Socialism in Venezuela: Why does the increase in the minimum wage no longer affect inflation?
Venezuela is going through an acute economic crisis characterized by hyperinflation that could exceed 13,000% in 2018. The different economic analysts, mostly idiots who know little or nothing about the real functioning of the economy, have repeated for years that the increase in the minimum wage has an impact on inflation, and that it is one of the fundamental causes of a hyperinflationary situation.
This approach was partly true, since the former president Hugo Chávez raised the minimum wage up to three times a year, however, his salary increases were around 20% and 25% every four months, which was matched with the inflation rate, nevertheless, with the arrival of Nicolás Maduro, in 2013, which coincided with the fall in the price of oil, salary increases have become more periodic to the point where the minimum wage has been increased 26 times in the last 5 years, in addition, the salary increases carried out during the Maduro administration are from 40% to 50%, that is, many higher than those of Chávez.
This situation, in which wages were constantly being increased, evidently impacted on the total demand for goods and services, which, in line with strong public spending, inevitably led to high inflation. But, is it possible to continue saying that, at present, these wage increases continue to have an impact on inflation?
Despite the fact that for the first time in many years I start to listen to people in the street complain about wage increases, because they have finally understood that such increases only represent inflation, I regret that they learned such a lesson too late.
In fact, in spite of everything the analysts can say, since about 2 or 3 years ago, wage increases are no longer the cause of the growth of inflation. How is this possible? Why before the increase in wages if it generated inflation and not now?
Well, wage increases do continue to impact inflation, but at such a negligible level, which is almost imperceptible, why? The answer is simple, wages, although they increase periodically, are not marching at the same pace as inflation, that is, inflation grows much more than wage increases, therefore, despite the fact that a wage increase, the purchasing power of people is increasingly lower, and if the purchasing power of people is lower, it means that they acquire less goods and services, so that wage increases are only, with a Keynesian strategy, pursuing inflation in a race that can not win.
Thus, in this cycle of economic suicide, wages pursue inflation, and in pursuing it, they increase it, but not enough to represent the whole of inflation, because the real generator of this, does not reside in the increase of the wages, but in the decrease of the production and the import, and in the increase of the money supply by means of the high public spending.
For this reason, if the State stopped increasing wages, faster than we could realize the workers would not earn even to pay for transportation to work, something that has been happening little by little, however, it is necessary make it clear that Venezuelans have lost their purchasing power, only so that the State can see theirs increased, and that it is the government's economic behavior and not the wage increases that are causing hyperinflation.
In short, the moral is clear, once the inflationary cycle begins, there are no non-radical ways to stop it, let wages stagnate, the only thing that would generate is voluntary unemployment, because people would be more likely not to work that to do it, and that in turn, would translate into a decrease in production, which would further increase inflation.
The most important thing for Venezuelans is to learn the lesson, it is the falls that allow us to learn, but for the rest of the people of this world, it is important to know what; A clever person solves a problem. A wise person avoids it. A stupid person makes it. And a very stupid person repeats it. I invite you to be wise and not to commit the mistakes that others have already committed, don't support politicians who promise solutions in exchange for power, much less if they are socialists, often wanting to get the quick benefit, the cost to pay It ends up being much taller.
Socialism is a philosophy of failure, the creed of ignorance and the religion of envy...its only inherent virtue is the sharing of misery...!
Curated for #informationwar (by @truthforce)
Relevance: Exposing Socialism/Dictators
What truly amazes me is that the USA has not ever had the kind of run-away inflation that our massive expansions of (intrinsically worthless) paper dollars should have had. I wonder what kind of mechanisms (especially since we also keep raising our minimum wage, both nationally and at the various state's levels) have kept inflation in check here. Is it because the "federal" "reserve" bureauRATS have convinced (or bribed, or commanded) the member banks NOT to lend those dollars into circulation, or is some other mechanism at play?
Well, what happens is that in the United States, as in Europe, Japan and South Korea, the mechanism they use to create money, is called quantitative easing, and is a bit more sophisticated than the system used by Venezuela or the rest of the third world countries. In the same way, we must also note that the level of production in the United States and the industrial countries is quite high, something that does not happen in these others countries. Last, but not least, most of the mechanism used by the US and European banks to expand credit, and therefore the money supply, is carried out in such a way that money is concentrated in the hands of a group of investors and corporatocrats, in such a way that when that money is not redistributed, it does not generate inflation, hence the 1% has most of the world's wealth. On the other hand, the international demand for dollars also helps that inflation does not exist, since oil and international trade is carried out with the dollar.
That's very helpful. Thanks.
I was most shocked that there was no explosion in inflation with all the QEs following the 2007 crash, of course. I kept thinking gold and silver would rocket, but they never did.
Perhaps, with the USD gradually being replaced by other mediums (especially in the BRICs nations, but elsewhere also) the banksters will finally lose control and gold/sliver/cryptos will benefit...?
The wage rise didn´t help, since the inflation it´s result of less production, due to expropiation and expelling the investors in the country, without a productive sector everything gets expensive so the inflation rises faster than the salary could do.
SAD!