The Venezuelan Economic Chaos - Part 2

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It was 6 years ago, with the collapse of oil prices in the international market, when there was a cut in the flow of income to the nation and in this way the internal shortage increased, since the import policy in all areas it had vastly outpaced national food and medicine production.

Precisely as of 2014, the increase in public spending began disproportionately, with the increase in ministerial payrolls, the financing of the "Social Missions" (which are nothing more than instruments of ideologization) and the massive importation of finished products that previously they were covered by internal production.

A chain of Government errors that lasted for more than 6 years in the application of macroeconomic policies, are bearing fruit.

In 2017 The Venezuelan Economy is Officially Declared in Hyperinflation.

Despite this, the policies continued to be wrong, accelerating the deterioration of the productive system and the fall of the Gross Domestic Product.
Inflation rates began to grow exponentially with the issuance of "Inorganic Money", thus expanding the money supply without having assets or services to support this new currency, which is not even physically printed.

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I would like to give a practical example of the current situation of inflation and devaluation in Venezuela, quoting part of the post published by @celi130 barely 13 days ago.

In her article Is $ 200 a lot of money in Venezuela?
by @celi130, my fellow countrywoman said the following:

Price of a basic Family basket
1 $ equals 690,000 Bs.F
Venezuelan worker monthly salary 400,000 Bs F. equals $ 0.53

1 Kilo milk 6.7 $
1 Kilo cheese 3.2 $
1 egg carton 2.8 $
1 Kilo of pasta 1.5 $
1 kilo of rice 1.2 $
1 kilo of precooked flour 1.3 $
1 Kilo of meat 4.5 $
1 kilo of fish 3.2 $
1 kilo of wheat flour 1.2 $
1 willow $ 2
1 mayonnaise 2.5 $
1 coffee (200grm) 1.2 $
1 kilo grains 2 $
1 kilo of sugar 1.2 $
1 liter oil 1.9 $
Fruits, vegetables and vegetables $ 10

Giving a total of 46.4 $, for a week, this amount of food for a family of 4 people (father, mother and two children) that is equivalent if both parents work earning a minimum salary that equals 0.53 $, would be 1.06 $ . What does the Venezuelan buy with that salary, not even for breakfast a day.

Today, this price relationship (published 2 weeks ago) is totally distorted, since the current official exchange rate (Today Sunday, November 29, 2020) places the dollar at 1,204,000.oo Bs/$. *An increase of 74.5%, or rather, 74.5% devaluation of the bolivar in just 2 weeks*.

Cumulative inflation so far in 2020 is 2,000%.

It's not just Government Policies

As we could see, bad fiscal policies and uncontrolled public spending show the genesis of these critical levels of hyperinflation and economic decline, but the elements of the Venezuelan social crisis also directly influence the rise in prices.

The almost total uselessness, due to the fall in its real value, of the national currency (the Bolivar), has pressured citizens to buy dollars, a fact that in turn detracts from the local sign.

There is no stake in Bolivares
Like in Blockchain protocols, where accumulating a stake of a token demonstrates the trust of users and this, in turn, revalues said tokens, the value of Fiat currencies also depends to a great extent on the trust that its users place in it.
In this way, we can find investments and large contracts that are signed and established in dollars.

If in Venezuela contracts were established in national currency, if Venezuelans had savings capacity and in bank accounts, the "Stakes" of the users were deposited, confidence in the currency could be retaken and in this way, its revaluation could materialize.

But when everyday money loses value exponentially and at the same time, users quickly get rid of this currency (rapidly increasing spending), what is generated is a greater devaluation that causes hyperinflation to increase.

@juanmolina

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