At 14:59 22/02/2007, yoshie wrote:
I've been following inflation stories about Iran and Venezuela (as
well as India, China, Mexico, etc.).
Both governments clearly want to avoid raising interest rates and
curtailing social spending, orthodox solutions to inflation. But if
not those, what else can they do? I've been reading about the Chavez
government threatening to jail hoarders, removing three zeroes from
the bolivar, lowering VAT, threatening to nationalize grocery
distribution and retail, etc., but they don't seem to be working.
Too soon to say whether the campaign vs stores hoarding necessities
is working. That is to be policed by neighbourhood committees. I
think that what is important to stress is that the response to a
capital strike (the holding of items off the market in order to
pressure for the price controls to be increased) and to the evasion
of controls has not been to give in but to move in. The proclamation
of a law vs speculation and monopolisation, calling for expropriation
of enterprises engaging in these, transforms a situation in which the
government was initially on the defensive; and by calling for
communities to monitor (and then run such enterprises), it becomes a
'teachable moment.' (Incidentally, the opposition is calling these
moves 'unconstitutional'--- contrary to the guarantee of 'economic freedom'.)
On the other points, the lowering of the VAT certainly
lowers prices, and the shift to a new Bolivar reflects 20 years or so
of inflation and will occur next year in the context of a strong
economy with high reserves (so an auspicious time to create a strong
Bolivar)./m
--
Yoshie
<http://montages.blogspot.com/>
<http://mrzine.org>
<http://monthlyreview.org/>
Michael A. Lebowitz
Professor Emeritus
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6
Currently based in Venezuela.
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fax: (58-212) 573-7724
