Why Are People In Venezuela Starving (Hyperinflation Explained)?

Venezuela’s economic crisis has made headlines all over the world for
the past few years. Hunger is widespread there. Unable to afford the small amount of food
available in supermarkets, many Venezuelans have resorted to eating garbage to survive. Even zoo animals in Venezuela are starving
according to a report by the Daily Mail, and people have been breaking into zoos to eat
them. A recent survey found that the “food crisis
has also created an education crisis, as more than 1 million children no longer attend school,
mostly due to hunger and a lack of public services.” Moises Rendon and Mark L. Schneider of the
Center for Strategic & International Studies provide a bleak assessment of Venezuela’s
current situation, saying the country is suffering “an unprecedented man-made humanitarian
crisis.” They say Venezuela resembles “a country
at war” and notes some of its major social problems, including “extreme food and medicine
shortages,” “rampant crimes in every city,” “constant electric blackouts,” and “looting
and repression.” When you see and hear these stories, you can’t
help but wonder what went wrong. How could a country that was once one of the
most affluent countries in South America reach such a sorry state? One source of the misery in Venezuela is its
out-of-control inflation, which we will examine in this episode of The Infographics Show,
“Venezuelan Hyperinflation Explained.” Before we discuss Venezuelan hyperinflation,
let’s begin with a discussion of what hyperinflation is in general. Simply put, hyperinflation is very high, rapid,
and continuous inflation. In a hyperinflation situation, the prices
of goods and services in an economy quickly rise to a level so high that they become difficult
to afford for most people. While experts cannot agree what that exact
level is, economist Michael K. Salemi states that hyperinflation is generally used to “describe
episodes when the monthly inflation rate is greater than 50 percent.” He gives the example that “at a monthly
rate of 50 percent, an item that cost $1 on January 1 would cost $130 on January 1 of
the following year.” The hyperinflation in Venezuela is significantly
more than the rate cited by Salemi. According to an August 2018 BBC article, prices
of goods “have been doubling every 26 days on average,” and the annual inflation rate
“reached 83,000% in July.” One source reported that a cup of coffee cost
450 bolivars in Venezuela less than two years ago. Earlier this year, it cost a shocking 2.5
million bolivars. But wildly high prices are not the only serious
effect of hyperinflation. As a Guardian article notes, the “problem
comes when the supply of paper money in an economy outstrips demand for goods and services,
causing the value of the currency to fall.” Following in the footsteps of Zimbabwe, Venezuela
turned to increasing its money supply because it had no other means to pay its debts as
we shall see later. But ultimately Venezuela ended up in its current
hyperinflation situation due to a combination of several factors: Number 3: High Government Spending President Hugo Chavez ran Venezuela from 1999
until his death in 2013. Chavez and his administration implemented
social programs called the Bolivarian Missions that were supposed to improve living conditions
for the poor by redistributing wealth and reforming the way land was used. There was also an attempt to promote economic
democratization through the establishment of worker-owned cooperatives. Data from the Center for Economic and Policy
Research (CEPR) indicates that Chavez achieved a high degree of success with these programs. He was able to reduce unemployment from 14.5
percent in 1999 to 7.8 percent in 2011. The poverty rate also dropped from 50 percent
in 1999 to 31.9 percent in 2011, while extreme poverty dropped from 19.9 to 8.6 percent in
2011. Unfortunately, this prosperity came at a high
financial cost. The social programs were good for the people
but bad for the economy. Chavez spent more money on these social programs
than the country could really afford. According to CNBC, public spending accounted
for more than 50 percent of Venezuela’s GDP in 2012. He also borrowed money from other countries
to keep the programs going. By 2013, Venezuela’s foreign debt climbed
to a little over $106 billion. According to one source, Chavez had been warned
about the growing fiscal deficit as early as 2002, but he didn’t pay attention to
the warnings. For Chavez, these social programs were a way
to win over the people. Maintaining his popularity with the people
was important to him because it was a way for him to maintain his power. An article in The Economist states that through
the Bolivarian Missions and the “flood of oil money” he was able to “rebuff a referendum
in 2004 that would have removed him from office.” To make matters worse, Chavez and his administration
failed to save money for future economic crises, which quickly emerged due to an event that
happened in 2014. Number 2: Low Oil Prices Venezuela’s economy is mainly based on selling
only one commodity: oil. Venezuela has the largest oil reserves in
the world. The World Atlas states that it has 300,878
billion barrels of proven reserves. According to Oil Sands Magazine, “most of
Venezuela’s proved oil reserves are located in the Orinoco Petroleum Belt,” which is
located on the eastern Orinoco River Basin. The Orinoco Belt is approximately 370 miles
(600 km) in length and has an area of about 21,357 sq. mi. (55,314 sq. km.). It is estimated that the area contains about
1.2 trillion barrels of oil. Another oil-rich area in the country is the
area near Lake Maracaibo, which is actually a brackish tidal bay that is located near
the Caribbean Sea. One source estimates that the “lake’s
basin supplies about two-thirds of the total Venezuelan output.” With the discovery of oil in Venezuela in
the early 1900s, the country relied more and more on it as a revenue source. Today, Venezuela “derives over 50% of its
GDP from petroleum exports which represents about 95% of total exports” according to
a Forbes article. This meant that when oil prices were high,
life was good. For instance, Venezuelans enjoyed a high standard
of living when oil prices spiked in the 1960s and 1970s. An online magazine called Foreignpolicy.com
describes how “Venezuela was considered rich in the early 1960s: It produced more
than 10 percent of the world’s crude and had a per capita GDP many times bigger than
that of its neighbors Brazil and Colombia — and not far behind that of the United
States.” Conversely, when oil prices went low, life
was bad, and this is what happened to Venezuela starting in 2014. That year, the price of oil dropped sharply
from $100 to about $70 a barrel, and the price decline continued “to a low of around $33
dollars a barrel in early 2016” according to the American Institute for Economic Research
(AIER). The slump in oil prices sent Venezuela into
an economic downward spiral. Lower oil prices brought with it a reduction
of Venezuela’s foreign reserves, and AIER states that this in turn reduced the government’s
ability to “subsidize basic goods and services for its people.” Number 1: Continuing Economic Mismanagement The Venezuelan government, now under the control
of Chavez’s successor Nicolas Maduro, dealt with the budget gap the way other countries
in a similar situation did in the past when they had no other way to pay their debts – print
money. AIER notes that printing money set the wheels
in motion for hyperinflation: “The budget shortfall was closed by printing money. Hyperinflation took hold, destroying the savings
of individuals and making productive business investment nearly impossible.” A comment made by a nurse named Maigualida
Oronoz helps you understand what living with hyperinflation is like for the average citizen
living in Venezuela. In an interview with the Guardian, she says,
“We are millionaires, but we are poor . . . We can just about eat, but if some health emergency
happens we’ll die because the prices of medicines are sky-high and rise every day.” According to economist Theodore Cangero, hyperinflation
continues under Maduro because “he is continuing the disastrous economic policies of the late
President Chávez.” Earlier this year, Reuters reported that Maduro
seemed to be in denial about Venezuela’s hyperinflation. In an interview with Reuters, Rodrigo Cabeza,
Hugo Chavez’s former finance minister, said that “Venezuelan President Nicolas Maduro
has refused to recognize the country’s hyperinflationary problem and has no plan to address it.” Now it seems that he has come up with course
of action. President Maduro has decided to play games
with the value of Venezuela’s dying bolivar currency in a desperate effort to give the
appearance that hyperinflation is disappearing from his country. The Peterson Institute for International Economics
(PIIE) outlines his current plans for the bolivar: “His proposed monetary reform has
three pillars: (1) slash five zeros from prices—so a product that costs 100,000 bolívares would
now cost 1 bolívar—and give the currency a different name, the “sovereign bolívar”;
(2) devalue the currency by 95 percent; and (3) peg the bolívar to the petro, Venezuela’s
digital currency backed by oil introduced in February 2018.” He then plans to combine these monetary reforms
with yet another round of questionable government interventions. CNBC reports that he will “hike the minimum
wage by over 3,000 percent, boost the corporate tax rate, and increase highly-subsidized gas
prices in coming weeks.” PIIE and other economic experts are skeptical
that these measures will work to reduce hyperinflation because they don’t address the underlying
problems that are causing the hyperinflation in the first place. PIIE argues that “there is no substantial
fiscal reform in the works, no attempt to rebuild dismantled institutions, and no announced
shifts in economic policymaking.” PIIE even forecasts that Venezuela “looks
set to beat Zimbabwe, a country that managed to have an annualized inflation rate of 79
billion percent in November 2008.” The economists interviewed by CNBC also have
a dire outlook for Maduro’s monetary plan. They think it will make the hyperinflation
in Venezuela even worse: “Amid this aggressive devaluation and monetary
expansions due to salaries and bonuses, we are expecting a much more aggressive stage
of hyperinflation. All the more so in a context where the elimination
of excessive money printing is not credible. The worst of all worlds, said Venezuelan economist
Asdrubal Oliveros of consultancy Ecoanalitica. A large number of Venezuelans have decided
that they no longer want to live in this world where all of the social gains of low poverty
and low unemployment recklessly bought by Hugo Chavez have been wiped out by incompetent
leadership, poor financial planning, and widespread corruption. They are fleeing from Venezuela in droves. According to the Guardian, “nearly two million
people have fled Venezuela’s economic and political crisis since 2015.” The exodus will continue unless some drastic
monetary and political changes are made. How long do you think Venezuela’s hyperinflation
will last? What do you think needs to be done to fix
it? Let us know in the comments! Also, be sure to check out our other video
called Why You Will Soon Be Eating Crickets and Other Insects! Thanks for watching, and, as always, don’t
forget to like, share, and subscribe. See you next time! v

Maurice Vega

100 Responses

  1. For all Venezuelans who live(d) there – how bad is it on a day to day basis? Do you have faith that there will be a change or is exodus your only rescue?

  2. Venezuela should really diversify its economy away from oil. They really should focus only on the basics human needs (water, food, shelter, clothes), …etc, for domestic comsumptions only, forget about all exports!

    Their socialist communal efforts is admirable, alas their corrupt & greedy leaders stand in the way (too greedy & power hungry). to make the saving feasible. Their political leaders needs to step down NOW.
    Maybe even go government-less & entirely money-less and rely on bartering for daily goods.

  3. America is a bully .America is responsible for this. Stop india born to buy oil from them.
    America destroying every country one by one .

  4. Stop making jokes about the crisis Venezuela is my home at heart but do to thi crisis I moved to USA and the crisis is because of as we like we call him Maburo and Chavestia

  5. Economic Sanctions by USA has destroyed the Venezuelan Currency & Economy since 2008 and nobody in the media talks about how the US strong arms little countries with economic sanctions – The US needs to be sanctioned by the world for hurting little countries in the name of profit!

  6. Bro stop saying Venezuela people are starving to death. the Americans are starving them, the American government like oil, they think they can control the world. They can't anymore.. I always pay attention on your video, wherever American say something about a country, you always trying to make that country look bad or say something about the leaders in that country. Is the American government paying you to make these videos, or are you working for the American government?

  7. Let's just be honest guys, who are starving this people? is the United States of America. I hate people who don't like other people's freedom, or they always care about oil not people life's. Look at Syria look at Iraq look at Libya. We are sick of the US starving other countries now

  8. I live in Venezuela and none of this is happening. If there is any crisis is due to the USA foriegn policy and sanctions. Infographics you need to do more research on this subject. It makes me think that you are being payed by the CIA on this video. Anyways most of the Venezuelans still elected Maduro as the president for a second term.

  9. Partly due to economic sanctions from the US – when you kick Uncle Sam out of the country and nationalized your oil, you got problems. Any way, having said that, most of the country's problem is due to mismanagement of the Gov.

  10. You should call yourselves the Propaganda Show. Not once did you talk about America manipulating the price of oil to under value Venezuela or the sanctions place on them which hurt their economy.

  11. Judging by like to dislike radio:
    For every 23,000 normal people, there are about 3,000 butthurt communists on YouTube, lol.

  12. Nicolas Maduro's sole selling point is that he's Hugo Chavez pt. 2. That was his entire campaign strategy to get himself elected and to maintain support for his entire time in office. He, as far as I know, had no merits of his own. That, alone, says a lot about this guy and none of it is positive.

  13. Show this to every leftist agenda pushing liberal you know. This is what happens when you want to live in your so called utopia.

  14. To all the idiots who keep saying socialism is what destroyed Venezuela, it's not. The government was in debt 30% of its GDP, they started printing an insane amount of money to try pay it off. The US President wanted to do the same exact thing, bad monetary policy and a poor understanding of economics corrupts countries.

  15. The only thing that could save Venezuela is go to the basic. The government should unite their country and create a system and turn into farming. this will resolve the issues of hunger. The next thing is to invite investors and tourist in their country………

  16. No need to mention that their negative "growth" started LONG before the "Oil prices" back in 2003.

  17. Question:
    Why is Venezuela in crisis???


    It happens everywhere Socialism & Communism exist
    100% GUARANTEE


  18. “They just didnt do socialism right. If we did it we would do it right, and it would be better” -dems 2019

  19. Me and my family’s are Venezuelans, we moved here to the US on 2014 ,we left behind most of my relatives from my mums side and my grandparents from my dads side, we have to be sending our families money monthly for them to even think about going to the grocery store it’s hard to believe what Venezuela has come to

  20. Brothers, sisters!, fellow workers and pheasants of Venezuela! Reclaim your freedom! And overthrow the dictatorship government that has done nothing for you!and does not care for you! Down with maduro! Break the chains BREAK THE CHAINS!!! (Kaisserreich hoi4 reference)

  21. This video needs to run during the democratic debates. It needs to run on stage after the candidates promise all their free BS and during every commercial break. But something tells me that those thick heads that vote for these idiots won't get it.

  22. Justin Mielke most people are of the mindset that they have to get food from the store even though food is growing all around them. Their mind is commercialized. It’s crazy most of the “poorest” countries in the world actually have the most natural abundance but due to commercialization they can’t seem to see it for some reason.

  23. Get rid of a system that gives the corrupt and power hungry weirdos a chance at power. Money is the root of all evil. Socialism, capitalism, none of it is working to create a balanced sustainable society.

  24. 1: Rely on a single product
    2: Implement some socialist programs
    3: Product loses value at some point
    4: Implement more socialist programs
    5: Favor political loyalty over competence and place incompetent cronies in positions that require competent people

  25. There is no way these people are leaving by plane. They’re walking out on a dangerous journey with illegal smugglers. Let’s be real here.

  26. Guess just saying the word "Socialism" wouldn't have been an entertaining vid. And then you didn't even say it. Sad.

  27. theres one thing i dont understand. when the money is worthle…..has no value, why waste more paper to print more money?

  28. You could just always go with the quick answer and say it's due to socialism and poor oil industry practices.

  29. Fun fact, not so funny: in Venezuela Supermarkets have no price stickers on their products, prices change everyday so the only way to find out is by asking to a employee

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