider that in 2016, only 3,000 vehicles were sold in Venezuela, a country of 30 million people.
…click on the above link to read the rest of the article…
Think Different About Purchasing Power
Think Different About Purchasing Power
The Tip of the Iceberg
The dollar is always losing value. To measure the decline, people turn to the Consumer Price Index (CPI), or various alternative measures such as Shadow Stats or Billion Prices Project. They measure a basket of goods, and we can see how it changes every year.
However, companies are constantly cutting costs. If we see nominal – i.e. dollar – prices rising, it’s despite this relentless increase in efficiency.
Prices in perspective – click to enlarge.
This graphic illustrates the disparity (I credit Tom Selgas for a brilliant visualization, which I recreated from memory). CPI measures only the orange zone, the tip of the iceberg. Most people don’t see the gray zone, and that’s a result of the greatest sleight of hand ever.
We need an accurate way to measure monetary debasement. For example, in retirement planning it’s tempting to divide your net worth by the cost of consumer goods. This seems to show your purchasing power. For example, if you have $200,000 and the cost of groceries for a year is $20,000 then you can eat for ten years.
However, this approach is flawed. To see why, let’s briefly consider primitive times when there was no lending or banking. People had to set aside some of their income, to buy a durable good like salt or silver—hoarding. When they could no longer work, they sold a little bit every week to buy food—dishoarding. People accumulated wealth while working, and dissipated it in retirement.
Life got a lot better with the advent of lending, because interest enables people to live on the income generated by their savings. People no longer consumed their principal, worrying about outliving their savings.
…click on the above link to read the rest of the article…
