Nationalize agriculture? Check.
Start government-enforced rationing when the food supply dries up? Check.
Seal the border when people try to flee to buy food elsewhere? Check.
The next step, and usually one of the last before total collapse, is runaway inflation. That’s what we’re starting to see in Venezuela.
Rapid inflation, called hyperinflation by economists when it gets really bad, is one of the deadliest poisons for any economy. The spiral is usually triggered when a government prints too much money to pay its debts, and prices start to rise. Once the people see this happening, they realize that their money will be worth less tomorrow than it is today. Every day they hold currency will make them poorer, so people spend as fast as they can. This is turn causes prices to rise still faster, which exacerbates the spending, and so on and so on until the currency is worthless.
Without a functioning currency, economic transactions cannot easily take place, and the economy collapses completely. It’s happened in a large number of socialist states, including Weimar Germany, Hungary, North Korea, and the Soviet Union.
In the worst examples, inflation rates can be astoundingly high. In Zimbabwe, perhaps the most dramatic example in history, monthly inflation topped out at 3.5 million percent. To make that number more comprehensible, imagine going out to McDonald’s and buying an item from the dollar menu. Now imagine that you go back tomorrow, and find that the same item costs $100,000. That’s how bad it was. It was only a couple of years ago when Zimbabwe was able to reset its currency, revaluing at a rate of 35 quadrillion Zimbabwean dollars for one U.S. dollar.
It’s not quite that bad in Venezuela yet, but we are seeing only the beginnings of the inflation death spiral. The government recently issued new denominations of 20,000 bolivars (the local currency) each worth about $6 U.S. Economists believe that the country exceeded 100 percent inflation in 2016 and are expecting 1,600 percent in 2017. Protesters have taken to the streets, setting fire to 100 bolivar notes in protest of their worthlessness.
Without a functioning currency, economic transactions cannot easily take place, and the economy collapses completely.
Unsound money, runaway printing presses, deficit spending, and government mismanagement of major national industries have all conspired to destroy Venezuela, and it’s heartbreaking to watch the country fall apart, leaving millions of innocent people without food or medical care. But perhaps more upsetting still is our own country’s refusal to learn the lessons of the socialism, even when we can see its destructive power with our own eyes.
The Federal Reserve continues to get away with irresponsible and opaque currency manipulation, pumping large amounts of cash into the economy while concealing its operations from Congress and the American people. The national debt creeps ever closer to $20 trillion, and legislative efforts to rein in spending, reform entitlements, or audit the Federal Reserve have so far come to naught. Meanwhile, an admitted socialist like Sen. Bernie Sanders, I-Vt. (F, 17%) was regarded by many as a fit choice for the presidency.
It may be unpleasant, but we should all force ourselves to look good and hard at Venezuela and see the horrors that socialism has wrought. And then we’d better do whatever we can to stop it happening here.
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Logan Albright is a researcher for Conservative Review and Director of Research for Free the People. You can follow him on Twitter @loganalbright73.