Venezuela's public finances are unravelling, with oil prices at $40 a barrel, while the national budget is calculated at $60 a barrel. Inflation is running at over 30 per cent, yet with the new measures Mr Chavez is seeking to ensure that his core support, the poor, can still fill their shopping baskets with food.
"If any industry wants to ride roughshod over the consumers, with a view to getting better dividends, we are going to act," said Carlos Osorio, the national superintendent of silos and storage. "For the government, access to food is a matter of national security."
Production quotas and prices have now been set for cooking oil, white rice, sugar, coffee, flour, margarine, pasta, cheeses and tomato sauce.
Fixing prices, rationing, hyperinflation -- you may say, "Well, that can't happen here in America," but how do you know?
Nancy Pelosi, Harry Reid and Barack Obama are spending borrowed money at an unprecedented rate. This sudden, massive addition to the deficit amounts to a huge additional demand for credit in a financial situation where capital was already in short supply. There are several possible outcomes of such an action, and none of them are good. The one certainty is that the shortage of capital for business investment will be exacerbated, and the consequences of that alone is enough to ensure that recovery won't happen.
However, the spiral into stagflation is almost equally certain, because with tax revenues plummeting as a result of the stagnating economy, the only way to pay interest on the debt will be to turn on the printing presses, producing the trademark inflation of unsound fiscal policy. That, in turn, will drive capital away from the dollar -- oh, there are lots and lots of ripple effects when this kind of snowball gets rolling downhill.
You cannot have a strong economy without a stable currency. You cannot have a strong economy without capital investment. The Obama administration's policies have already begun driving capital investment out of the market -- which is the Wall Street plunge is represents -- and the currency has already been destabilized, we just haven't begun seeing the inflationary effects yet. You wait, though -- it's coming.
And notice how Chavez responds to his country's financial crisis -- caused by government intervention -- with more intervention. A classic socialist response to economic woe:
Hmmm. Our programs of coercive expropriation don't seem to be working. We must apply more coercion!They never learn.