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This paper money being created out of thin air is actually printed, it is used by real Venezuelans to buy real food and pay real medical bills and buy real bus tickets. And as inflation rages, the working class, the poor, are the ones who suffer the most. Real consumption has been dropping - meaning even though there is a lot more of this papar money but there is less being produced, so the prices go up and up and up.
In a country where the productive capacity is destroyed by nationalizations and energy shortages, this type of inflation is to be expected when the government pumps even more paper onto the streets, in an atempt to sustain its popularity as the elections approach. The excess paper money allows individuals who want to import goods to offer more Bolivars for the dollar denominated bonds the government offers in the parallel market. But the government has been reducing the amounts of bonds it puts on offer, because the dollars to back those bonds come from PDVSA earnings, and national cash reserves held in US dollars. As PDVSA's earnings drop (or maybe Chavez takes the money and sends it abroad to Cuba and other client states?), there's less ability to feed this bond market. And this means there are lots of Bolivars chasing the few bonds available. And this in turn drives the offer prices, which weaken the Bolivar and make Chavez mad, because a weaker Bolivar means even higher inflation, which they in turn stoke by printing more Bolivars.
Get it? It's an avalanche of bolivars raining on us, misallocated bolivars because they are aimed at their clients - and not everybody is a government flunky or gets their cash. So this leaves a lot of people in dire straits, there are the unemployed from the nationalized businesses, the little guy who can't make a living anymore because his business uses imported material, the worker in a factory which closed a shift because the power rationing mandated it, the old retired lady whose retirement check hasn't been changed even though inflation is running at over 30 % per year, and so on. And this is why the government's popularity is dropping among the working class, and the same poor they claim to be serving.
As for the middle class, it is under attack, the hostility and hatred expressed by the red-clad penguins surrounding Chavez is very evident. Even if they don't feel it, it's their dogma now to be marxist radicals, and to hate the most productive sectors of society. So the middle class is hunkering down, reducing its activity, afraid of doing anything which may be seen as "profitable" because this means the government will descend upon you like a vulture and steal your property.
And this is what is going on right now. And yet you wonder, why is Chavez losing popularity?
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