Venezuela’s Hyperinflation: When Fair Prices equals Government Sanctioned Looting

Here is a recent video of looting in action

No this isn’t from Tacloban, Leyte Philippines. This is from Venezuela. (video from Liveleak.com)

Severe shortages of goods and services combined with skyrocketing prices has forced the Venezuelan government to resort to populist squid tactics by pushing the blame of societal malaise to the private sector enterprises, where government “occupation” of businesses to impose “fair prices” has motivated widespread looting.

Also this is a prime example of the conditioning of people’s actions based on what I call as “steep cultural dependency on political solutions”.

From the International Business Times editorial

Looters: Venezuelan troops storm a local electronics retailer in the name of enforcing "fair prices," brazenly blaming the private sector for state policies. Sounds familiar — and not just because it's a communist takeover.

With municipal elections just around the corner on Dec. 8, it's no surprise to see Venezuela's failing socialist government turning to pork-barrel handouts to lure voters — as it always has.

Shovel the goodies to the red-shirted low-information voters and gain just enough votes in upcoming elections to claim a dictatorship is really a democracy.

Not coincidentally, President Nicolas Maduro declared that Venezuela would celebrate the beginning of Christmas in October — to distribute goodies.

But there's a new twist here: Venezuela is out of money to shovel pork. Its foreign reserves have fallen to $21.4 billion as oil prices slump. Instead of using its vast oil earnings to buy votes, as in the past, Venezuela's Marxist government is now making do by stealing from Venezuela's battered private sector.

Which is what brought the bizarre spectacle of the Venezuelan military occupation of Daka — the country's five-store equivalent of Best Buy, loaded with the flat-screen TVs, computers and smartphones favored by looters everywhere.

As troops stood by, crowds looted one Daka store, stripping its shelves bare. Call it government by looting.

Or in reality, call it communism. Because such destruction of private property in the name of redistribution has been a feature of every communist takeover from Russia to China, to Vietnam, to Cuba.

One would note that Venezuela’s currency the bolivar's collapse on the black market has been accelerating…

And this has reflected on Venezuela's intensifying hyperinflation. (from Cato’s Troubled Currencies)

After hitting a high of 475% return year-to-date, the Venezuelan stock market, as seen via the Caracas Index, has tumbled. That’s partly due to the crackdown by the Maduro government on alleged "speculators" whom the government accuses of engaging in an “economic war” with Venezuelans. 

So the newly instituted “happiness ministry” of Venezuela extrapolates to the pursuit of happiness of those in power to remain in power by appeasing voters through policies that encourage plunder. 

As the great Austrian economist Ludwig von Mises warned:

those engaged in futile and hopeless attempts to fight the inevitable consequences of inflation — the rise in prices — are masquerading their endeavors as a fight against inflation. While fighting the symptoms, they pretend to fight the root causes of the evil. And because they do not comprehend the causal relation between the increase in money in circulation and credit expansion on the one hand and the rise in prices on the other, they practically make things worse.

The unfolding currency crisis of Venezuela will deteriorate further until either the Venezuelan government desists from more financial repression and inflationism or a complete societal breakdown. 

Venezuela is real time paradigm to what governments will do to remain in power.