The Liberty Papers

And the economists in the room smack their foreheads and let out a resounding “D’UH!”*

Yep, what a surprise:

At the Coche wholesale food market in southwestern Caracas, business is topsy-turvy: Vendors say they have nothing to sell.

“Our suppliers are saying, `No, we had an accident at the plant,'” said Jose Branco, manager of a dairy store in Coche, the Venezuelan capital’s largest open market. “So we have to limit the amount of product we sell to each customer.”

The tale is being repeated throughout this country of 26 million. The reason: Inflation is now so high that the government has put price controls on basic goods such as chicken, beef and sugar, leaving vendors in search of an escape hatch.

…

The inflation rate in Venezuela has now hit 20.4 percent, the highest in the Western Hemisphere, amid the widespread changes instituted by President Hugo Chavez.

The retail sellers understand what’s going on. And they know they’re stuck between a rock and a hard place:

At the Coche wholesale market, meat seller Varela says the prices have left him in a quandary.

“I could sell the meat secretly, because there’s demand, or I could not sell because the price isn’t any good, or I could change professions,” he said caustically.

So he can break the law, or he can go out of business. Either shows the folly of price controls.

As any economist will tell you, when you remove the profit margin, done here to the point where often a business will lose money by selling at the approved prices, you see the end of supply:

Wilson Rangel, who runs a meatpacking plant in the Baruta municipality along the southern edge of Caracas, said he used to get 120 cows a week. But last week, he said, he received 20 because it’s not profitable to slaughter cows at such low prices.

“There are five slaughterhouses around here, but the cows aren’t coming,” he said.

Cheese, sugar and chicken supplies have also dwindled. Blocks of cheese can cost distributors more than double what they sell it for, they said; sugar supplies have slowed.

Now remember, with high oil prices, Chavez and Venezuela are flush with money. So why can’t the people of Venezuela get a hold of things like beef, chicken, cheese, and sugar? Maybe some of the Chavez apologists can explain this to me?

Of course, the Venezuelan government has a “plan” to stop the inflation that has hit such high levels. But Venezuelan financial analysts think they’re offering empty promises.

Annual inflation reached 20.4 percent in Venezuela in February, as soaring government spending pumped cash into the economy and exchange controls trapped money in the system.

“Prices are going to fall a little bit in March because they cut the value-added tax,” Miguel Octavio, head of research at BBO Financial Services in Caracas, said in a telephone interview. “But that doesn’t mean inflation will slow for long. It’s temporary, it’s a one shot deal.”

…

Octavio, who called the central bank’s 12 percent target “unbelievable” given the 3.7 percent inflation the country racked up in the first two months of the year, doubted the government’s measures.

“These things attack the effects of inflation, not the origin of the problem,” he said. “Unless the government announces it’s going to start spending less tomorrow, I don’t know what they’re talking about.”

Hmm… The answer is to stop printing money to cover your overspending… I only wish our own politicians would figure that out.
» Read more