“Reality Contradicts Maduro’s Explanation for Venezuela’s Currency Switch” Tim Worstall, Forbes, 17 December 2016

“The Maduro government has been simply printing money to pay its bills and production has also collapsed as a result of the Chavistas’ other economic policies”.

Last week President Maduro announced that the 100 bolivar bill was going to be taken out of circulation. The reason for this move is that the US has been buying money through NGOs and taking it out of the country. But the story doesn’t make sense, and here’s why. Venezuela’s biggest problem is inflation. It’s over 1,000% a year and reaching a 2,000%. And what’s inflation? Basically it is the value of money decreasing against the value of goods. It happens when there’s more money than goods. So, let’s believe what Maduro said about the US. If they’ve been taking money out, that means less money in Venezuela, that means inflation should be reduced when it’s actually not. It makes no sense. Maduro has reduced the amount of money, and the bolivar is becoming more valuable. There has been a fall in the inflation rate. So Maduro’s move shows that the allegation of the US taking money out cannot be the explanation of inflation. What we also have learned is that price-fixing and non-market economies don’t work. It is time we learn this lesson.

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“Reality Contradicts Maduro’s Explanation for Venezuela’s Currency Switch” Tim Worstall, Forbes, 17 December 2016

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