Updated 1 month ago

Venezuela stops publishing money supply data

It's not unusual for people to be a bit more reticent about information that reflects badly upon them than they are about stuff that makes them look good. But we do still normally expect governments to keep pumping out the usual economic data. The US will still publish the trade deficit whatever the success or not (and it'll be not) of Trump's attempts to cut it for example. This is not true of the Bolivarian socialists down in Venezuela. When an economic number becomes embarrassing for them they tend to just stop publishing it:

"Venezuela has stopped publishing money supply data, depriving the public of the best available tool to ascertain soaring inflation in one of the world's worst-performing economies.

The country quit issuing inflation data more than a year ago, but annual consumer price rises are widely seen to be in triple digits, driven by an unraveling socialist system in which many people struggle to obtain meals and medicines.

A money supply indicator known as M2 was up by nearly 180 percent in mid-February from a year earlier, according to the central bank before it halted the release of the weekly data without explanation last month."

We should note that it's not a direct route from that M2 money supply to increasing inflation. Or at least it's not a one to one relationship. Money supply up 180% does not mean that inflation will be 180%. It would be remarkable if it were less than that rate and we'd expect it to be a multiple of it. The point being that there's also the velocity of circulation to consider. That can multiply the inflation rate well above the expansion in the money supply. And we would expect it to as well. For one of the things that happens when inflation really arrives is that people will buy absolutely anything at all immediately. Simply because there's no point in holding money whose value is evaporating as you stand there. So, go buy something, a wheelbarrow, a coat, anything at all, but something which might retain value. That is, the velocity of circulation increases, meaning the multiplier between money supply increases and inflation increases.

I'd say myself that Venezuela is now well on the road to true hyperinflation as happened in Zimbabwe.

As to the why it's just because the Bolivarian socialists are economic incompetents. They noted that the government can buy things with money. Also that the government makes the money. So, if the government wants to buy something just make more money to buy it. The problem here being that this is called the monetisation of spending and it leads, inevitably, to high inflation. It might be in the second chapter of the standard textbooks on monetary policy but not much later in the lessons than that.

But then the Chavistas really don't know their economics. They had one economy minister who was adamant that inflation was nothing to do with the money supply at all, it was just capitalists being greedy. Running a country with that level of ignorance just isn't going to work out well.