Crackers in Caracas
THIS month Venezuela’s currency, the bolívar, passed a melancholy milestone: its value on the black market is now a hundredth of what it is supposed to be at the main official exchange rate. The government insists that there are 6.3 bolívares to the dollar, but it will cost you 630 to buy one from a willing seller. As the country’s stock of hard currency shrinks and the central bank prints money to plug a huge budget deficit, the bolívar’s collapse is accelerating (see chart). It is worth a thousandth of what it was in 1999, when Hugo Chávez, Venezuela’s late autocrat, came to power.
The country may be on the verge of hyperinflation. Most economists reckon that the inflation rate is already 120% a year (the central bank stopped publishing price data, so no one is sure). Some expect it to reach 200% by the end of 2015.
The government uses a labyrinthine system of price and exchange controls to shield Venezuelans from soaring prices. But these make matters worse. Price ceilings have devastated local production; factories are operating at half-capacity and more than two-thirds of food is imported. Affordable goods are in short supply.
With a dollar’s-worth of bolívares, you can in theory buy 33kg (73 pounds) of maize flour, the national staple. But only if you can find a supermarket that has some and you are willing to queue for hours (repeatedly, since flour is rationed). For the same price, consumers could fill the tank of the family car 140 times with subsidised petrol. That amount of fuel is worth $5,000 across the border with Colombia. Guess what? Enterprising Venezuelans smuggle it across.
http://www.economist.com/news/americas/21659764-government-prints-money-hyperinflation-looms-crackers-caracas
Thanks Obama -- for creating this crisis in Venezuela.
= new reply since forum marked as read
