It all reminds me of Britain in the 1970s. In Venezuela, facing 25% inflation, the government of retro-Marxist Hugo Chavez has had to devalue the national currency, the bolivar, by 17%. It will drop from the official rate of 2.15 to the US dollar, to 2.60. At least, that is the official rate for 'priority' imports like food and medicines, and whatever the government itself happens to want from abroad. The rate for imports of 'inessential' imports like cars, chemicals, electronics and suchlike will be 4.30 to the dollar (a 50% devaluation).
Chavez will be lucky if this move has any effect at all, of course: even these huge devaluations do not reflect how worthless his currency really is. The unofficial exchange rate for bolivars is more like six to the dollar – that is how much people think it is really worth.
Sure, there is a recession on and people aren't consuming so much oil, but it puzzles me how a country in the world's top ten for oil reserves – and where oil generates about 80% of export revenue, half the government's income, and a third of GDP – can get itself in such a pickle. Well, actually, I do know. It is the same problem that we had in the 1970s, in fact – ultra-socialism.
One might have thought that governments would learn. (Though to quote Milton Friedman, in reply to the question: 'Don't governments ever learn?' he said sagely: 'No. governments don't learn. People learn.') I worry that perhaps they do learn, and know full well that their fiscal alcoholism is a road to ruin, but cannot stop themselves because their electors always vote for higher spending and lower taxes. Does that mean democracy itself is the problem? Or a woeful lack of public education on common sense economics?
See Dr Butler's new Alternative Manifesto here.