Archive for February 3rd, 2011

Creative Chavista Thinking for the Fight Against Inflation.

February 3, 2011

Chavismo has an incredible ability to come up with creative new ideas. These guys, who never seem to be able to complete a project or even manage one, seem to always be thinking of new imaginative ways to screw up the country.

The latest one s a report that the Cabinet is thinking of imposing a salary cap on private sector salaries. Your immediate thought is that this is once again a measure to make us all poor, rather than having all of us be well off, that is how socialism works., no?

Well, you are wrong. This has nothing to do with narrowing the gap between rich and poor (funny how they always want the upper layers to come down, no?). Nope. The idea has nothing to do with equality, or with narrowing down the difference between rich and poor. It is actually qute clever. The objective is… (drum roll)

To lower inflationary pressures!

You see, despite what that dead guy with the Nobel prize from the University of Chicago said, Chavismo does not buy this monetary explanation.  They like their explanation better, obviosuly there is inflation because wealthy people have more money (Even if there are few wealthy people and lots of poor ones), not because Chavez increased the money supply in eight years by a factor of 15.(Do these guys ever stop to think about what they are saying?)

But think about it. Capping salaries in the private sector will affect only a small amount of salaries, no? If everyone is as poor as Chavez says, and there are so few noisy, capitalistic oligarchs, then it is those salaries that will be capped and according to Chavista lore there are few people in this category, no?

But then, of course, some Chavistas think they are smarter or more knowledgeable than others. While Chavista Deputy Sanguino, President of the Finance Committee of the National Assemby thinks it is a very interesting idea in terms of fighting inflation, the VP of the same Committee is not so sure. He thinks that the inflation problem can be solved by stopping speculation, thus, says Deputy Farias, we have to concentrate in the Anti-Monopoly laws. He also thinks that being underdeveloped has a lot to do with inflation, but apparently he has no clue on how to get us out of that, so he will concentrate in the first law.

Meanwhile, the Devil sits here in his ignorance wondering what part of:

“Inflation is a monetary phenomenon”, these guys did not understand.

Let’s see, in 2003, monetary liquidity in public hands stood at Bs. 18.7 billion. Eight years later it stands at Bs. 295 billion. That is an increase of 1,577 %. An increase of almost 16 times more bills, coins, however you want to imagine or count them.

Is the country producing 15 times more?

Obviously not, But there is 15 times more money chasing for the same goods, plus the increase in GDP, which is about 50% in that period. So, you have 15 times more money and only about 0.5 more goods.

Guess why there is inflation?

But, they will likely approve this crazy idea and when inflation persists, they will blame the phases of the moon, astrology or El Niño, but somehow they will never imagine that this guy Friedman from the Evil Empire had any clue as to what he was talking about.

But if you don’t get Friedman, just see the picture of the little kid above and you will get the whole picture of what Friedman meant.