Venezuela’s death spiral is getting worse (Wonkblog/ WP)

[Sgent]

https://www.washingtonpost.com/news/wonk/wp/2016/08/08/venezuela-is-stuck-in-a-death-spiral-and-its-only-getting-worse/

...

1. Inflation. Even when oil prices were in the triple digits, Venezuela's government was in the red. The problem was that its state-owned oil company stopped producing as much after Chavez took money that should have gone into maintaining its fields and put it into social spending instead. This was the economic equivalent of eating your seed corn when it would have grown you more than ever before. Now, at first, the regime was just spending more than it had, but eventually, after oil's vertiginous drop, this became more than it could borrow as well. So it did what every bankrupt government does: It printed the money it needed. Which is why inflation went from 19 percent in 2012 to, the IMF estimates, 720 percent this year, and a projected 2,200 percent the next.

2. Price controls. Venezuela, for is part, has resorted to a tried-and-untrue strategy for dealing with all these price increases. That's pretending they haven't happened. The government tells businesses what they're allowed to charge, and then given a select few of them dollars at deeply discounted rates so they can afford to buy what they need overseas and still sell at these deeply discounted prices. In effect, the Chavista regime is trying to spend the inflation away. It hasn't worked.

3. Shortages. Something Venezuela's government hasn't quite managed to figure out, though, is that trying to force companies to sell at a loss means they won't sell anything at all. It's better to make nothing than to lose something. And that's even been the case when the government has tried to cover some of their costs. The problem, you see, is that it isn't profitable for unsubsidized businesses to stock their shelves, and isn't profitable enough for subsidized ones to do so either. Why is that? Because companies can sell the cheap dollars they get from the government for more than can resell the imports they're supposed to buy with those dollars.

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4. Nationalizations. So what do you do when businesses refuse to sell things at a loss? Easy. You blame them, and then do so yourself. That, at least, is what Venezuela's government did when it took over toilet paper factories in 2013, and what it's threatened to do with the country's top food and beer brewing company today. But, of course, this means losing even more money that Venezuela's government doesn't have — which, in turn, means it has to print even more money. And round and round it goes.

[Sen. Walter Sobchak]

1. Someone needs to make a clip of the scene in Wag the Dog where...

Robert DiNero mumbles "CIA... yup CIA" just for the Venezuela topics.

[FrodosPet]

2. But Pinochet and Allende and the CIA!

Every problem in Venezuela is caused by us. We should have passed a law that requires us to buy as much oil as Venezuela wants to sell us at a minimum price of $200 a barrel.

Then they would have the money they need to take care of the oil production equipment AND provide all the social services needed and desired.

OK, $250-$300 a barrel.