Why is Inflation So High in Venezuela?


The Real News Network has a two part interview starting with the segment titled Venezuela Protests Reveal Rivalry in Opposition Leadership.


This part of the interview has more to do with analysis of the political situation. There is plenty of room to wonder if the source is completely unbiased. Well, what source is completely unbiased? So take it for whatever you can make out of it. It’s not like what the interviewee is saying is so  unbelievable. It’s just that if you didn’t want to believe what he is saying, you could find your reasons not to.

The second segment is titled Why is Inflation So High in Venezuela?


If you see the interview on The Real News Network Why Is The 2008 Crisis Taking So Long To Resolve?, you find that the low interest rates in the US caused by the Fed’s quantitative easing caused capital flight from the US to emerging markets that paid higher interest. Now with the Fed tapering its QE, some of the capital that went to emerging markets is being returned to the US causing capital flight from the emerging markets.

So at least a part (and I do not know how big a part) of the emerging market capital flight is caused by external factors beyond their control.  Even the countries without the Venezuelan inflation are experiencing problems.  I am sure that the historical base Venezuelan inflation rate only makes things worse for Venezuela.

This is a very complicated situation, and it is not going to be explained in one 15 minute interview with people who may not have an eye on the situation in all the parts of the world that are interacting with Venezuela.  The two part interview that is the subject of this post was conducted by Paul Jay.  The interview about the 2008 crisis was conducted by Lynn Fries.  Both interviews were watched by me, so I may have a bit of an advantage in connecting the two stories that the interviewers conducting these two interviews may not have.

Moreover, the actual key piece of information might not have been in the Lynn Fries interview, but was actually in the paper written by the interviewee, “The Uncertain Future of the World Economy.” Lynn Fries probably read the paper, but Paul Jay may not have seen it.

The key paragraph from that paper started with “The normalisation of monetary policy in the U.S. will also cause problems for emerging economies.”  See the end of my previous blog post.

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