Imagine a $25 gallon of milk. Or a $5,889 flat screen TV. Those are real prices in Venezuela. Many products are too expensive for average consumers. Inflation is widespread, and experts warn that hyperinflation is just around the corner. Venezuela seems headed toward economic chaos.
What’s Inflation?
Inflation is the price increase of goods or services over time. Here’s an example of inflation: Say the items on your grocery list cost $100 last year, but this year the same items cost $110. Your bucks don’t buy what they used to. That’s inflation.
Several market conditions can also cause inflation:
—a decrease in supply (too little of something),
—an increase in demand (everyone wanting something), or
—failing consumer confidence (reduced spending because of worries things may get worse).
Governments can also cause inflation by printing too much money. Sometimes a poor country mints coins and bills without actual wealth to back it up. It’s legal, but people soon realize the money doesn’t have as much value. And some Christians believe that when a government prints more money without value to back it up, it’s a form of breaking the eighth commandment not to steal. They believe the government is stealing the value of the cash people have already worked to earn. (Look up Amos 8:5.)
A little inflation is normal. Economies grow and shrink naturally. Events like droughts, crop failures, bug infestations, or wars change the way people and countries spend money.
What’s Hyperinflation?
The prefix hyper means “above normal.” So hyperinflation is a term for large, uncontrolled price increases.
Last summer two ice cream companies found bacteria in their products. The outbreak forced stores to pull containers from freezers (decrease in supply). People who loved those brands quickly bought the ice cream (increase in demand). People paid more than the ice cream was worth. One online site tried to sell a single pint for $10,000! That’s hyperinflation.
Governments can experience hyperinflation. This usually happens when a poor government tries to solve severe money problems by overproducing bills and coins. People lose confidence in the money, so companies start to collapse. No one wants to do business with a failing government.
What Happened in Venezuela?
Many experts believe Venezuela is nearing hyperinflation. The Venezuelan government spends a lot of money extracting and refining oil. For years, the government has given money from selling its oil to the country’s poor people. Good idea, right?
Sorta—except they didn’t make enough money to help the poor and run the oil business. Solution? Print more bolivars, the country’s official currency. This worked okay while demand for oil was high. They made enough to float along without drowning in debt. But demand fell and so did prices.
Inflation kicked in. The bolivar crumbled.
Today, oil prices keep dropping. Businesses are leaving the country or accepting only U.S. dollars for payment. The Venezuelan government can’t pay its debts. The money for the poor people has dried up too.
In the beginning, printing money might have looked like a good idea. But it has only worsened the country’s poverty.
Now millions of Venezuelans must live with the hyper-painful results.
