Venezuela's hyperinflationary economic crisis has gotten worse in one very important and apparently unprecedented sense than even the one seen in Weimar Germany in the 1920s. Yet the Associated Press and the New York Times apparently have no interest in telling their readers, listeners or viewers about it.
In the post-World War I German Weimar Republic, the situation became so out of control that people needed wheelbarrows to carry around the money they needed to pay for basic everyday purchases. A Bloomberg News story published early Wednesday morning, i.e., in plenty of time for the rest of the world's press to notice the story by now, has a similar "wheelbarrows" reference to Venezuela's crisis. But there's more. Venezuela doesn't even the money to pay to keep those wheelbarrows stocked with ever more worthless cash.
The nation outsources the money-printing task to overseas vendors. Now, Nicolas Maduro's cash-starved Bolivarian socialist government doesn't have the funds to pay them to continue printing the mountains of bills the 500 percent-plus hyperinflation-wracked economy needs to even function.
There's even more. The government saw this train wreck coming, and put off the day of reckoning by doing what some foolish, cash-desperate people do when a financial crisis looms. Such individuals often apply for several credit cards and credit lines all at once so they can borrow as much as possible and survive for a time. Bloomberg News's Andrew Rosati reported that Venezuela essentially did the same thing with several of the world's major providers of printed currency.
This is the kind of situation which could force those who hate capitalism to face the kinds of ugly results one sees when socialism on steroids prevails in a country for a decade or more — which likely explains why the AP and Times have avoided mentioning it thus far. But, as has so often been the case in stories about Venezuela as its situation has deterioriated during the past several years, Rosati inexcusably failed to identify the country as socialist.
Here are key paragraphs from Rosati's report:
Venezuela Doesn't Have Enough Money to Pay for Its Money
Billions of new bills in circulation and still more are needed
Rampant inflation means gym bags full of cash for dinner
Venezuela’s epic shortages are nothing new at this point. No diapers or car parts or aspirin -- it’s all been well documented. But now the country is at risk of running out of money itself.
In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported. And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business.
Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.
... The story began last year when the government of President Nicolas Maduro tried to tamp down a growing currency shortfall. Multi-million-dollar orders were placed with a slew of currency makers ahead of December elections and holidays, when Venezuelans throng banks to cash their bonuses.
... Last month, De La Rue, the world’s largest currency maker, sent a letter to the central bank complaining that it was owed $71 million and would inform its shareholders if the money were not forthcoming. The letter was leaked to a Venezuelan news website and confirmed by Bloomberg News.
“It’s an unprecedented case in history that a country with such high inflation cannot get new bills,” said Jose Guerra, an opposition law maker and former director of economic research at the central bank. Late last year, the central bank ordered more than 10 billion bank notes, surpassing the 7.6 billion the U.S. Federal Reserve requested this year for an economy many times the size of Venezuela’s.
... The first signs of the currency shortage date back to 2014 when the government began increasing shipments of bank notes as wallet-busting wads of cash were already needed for simple transactions. Venezuelans spend hours waiting in line for consumer staples, lining up first at banks and cash machines, often carrying the loot in backpacks and gym bags to pay for dinner out.
... Companies are backing away. With its traditional partners now unenthusiastic about taking on new business, the central bank is in negotiations with others ...
... “It’s a very bad sign to see people running around with wheelbarrows full of money to buy a hot dog,” he (Steve Hanke, a professor of applied economics at Johns Hopkins University) said. “Even the cash economy starts breaking down."
There is a very real chance that the ability to use money to conduct even the most basic financial and economic transactions in Venezuela may disappear, plunging the country into a chaotic barter-only situation.
How can the AP, the New York Times, and most of the rest of the establishment press not consider this news?
Cross-posted at BizzyBlog.com.
