Hyperinflation coming soon to Venezuela

Published On November 25, 2013 | By Joseph (Ken) | Economy, Government, World

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Who needs soap operas when daily life around the world has so many stories to tell.

Government-ordered price cuts spawn desperation shopping in Venezuela

“Desperation shopping has been common in Venezuela in recent days, since President Nicolas Maduro‘s move to force shop owners to cut prices on appliances and electronics. Maduro, the handpicked heir to the late leftist leader Hugo Chavez, has become increasingly aggressive — heavy-handed, say many economists — as he struggles to shore up a sinking economy.”

Price controls are used in the early stages of hyperinflation: Hyper Inflation in Zimbabwe

“Because basic goods are in short supply it is easy for market prices to be increased causing a spiral effect of upwardly rising prices.  Ironically, this shortage of supply has been made worse by the imposition of price controls. These fix prices for basic goods. But, because the cost of production has been increasing faster than prices, suppliers have little incentive to supply (at least to official channels). This makes the shortage worse and therefore the likelihood of inflation stronger.

“Mugabe once blamed inflation on ‘Greedy businesses’ demanding price rises. This encouraged him to set up price controls. But, as mentioned these have been ineffective in preventing inflation.

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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