Venezuelan Hyperinflation Explodes, Soaring Over 440,000 Percent

This, IMO, is what economic bubbles are predicated upon. It's hard to build value in our economy as more people are pushed to the side, so let's give away home loans and tether people in with good feelings, based upon poor reasoning!

It started with an arbitrary collective belief; we all just want nuclear family type lives in these all-services included by nearby strip mall, burb communities. Which is ... patently untrue. But people need a home so if that's where the action is!

And some quaint or wonk starts to see through this with data, and invents credit default swaps.

It's a crappy example; I'm tired, no coffee, and this is HN, not some economic summit, the kernel of truth I believe is there is this: Bubbles are the result of pushing social norms into the purview of utilitarian decision making for the species as a whole.

It wasn't a fleeting belief that caused Venezuela's hyperinflation, it was dutch disease wiping out most of their industry followed by oil prices plunging while demand for real goods and services remained static.

The level of spending outstripped the economy's ability to deliver, because the output of that economy is largely oil and oil suddenly wasn't worth very much any more (for reasons that had very little to do with venezuela).

Venezuela would be fucked for this reason with or without hyperinflation. Hyperinflation is simply a side effect of what they're going through. Gold-link their currency and people would be in just as much poverty thanks to their main export tanking - quite possibly even more.

(An interesting lesson to take from the incredible energy consumption of Bitcoin is just how much trust is worth)

You may not need to trust that the central bank won't fire up its printing press, true. But you're absolutely trusting that someone somewhere will want to exchange your bitcoins for something other than bitcoins, and there's no inherent reason why they would.

I trust USD issuing, the federal reserve, and American military for the most part (so does wall St, EU, Japan, and China).

The USD derives its value from an extraordinarily productive and innovative economy, that has led the world for a century, and has been the world's largest economy since the 19th century. The US economy has been highly functioning, and remarkably consistent on an averaged out basis, for approaching 200 years, more so than any other major economy. Venezuela's problem is precisely that their economy ceased to function properly, and its currency followed in line.

The US military exists solely because of that successful economy. One must inherently go before the other. US wealth and economic primacy did not originate from military strength, it originated overwhelmingly from trade, commodities, industry, invention during the 19th century. The US military was barely a third rate power when the US economy became the world's largest circa ~1890.

If military power played an outsized role in determining economic outcomes today, North Korea would be rich. Saddam's Iraq would have been incredibly affluent. Soviet Russia would have ruled the world economically. And Canada today would be bankrupt, as would Norway, Finland and Sweden. Japan would have wilted after WW2, instead they witnessed one of the greatest economic recoveries and booms in world history, almost entirely sans military; their boom wasn't because of Japan's ability to project military power. The US economy would not wilt if the US spent $450 billion (~2.3% of GDP) instead of $700 billion (~3.4% of GDP) on its military - the economy would benefit in fact, by redirecting resources to superior productive uses.

> What happens to the dollar when public consensus, trust and collective belief is weakened?

That has been a fantasy premise for about 3/4 of a century now. The Yen was going to crush the dollar. The Euro was going to overtake the dollar. The Yuan is going to crush the dollar. Meanwhile, dollar dominance is as strong as it has ever been. The US economy chugs forward, adding $600 to $800 billion a year in new economic output, still one of the core leaders in innovation and productivity. Venezuela's failure was one of State corruption and oppression, destroying any semblence of a functioning economic system, it's not because they needed a bit more military might to project with.

Crypto actually proves that money doesn't need to be backed by anything. It simply achieves value by being a) useful for transactions and b) scarce. The US dollar's scarcity is carefully handled by the Federal Reserve which is why it has stable value. In Venezuela, the government simply prints money to spend without a thought to managing scarcity, and hyperinflation is the natural result. Collective belief is important, yes, but it's simply a belief about the future scarcity of the currency.

This is a funny way of looking at the problem because it frames money as if it were some sort of robot that did things by itself.

https://www.npr.org/sections/money/2010/10/04/130329523/how-...

Putting someone economically competent in charge?

...how do you think Venezuela got here?

They also encourage "invasions" of unoccupied properties.

Furthermore, credit is a joke now. The average venezuelan credit card now issues somewhere around $5 of credit. Buying real estate through credit is similarly ridiculous.

(Source: I live here)

I remember back in like 2011 Kirchner did this in Argentina while I was living there. There was out of control inflation and capital controls. The government also covered their ear and said "lalalalala I don't care what the world markets say, our currency is worth $x.)

If you were traveling, you could get foreign currency, but you had to apply for it, prove you were traveling, and then accept that the government would allot how much they thought you needed on your trip. I had a friend get $75 per day for their trip to the states. This creates the black market (or in Argentina, the "dolar blue") where the government said that the exchange was 5:1, but economics and the black market said 15:1 (at one point).

Moral of the story - you can not just ignore basic economic principles and dictate the value of your currency. Focus on building a strong and diverse economy and promoting a free market.

People still do it privately, but you can't openly accept them in your business anywhere.

Last year, oil has been $30 to $50 per barrel. `nuff said. Its an issue of poor governance. Venezuela was heavily dependent on high-priced oil to keep their finances together, and it all collapsed as oil prices dropped.

And corruption probably, although that might not be unrelated.