Saturday, February 9, 2019

Ellen Brown - The Venezuela Myth Keeping Us From Transforming Our Economy

Some critics of MMT say it will create inflation, like 'money printing' has done in Venezuela, but Ellen Brown explains why this isn't the case.

Venezuela’s problems are not the result of the government issuing money and using it to hire people to build infrastructure, provide essential services and expand economic development. If it were, unemployment would not be at 33 percent and climbing. Venezuela has a problem that the US does not have and will never have: it owes massive debts in a currency it cannot print itself, namely US dollars. When oil (its principal resource) was booming, Venezuela was able to meet its repayment schedule. But when oil plummeted, the government was reduced to printing Venezuelan Bolivars and selling them for US dollars on international currency exchanges. As speculators drove up the price of dollars, more and more printing was required by the government, massively deflating the national currency.
It was the same problem suffered by Weimar Germany and Zimbabwe, the two classic examples of hyperinflation typically raised to silence proponents of government expansion of the money supply before Venezuela suffered the same fate. Prof. Michael Hudson, an economic rock star who supports MMT principles, has studied the hyperinflation question extensively. He confirms that those disasters were not due to governments issuing money to stimulate the economy. Rather, he writes, “Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.”

Although Venezuela is not technically at war, it is suffering from foreign currency strains triggered by aggressive attacks by a foreign power. US economic sanctions have been going on for years, causing at least $20 billion in losses to the country. About $7 billion of its assets are now being held hostage by the US, which has waged an undeclared war against Venezuela ever since George W. Bush’s failed military coup against President Hugo Chavez in 2002. Chavez boldly announced the “Bolivarian Revolution,” a series of economic and social reforms that dramatically reduced poverty and illiteracy and improved health and living conditions for millions of Venezuelans. The reforms, which included nationalizing key components of the nation’s economy, made Chavez a hero to millions of people and the enemy of Venezuela’s oligarchs.

Ellen Brown

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