By Mr. Curmudgeon:
Venezuelan strongman Hugo Chavez is dead of cancer. The socialist leader ruled his nation uninterrupted for 14 years – three years longer than FDR served as U.S. President. A CNN headline attempted to connect Chavez’s economic accomplishments with those of a certain community organizer in America: “Chavez leaves Venezuelan economy more equal, less stable.”
CNN described Chavez as “the man who built his powerful persona on a populist platform of sharing Venezuela’s vast oil wealth with the poor and disenfranchised … [leaving] his nation with a greater distribution of cash to the poor. But his death also leaves an economy in tatters, some analyst’s say, as the country had to step in and massively devalue its currency 30% to the U.S. dollar last month.”
The Reuters News Service explained Chavez’s decision to devalue Venezuela’s currency – the bolivar, “A spending spree that almost tripled the fiscal deficit last year helped Chavez … win a third six-year term. The devaluation can help narrow the budget deficit by increasing the amount of bolivars the government receives from oil exports. Yet the move also threatens to accelerate annual inflation that reached 22 percent in January.”
Venezuela’s “more equal” economic model redistributes the nation’s wealth … then devalues the cash it gives the masses to help diminish the government’s budget deficit. Gee, does that sound a tad familiar?
Recently, the Federal Reserve announced the specifics of its third round of quantitative easing: it would print 40 billion dollars a month to purchase mortgage-backed securities from Freddie Mac and Fannie Mae, freeing the mortgage giants to buy home mortgages from the banks. The Fed would print an additional 45 billion dollars a month to purchase 10-year U.S. Treasuries to flood the banks with cheap money. The Fed admitted the move would increase price levels (inflation) by 2% a year – equaling a 50% devaluation of the dollar over the next 20 years.
Forbes magazine’s Charles Kadlec noted, “It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today.”
Cancer may have taken the life of Hugo Chavez, but the cancer of redistributive economics continues to eat at the living standards of the citizens of his poor, oil-rich nation – and in “hope and change” America.