Why Not Use the Bolivar?

Shortages in Venezuela are piling up, as a result of the Glorious Revolution's imposition of price controls. It is a lesson that governments apparently need to learn over and over again since at least the time of Roman emperor Diocletian. It is not only a lesson regarding the inevitable end result of price controls – it is also a lesson on a more profound level, namely: There are economic laws, and no government, no matter how powerful, can suspend them.

What is now apparently bringing the pot to boil over in Caracas is that the country has run out of toilet paper. The government's comments on that embarrassing situation are truly hilarious. What is less funny is that as the Caracas stock index runs from record high to record high to ever more extreme levels due to the plunging value of the Bolivar, the economy of Venezuela is on the verge of a total collapse. All the hallmarks of an inflationary crack-up boom in a command economy breathing its last are in evidence (what is booming are the prices of everything the plummeting currency can still be exchanged for).



“First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities — toilet paper. Blaming political opponents for the shortfall, as it does for other shortages, the embattled socialist government says it will import 50 million rolls to boost supplies.

That was little comfort to consumers struggling to find toilet paper on Wednesday. "This is the last straw," said Manuel Fagundes, a shopper hunting for tissue in downtown Caracas. "I'm 71 years old and this is the first time I've seen this."

One supermarket visited by The Associated Press in the capital on Wednesday was out of toilet paper. Another had just received a fresh batch, and it quickly filled up with shoppers as the word spread. "I've been looking for it for two weeks," said Cristina Ramos. "I was told that they had some here and now I'm in line."

Economists say Venezuela's shortages stem from price controls meant to make basic goods available to the poorest parts of society and the government's controls on foreign currency. "State-controlled prices — prices that are set below market-clearing price — always result in shortages. The shortage problem will only get worse, as it did over the years in the Soviet Union," said Steve Hanke, professor of economics at Johns Hopkins University.

President Nicolas Maduro, who was selected by the dying Hugo Chavez to carry on his "Bolivarian revolution," claims that anti-government forces, including the private sector, are causing the shortages in an effort to destabilize the country. The government this week announced it would import 760,000 tons of food and 50 million rolls of toilet paper.

Commerce Minister Alejandro Fleming blamed the shortage of toilet tissue on "excessive demand" built up as a result of "a media campaign that has been generated to disrupt the country."

"The revolution will bring the country the equivalent of 50 million rolls of toilet paper," he was quoted as saying Tuesday by state news agency AVN. "We are going to saturate the market so that our people calm down."

Finance Minister Nelson Merentes said the government was also addressing the lack of foreign currency, which has resulted in the suspension of foreign supplies of raw materials, equipment and spare parts to Venezuelan companies, disrupting their production. "We are making progress … we have to work very hard," Merentes told reporters Wednesday.

Many factories operate at half capacity because the currency controls make it hard for them to pay for imported parts and materials. Business leaders say some companies verge on bankruptcy because they cannot extend lines of credit with foreign suppliers.”


(emphasis added)

Let's see: "The revolution will bring the country the equivalent of 50 million rolls of toilet paper. We are going to saturate the market so that our people calm down."

The 'equivalent'? Does that mean they are planning to raid the central bank in order to provide Venezuela's marble-quiet temples of contemplation with excess Bolivars for the purpose of wiping? If so, then we can only say it's an idea whose time has evidently come. After all, the Bolivar is one of the few things there is anything but a shortage of. What could be better suited for 'saturating the market'?




The Venezuelan Bolivar: black market versus official rate. Now you know why the Caracas Stock index trades at 700,000 points (chart via Steven Hanke) – click to enlarge.




Get ready for the imminent delivery of the “equivalent of 50 million rolls of toilet paper to calm the people down”! Guaranteed to be both tear-proof and soft!





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3 Responses to “Counter-Revolutionary Toilet Paper Shortage”

  • mc:

    Nothing can illustrate the flaws in price fixing more than a forced-shortage of a common cheap necessity. It is probably true that nearly everyone in Venezuela can afford toilet paper, and whatever tiny savings one could reap from a lowered toilet paper price is rapidly lost as the supply dries up. No doubt the black market price of TP in Venezuela is now much higher than before the price fixing began, and almost certainly higher than that of surrounding nations.
    It sounds like a one way ticket to social unrest. If you envy your neighbors wealth, you are likely to resent him or yourself, but if you are the same wealth as your neighbor but have to live at a lower standard because of the machinations of your government, you are likely to resent the system. If I am ever a autocrat, I am keeping my hands off price fixing because that seems to always be the prelude to regime change. Given total power, the urge to try to repeal economic law must be too strong a lure to resist no matter how impossible in practice.

  • zerobs:

    Q: How can you tell you are living in a socialist economy?

    A: The toilet paper has serial numbers.

  • JasonEmery:

    We’ll see the same thing here in the USA. Gasoline consumption here is down to the levels of consumption of the late 90’s, but the price is 3 X the late 90’s price. And of course just about everything else is way up too.

    Chavez’s (and now Maduro’s) brand of socialism is a little different from Bernanke’s, so they are have reached the hyperinflation stage quicker, but like Pater said, there are economic laws that have not yet been repealed.

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