Venezuela—The Sequel

Venezuela—The Sequel

Earlier this year, we published an article entitled, “Watch the Movie Before It Is Filmed.” In that article, we suggested that the future of the reader’s own country may well be seen in advance, by carefully observing other countries that are in decline but are further down the road in that decline.

The basic principles are:

  1. Study the evolution of nations and empires of the past
  1. Take note of the patterns that political leaders repeatedly follow
  1. Examine what stage a given country has presently reached in its evolution
  1. Project future events based on what has not yet transpired in the pattern

In the article, we focused on Venezuela in particular—making reference to their use of governmental regulatory edicts, price controls, takeover of private-sector factories, the setting of price ceilings, and finally, governing by decree. All these developments are standard playbook steps as a nation enters the final stage of governmental deterioration from Dependency to Bondage.

It’s fair to assume that the same playbook will be used in other countries that are in decline.

Those who have been watching Venezuela as a guide as to what’s to come in their own countries may now be watching “Venezuela—The Sequel.”

Price Fixing in Venezuela

Since the “Watch the Movie” article was written, the government fixing of prices in grocery stores has caused unnaturally low prices on many staple goods. A predictable result has been that Venezuelans have been cleaning out the shelves at supermarkets and taking the goods to neighbouring Colombia for resale. (Colombia maintains free-market pricing, and as such, a profit can be made by Venezuelans.)

Typically, such staples as meat, grains, and toilet paper are bought immediately upon delivery to the supermarkets in Venezuela. Shortages are so significant that people frequently queue at supermarkets in shifts, as the waits are so long to receive goods.

This movie is, of course, ongoing. Historically, however, food shortages tend to occur in the latter stages of a decline, just prior to collapse of the system. (No fear is more gripping in the minds of a population than the fear of starvation, and already, in the last year, food prices have nearly doubled in Venezuela.)

Of course, we in the Western world have never experienced a food crisis. When we hear the term, our collective mind pictures starving children in Somalia. Whilst we may sympathise with this situation, it seems exceedingly distant from the realm of possibility in our own countries.

Not surprising, then, if the reader feels that, however trying his present situation is, he can at least rule out a food crisis as a possibility in his future.

Economic Deterioration at Home

However, if we’re being honest with ourselves, we will recognise that the level of economic deterioration that’s been reached in the countries of the First World is dire enough that we may soon experience many, if not all, the knock-on effects that are evident in Third World countries that have followed a similar destructive economic path.

Indeed, if we follow the events that are unfolding in countries that have made the same mistakes but are further downstream, it may be that food shortages may not only be in our future, but may come relatively soon.

We’ve reported on this possibility previously:

Food Crisis, July 2011

Can You Afford to Eat, October 2011

When Price Controls Reach Your Dining Table, July 2013

So, does this suggest that we all visit the supermarket tomorrow and load up our larders with as much as they’ll hold? Probably not; there is time. The greater question will be whether we will wish to be living in a community—any community—at a time when a food crisis may take place there. In such a situation, it would be dangerous to be without a store of food. Trouble is, unless it could be kept quiet, it could be equally dangerous to be with a store of food.

When the subject was first addressed in 2011, many readers regarded the subject as an absurd impossibility. Today, most would say that it is a possibility but not a probability. If it is a probability, a plan would need to be in place. “Venezuela—The Sequel” shows us that the actual warning time will be short. Those who have not planned well in advance may face a problem unprecedented in their lifetimes.

But how do we know if the time for such a condition is drawing close? Well, again, historically, it often occurs as a specific domino in a series of falling dominoes. As stated above, the initial dominoes are likely to be governmental regulatory edicts, price controls, takeover of private-sector factories, the setting of price ceilings, and governing by decree. Most of these have taken place in the EU and the US and are being expanded upon.

Historically, following these developments, we’re likely to see a measure of deflation, which the government attempts to combat through the printing of money. The more persistent the deflation, the greater the demand to print.

Governments always prefer inflation to deflation and even declare inflation to be beneficial. But, invariably, wages fail to keep pace with inflation in the prices of commodities, creating an inability for the average person to pay for those commodities. As this worsens, he turns to selling his assets to pay for essentials. As this becomes a national trend, asset prices drop. The government then prints more in order to combat the new deflation in assets.

At this point, the relationship becomes circular:

  1. Print more money to combat deflation in the prices of assets
  1. Inflation increases in the prices of commodities
  1. Wages fail to keep up with inflation in commodities
  1. People need to liquidate assets to pay for essential commodities
  1. Deflation occurs in the prices of assets
  1. Print more money to combat deflation in the prices of assets

If the government in question does not cease printing and break the conundrum, the ultimate result may well be hyperinflation. One of the most consistent by-products of hyperinflation in any country is a food crisis.

Hyperinflation Hits Venezuela

So, returning to our ongoing viewing of Venezuela, what does the sequel to the movie tell us? The latest development is that, in November of 2014, Venezuela reached the hyperinflation level (generally regarded as a decline in purchasing power that exceeds 50% on a monthly basis).

This tells us that we might anticipate a food crisis in the near future in Venezuela. If and when it occurs, we should replay the movie in our minds and again ask whether our own country (especially if we live in the EU or US) has a food crisis in its future.

Again, this is one of the hardest of eventualities for any person to accept. However, if we examine the historical pattern, we should be prepared for what it says is coming.

Editor’s Note: Unfortunately there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation. That’s what International Man is all about—making the most of your personal freedom and financial opportunity around the world. The free IM Communiqué is a great place to start.

Tags: venezuela, hyperinflation, economic collapse,