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[Culise]

But those food inflation figures are in their own fiat currency. Since they can print that, looking at values in raw US dollars is actually more meaningful for the overall health of an economy. e.g. if you look at minimum wage, it's kept pace with inflation, while the unemployment rate is 7.3%, which is less than the USA during their own recent crisis.
http://www.tradingeconomics.com/venezuela/minimum-wages
http://www.tradingeconomics.com/venezuela/unemployment-rate

The main source of the inflation is actually artificial and external. It's because of the oil money, which is dependent on global oil prices. This has happened to Venezuela before.

Venezuela gets a constant stream of US dollars into the economy. When the oil price fell, less dollars come in, making dollars more scarce, pushing up their price. And the GFC created a very large sudden drop in the oil price. People then start seeing an opportunity and start hoarding dollars to make a profit. The more that gets hoarded, the faster the price goes up (artificial scarcity), and at this point the process accelerates itself without needing an external engine. The problem is that to get off that train, you need to either flood the market with US dollars to stop people hoarding it (too expensive), print more money to keep the real liquidity the same (easy but puts the problem off), or restrict the money supply (crashes the economy).

Yes, they are in a fiat currency, but I'm not seeing a three-fold increase of minimum wage in 2015 (the most recent dates of those inflation figures) in your charts.  Without actual numbers for 2016 food- and CPI-index inflation that you would find acceptable (since apparently my numbers and sources for 2016 are not acceptable, given your complete lack of comment on them), I'm not sure I can accept your assertion that minimum wage has kept pace with inflation, rather than being well-behind it. 

[Reelya]

Let's check that with the hard numbers. I see reports that inflation in 2014 was ~63% and ~180% by the end of 2015.

If you look at minimum wage of jan 2014, it was 4667, that rose to 8097 by Jan 2015, and 24897 in jan 2016. 2014-2015 is therefore an increase of 73% and 2015-2016 is almost 200%.

Both wage increases exactly match the reported inflation rates for those years, so there's no "lagging" in any of the published data we can match up, so saying it's going to lag next year is speculative. They've already increased the minimum wage again by about a factor of 3.5, which matches the current years inflation estimates, so that sort of kills the idea of lagging at all, and it also kills the idea that poor people have less real money to spend, since minimum incomes have maintained the same real-adjusted level since the boom was on in 2014.

[Culise]

Indeed, I did misread the chart slightly; I mistook the January 2016 data for being later in that year. 

The other issue, which I avoided bringing up until now since you seem to ignore it every time I indicate that the numbers given are official Venezuelan figures given by their government rather than external assessments of Venezuela, is actually simple: the lie is elsewhere.  Specifically, prices for foods and consumer goods are fixed by the state, but supply is not.  This is the major issue that has resulted in the growth of a significant black market within Venezuela; there isn't enough food to sell, and with low fixed prices, people are seeing more profit in selling it on the unofficial market not seen in the data presented.  Prices don't matter if there is no food on the shelves to buy.  Heck, even Venezuela itself doesn't pretend there is no crisis; they used the crisis as pretext to grant Maduro sweeping powers in order to solve it.

[Reelya]

there isn't enough food to sell

Well that's the thing. This is a misreading of the problem. Consumption of all categories of food vastly increased during the Chavez years. Supply shortages are not the cause of this.

The price controls and exchange rate mechanisms are the cause of the whole problem. They already lifted price controls in some regions, and people there are reporting the stores instantly refilled with products.

http://www.wsj.com/articles/venezuela-backs-away-from-price-controls-as-citizens-go-hungry-1476475368

“Before there was nothing; now there’s everything,” said Jesús Barrios, 36, as he shopped in Maracaibo, the state capital of Zulia.

What caused shortages were misguided attempts to cap inflation, when the inflation is largely caused by the hoarding of US dollars and inefficient currency exchanges. Price caps cause the shop goods to be too cheap, so people hoard those too, or divert them straight to the black market.

[Culise]

Is there a citation for that?  I'm curious, since while it does match the expected result I would see for a cessation of price controls (that is, that the lifting of said controls would result in a restoration of supply as food shifts back from the black market to legal markets), I haven't actually heard of Venezuela actually doing such a thing anywhere.  I'd also be curious to see the effect on prices that it actually had. 

EDIT: Thank you for the citation; reading now.

[Reelya]

Well it's the Wall Street Journal, which is hardly a pro-Chavez outlet.

One interesting thing is that if you look at publications aimed at investors they have a very different take on Venezuela's economy. Not "wine and roses" still, but a lot less pessimistic and more informative / level-headed. e.g.:

http://fortune.com/2014/07/22/how-to-fix-venezuelas-toubled-exchange-rate/

[Culise]

Well it's the Wall Street Journal, which is hardly a pro-Chavez outlet.

Yes, but that's not why I was asking; there was no link at all when I responded to your post.  I've just edited my post accordingly to acknowledge its existence.

EDIT: OK, access obtained. Prices have jumped significantly compared to state market prices, as I would also have expected - rice from $0.12 to $1.80; sugar from $0.38 to $1.80, and so forth.  The article is a bit light on details on whether people can afford these price jumps; the reason a lot of people didn't go to the black market in the first place was because they couldn't afford the prices.  The article backs that up, indicating that a bag of $3.50 sugar consumes a quarter of the buyer's monthly wage and that professionals make less than $100 USD monthly.  More pertinent than the elimination on price controls in itself is also that the difference in food supply is being made up for by imports from neighboring countries, which the increased prices makes practical.  I also see that it's purely a local initiative by governors and regional military officials, and that official legislation from Maduro still makes it technically illegal.  That said, it seems that if he is indeed involving himself directly in expanding the program, that may soon change. 

The Fortune article does indeed accord well with my own thoughts on Venezuela, actually.  It only really got into trouble in the last couple two-three years, and that largely due to its heavy dependence on oil revenues (some 95% of government revenues at the time, if I recall properly) in a time of dropping oil prices.  Currency pegging (the fixing of exchange rates) in itself is not a tremendous deal-breaker; it can result in constrictions in currency flow, but that's hardly the major issue facing Venezuela right now.  Indeed, nations such as China and Montenegro do not do poorly by pegging their currencies to, respectively, the dollar and Euro (well, Montenegro actually uses the Euro directly in spite of EU complaints, but let's set that aside and treat it as a 1:1 fixed-ratio).  A rationalization of the exchange rates, if Maduro actually follows through and it's not just speculation by Fortune, and a resumption of foreign specialization could assist.  One major issue the Fortune article doesn't mention is the drop in absolute oil production by Venezuela, though, that I linked in a previous article.  That issue means that Venezuela will be a bit slower in recovering its previous share, whether you tie it to a transient phenomenon caused by the present economic situation or to the loss in expertise caused by the 2007 expropriation of two major companies during the restructuring of foreign oil holdings. 

[Reelya]

That fortune article i posted is definitely worth reading.

Key point: almost all of the inflation has been in imported goods. Now, imports are falling rapidly - which has been labeled a doom and gloom story, predictably elsewhere. But it's good for the balance of trade. And improving the balance of trade means less dollars leaving the economy, which could ease things off.

BTW: I'd be skeptical about any particularly "OMG" predictions from the IMF. I've seen them do it a number of times. for example, back in 2008 they predicted hyperinflation from 2009-2012 for Venezuela, but inflation actually slumped to an all-time low in that period, the exact opposite of what the IMF report said would happen. Then I noticed something peculiar. They had inflation for Venezuela rounded off to exactly e.g. "36.50"% , and increasing by the same whole-number amount per year (so always something.5%, and always the exact same yearly increase). Whereas every other country in the report had figures calculated to 2 decimal places. Basically, it looked like they were just making up bullshit figures for Venezuela rather than doing any actual analysis. That's why I trust the World Bank and other institutions and not the IMF, they have produced wildly inaccurate and clearly fake "research" in the past, for political purposes.

EDIT: Btw here's the Cato Institute, claiming the IMF's Venezuela inflation figures are bullshit:
https://www.cato.org/blog/imfs-feeding-press-unreliable-inflation-figures-venezuela

I have been saving bits of misreported statistical string about Venezuela’s inflation over the past couple of months, and it has become a giant ball. The bits all come from the International Monetary Fund (IMF)

The IMF’s World Economic Outlook (April 2016) forecasts inflation to rise to 720 percent by the end of 2016. This number, which is nothing more than a guestimate, is now carved in stone. The media, from Bloomberg, the New York Times, the Washington Post, the Wall Street Journal, to countless other ostensibly credible sources, repeats that guestimate ad nauseam.

Instead of reporting pie-in-the-sky estimates for future inflation rates in Venezuela, the press should stop worshiping at the IMF’s altar and, instead, stick to reporting current inflation rate. These are updated regularly and are available from the Johns Hopkins-Cato Institute Troubled Currencies Project. The current implied annual inflation rate is 140 percent; while it is currently the world’s highest, it is well below the IMF’s oft-reported forecast of 720 percent.

Short version: IMF are lying liars who make up bullshit figures. Wait for next years inflation figures, this is the Cato Institutes data:


That figure is based on the free-market rate for US dollars, which is a very good estimate of true inflation since dollars are stable, and almost all Venezuelan imports are priced against US dollars. So rather than escalating to 1600% or 2000% or somesuch, the rates of increase has been slowing for the last 18 months. So the true rate, according to anyone keeping track has been dropping, while the IMF estimates just jump higher and higher to nice scary-sounding round numbers. Just like they did in 2008.

[Culise]

Ah, thanks for the link to the Cato Institute as well.  I had actually seen that article, but I didn't actually click to read it because the Cato Institute is...ah, rather infamous for their right-wing libertarian political tendencies; I did not expect anything resembling a balanced statement from them.  That is a much more even-handed position than I expected, given their past support to the Venezuelan opposition.

[Reelya]

It's nice when a source like that admits they got it wrong, then push the correct info, even if it contradicts their political position. e.g. the same author from Cato was sounding wardrums about Venezuela inflation back in 2015 when it was rising, but he changed his tune when it started falling and is calling out other institutions to admit that it's falling, rather than push a clearly fabricated narrative. This is the most recent article i can find about it from Cato:

https://www.cato.org/blog/venezuelas-inflation-wall-street-journals-reportage-way

International Monetary Fund’s (IMF) October 2016 World Economic Outlook (WEO), which contains an estimate for Venezuela’s annual inflation. This report projects Venezuela’s annual inflation to average 475.8 percent for 2016, a far cry from my current estimate of 55 percent.

So, prices rose by 55% in Venezuela in 2016 (for reference the average inflation in the decade before Chavez was 52% per year, so 2016 was the exact average of what the opposition delivered), yet media are still pushing various estimates for 2016-2017 ranging from 500%, 720%, 1600% and 2000%. All of which seem to be based on unsubstantiated statements from a single organization: the IMF.

IMF's 2016 prediction wasn't just wrong, it was out by a full order of magnitude (10x) and headed in the wrong direction. This is what I'm talking about with anti-Venezuela economic hype. It's a repeated pattern where merely checking reputable data sources contradicts most of what the corporate media is telling you. For example, only yesterday IMF was telling the media it was headed to 2000% next year, despite that being 40 times higher than the actual inflation right now, which is falling:
http://www.reuters.com/article/us-venezuela-economy-idUSKBN13T0MJ

[Sergius]

Also, heads up, one of the 5 posts following this one, I will find extremely offensive. Which one, will be decided at random.

This one!

This post is 100% guaranteed to be more offensive to people who use the username Sergius.

Hahaha! I can play the odds!

Using my own random algorithm in my brain, I've selected at random this post and now I'm triggered. Also technically I'm offended at 3 posts instead of one, so great job!

And now back to your regularly scheduled program...

[Egan_BW]

*Egan_BW gains one triggering point!

[Loud Whispers]

roll for san loss

[Egan_BW]

I gain 10 insanity points, and a new psychosis. Would you mind rolling on the table, LW?

[Loud Whispers]

I gain 10 insanity points, and a new psychosis. Would you mind rolling on the table, LW?

* Egan_BW babbles in incoherent rabid speech

* Egan_BW has gone stark raving mad!