Nothing Can Prepare You for Life With Hyperinflation

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https://www.nytimes.com/2019/02/12/opin ... tages.html
I’d seen the black and white photos of German children using bundles of money as building blocks during the Weimar Republic. I’d read about the skyrocketing price of bread in Zimbabwe, and how people were carrying their cash in wheelbarrows. But nothing you read can prepare you for life with hyperinflation.

In the Weimar Republic hyperinflation was largely the result of reparation: payments imposed on Germany after World War I. In Zimbabwe it was the result of Robert Mugabe’s land reform policy and the drop in food production and foreign investment that followed.

But in Venezuela it has been the result of two decades of gross economic mismanagement, profligate public spending, government debt despite a historic oil windfall, and epic corruption. What was once the most prosperous country in the region is now a man-made disaster.

As Venezuela’s political crisis reaches new heights and international pressure mounts against Nicolás Maduro, hyperinflation and the hunger it has sown could worsen. But they could also prove to be the force that hastens his exit from power. In the end, hyperinflation spares no one.

Inflation in Venezuela began to creep up slowly after Mr. Maduro rose to power in 2013. As a journalist, I began to report on how it, along with chronic food shortages, was one of the reasons life had become so hard in 2014.

Price controls meant that subsidized food disappeared from shelves. If and when you found cooking oil, corn flour or sugar, you could offset the cost of more expensive food by reselling the cheap goods in the black market or across the border. It became such a profitable business that a new job soon emerged. Bachaqueros, or ant-traders, would carry anything from soap to powdered milk to Colombia and make five times as much in a day as in a month at their formal jobs.

As shelves were bled dry in this scheme, Mr. Maduro blamed “economic warfare waged from abroad.” The government supporters that stood in mile-long queues outside food shops still believed him then.

By 2015, Venezuela had the worst inflation rate in the world. Some food items have never made it back on the shelves. Shop owners started using money-counting machines. People carried bags full of cash. By 2016, the inflation rate hit over 700 percent.

At the time, I interviewed Hugo Lugo, a collector of rare coins and old bills. At his numismatic shop, Mr. Lugo, a self-taught amateur historian, told me that what had begun as a hobby had become a painful reminder of the turn the country had taken. Next to rare bills used during the country’s best years — and now protected carefully by plastic vault-like envelopes — was a glass shelf where crinkled, more recent notes had been carelessly shoved. Printed less than three years before, he said, they were now worthless.

By late 2017, the inflation rate exceeded 50 percent a month. It was a turning point: economists signaled that we were officially in hyperinflation. Inflation is bad, but hyperinflation is a totally different game.

Hyperinflation hits the poorest the hardest. Venezuelans have reported losing on average 24 pounds in body weight. Nearly 90 percent now live in poverty. In the slums of Caracas, I visited mothers who have gone from reducing their children’s portions to having them skip meals altogether.

Marilyn Alma, a mother of three, had to give up custody of her eldest child because she can no longer feed him. One week, a dozen eggs cost Alba three days of wages; the next week, the cost doubles. Eggs, the cheapest source of protein, are now a distant dream for the vast majority of people. Ms. Alma, who had once been a staunch government supporter, told me, “Maduro betrayed this country.”

The professional class has also been affected. In middle-class neighborhoods large supermarkets previously stocked with imported goods are now half stocked with cheaper versions. Professionals can only afford two or three food items, and retirees often must leave behind products they can no longer afford. Their life savings and pensions are suddenly worthless.

Hyperinflation has also meant a brain drain. Young engineers or doctors are now working as waiters in Bogotá, Colombia, or as store clerks in Lima, Peru. “The worst part is that they send back money to help us,” Melani Delgado, whose two sons have left, told me recently as she fought back tears. A part-time dentist, Delgado said she could once afford to send her children to private university on her salary. Today remittances are fast becoming a lifeline for those left behind. “This government broke up the Venezuelan family and turned parents into parasites,” she said.

If you belong to the dwindling minority that has access to dollars, you can somewhat offset the rise in prices with the surge in the black-market exchange. You may be able to survive, but it’s impossible to plan for something that changes every day. To adapt to the destruction all around you.

For those with access to dollars, living with hyperinflation is demoralizing. At 6,000 bolívars (the equivalent of $2, or one third of the minimum monthly wage), a pound of butter is obscenely expensive. Paying $30 for a 17-ounce bottle of olive oil feels criminal. Today this bottle costs the equivalent of five times the minimum wage, but that’s likely to change tomorrow. “Beating the system” feels like you are eviscerating your country’s economy.

In a hyperinflationary economy, buying food becomes your one and only priority. But even for those in the business of selling food, hyperinflation is a losing game. Strict price controls mean that producing, distributing or commercializing food is either going to lead you to bankruptcy or if you sell at a profit, to jail.

“If people feel their salaries are evaporating, I feel the work of two generations of my family could vanish overnight,” the owner of a supermarket, who asked to remain anonymous, told me. Scores of executives, managers and employees in the food distribution business have been imprisoned on charges of price manipulation, hoarding food or conspiring against the government. Speaking to the media or even allowing journalists to film inside stores can also land you in jail.

A recent move to slash five zeros off the previous currency became obsolete within months. Venezuela now has two currencies simultaneously in circulation — the strong bolívar and the sovereign bolívar — both of which are worthless.

Venezuela’s economic collapse is fast becoming an international conflict. Mr. Maduro’s inability to tackle an economic crisis with rampant shortages of food and medicine has fueled a humanitarian crisis where hundreds of people, like Hugo Lugo the numismatic, have died of preventable diseases.

This humanitarian crisis, in turn, has led to the exodus of more than 3 million, like Ms. Delgado, the part-time dentist, who has since joined her sons abroad. It is the worst migration crisis the Americas has seen in this century and one that our neighbors can no longer resist.

While a growing number of countries condemn Mr. Maduro as illegitimate, the queues outside food shops or at the border only grow longer. More than 80 percent of Venezuelans want Mr. Maduro to resign. Like Ms. Alma, they blame him and no longer “economic warfare” for destroying the country. For Mr. Maduro, hyperinflation is the force that is rallying half the world and his entire country against him.
It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach.

- Franklin D. Roosevelt

Re: Nothing Can Prepare You for Life With Hyperinflation

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Yeah, it’s what an economy looks like when global capital aligns to crush you for not just handing everything over to the rich. High oil prices during Chavez’s term in office was the only way Venezuela managed to resist this long.

Everybody knows that the war is over.
Everybody knows that the good guys lost.
Everybody knows that the dice are loaded.
Everybody rolls with their fingers crossed.
Everybody knows that the fight was fixed.
The poor stay poor, and the rich get rich.
Image

Re: Nothing Can Prepare You for Life With Hyperinflation

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Mason wrote: Tue Feb 12, 2019 2:12 pm Pay attention USA.

But there's an extra special sportsball game on tonight and all that stuff is sooo confusing anyway. Let President Trump deal with it...
He's a very smart person. He has all the best words. He'll use them to fix the problem! :wall: :wall: :wall: :wall: :wall:

Hyperinflation comes from running the printing presses of paper money too fast. In Germany's case, it was used to erase debt. As the Reichsmark was on the way to devaluing one trillion times, the courts insisted "A Mark is a Mark!" causing every loan holder to be wiped out. The insanely high reparations debt strangled recovery, and because Germany couldn't pay it, France and Britain couldn't repay us...both owed in excess of $30 billion when Standard Oil was the only billion dollar corporation on the planet.

So they printed money, faster and faster. Finally, they turned it off, creating the "RentenMark" fixed at 1 trillion Reichsmarks, instead.
Argentina suffered hyperinflation as well.

Hyperinflation is the ultimate default: Denying that goods and labor have relative values to each other and the MONEY is merely an intermediary. If you cannot trust the money, you go back to a barter economy. But if the Government DEMANDS you produce at a loss, or go to jail, sooner or later you'll go to jail or the economy collapses.

This is not a failure of socialism. Weimar Germany wasn't socialist, Madura claims Venezuela is. Cuba is, and has never had hyper inflation. It's not a failure of capitalism either. It's a failure of Government to understand economics and finance.
"Even if the bee could explain to the fly why pollen is better than shit, the fly could never understand."

Re: Nothing Can Prepare You for Life With Hyperinflation

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Marlene wrote: Tue Feb 12, 2019 2:30 pm Yeah, it’s what an economy looks like when global capital aligns to crush you for not just handing everything over to the rich. High oil prices during Chavez’s term in office was the only way Venezuela managed to resist this long.

Everybody knows that the war is over.
Everybody knows that the good guys lost.
Everybody knows that the dice are loaded.
Everybody rolls with their fingers crossed.
Everybody knows that the fight was fixed.
The poor stay poor, and the rich get rich.
If this didn't happen over and over, it would be a conspiracy theory.
It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach.

- Franklin D. Roosevelt

Re: Nothing Can Prepare You for Life With Hyperinflation

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A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis.Economists warn that this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.

https://www.washingtonpost.com/business ... g-economy/

My dad left Germany with his family in 1926. I heard the "pay day carried home in a wheelbarrow" story.

CDFingers
Crazy cat peekin' through a lace bandana
like a one-eyed Cheshire, like a diamond-eyed Jack

Re: Nothing Can Prepare You for Life With Hyperinflation

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CDFingers wrote: Tue Feb 12, 2019 7:15 pm
A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis.Economists warn that this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.

https://www.washingtonpost.com/business ... g-economy/

My dad left Germany with his family in 1926. I heard the "pay day carried home in a wheelbarrow" story.

CDFingers
It was real. There's film of it. People papered walls with money because it was, by far, the cheapest wall paper. I believe it was also used for TP, making moot "Do you have 2 fives for a ten?"
"Even if the bee could explain to the fly why pollen is better than shit, the fly could never understand."

Re: Nothing Can Prepare You for Life With Hyperinflation

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Grandpa Braun left Germany in '20, set up his biz in Grand Rapids. Eventually he made enough to build a duplex, rent half of it out, and be debt-free.

Grandma Frederika and the kids came over in '28 to a much better and stable life. The rest of the clan stayed, suffered through it all the way from worthless Marks to Nazis. I know the story first-hand.

SR
"Oozing charm from every pore, he oiled his way around the floor."

Re: Nothing Can Prepare You for Life With Hyperinflation

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SubRosa wrote: Sun Mar 31, 2019 10:10 am Grandpa Braun left Germany in '20, set up his biz in Grand Rapids. Eventually he made enough to build a duplex, rent half of it out, and be debt-free.

Grandma Frederika and the kids came over in '28 to a much better and stable life. The rest of the clan stayed, suffered through it all the way from worthless Marks to Nazis. I know the story first-hand.

SR
The ones of my dad's family who stayed lived in Dresden. The rest, as they say, is history.

Slaughterhouse Five, kids. Read it.

CDFingers
Crazy cat peekin' through a lace bandana
like a one-eyed Cheshire, like a diamond-eyed Jack

Re: Nothing Can Prepare You for Life With Hyperinflation

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interesting. two of my grandparents fled the czarist pogroms in ukraine, cossacks were apparently not nice people. fiddler on the roof was not just a musical. they didn't look back when the bolsheviks came to power. my grandfather marcus came before ww1, and somehow my grandmother sarah made her way across postwar europe to america with my uncle, babe in arms. they missed that whole babi yar thing. my guess is, any kin still there in '41 didn't make it. i wish now that i'd been interested when they were alive.

it's sort of hard to take america for granted when that sort of recent memory is in your family.
i'm retired. what's your excuse?

Re: Nothing Can Prepare You for Life With Hyperinflation

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CDFingers wrote: Tue Feb 12, 2019 7:15 pm
A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis. Economists warn that this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.
https://www.washingtonpost.com/business ... g-economy/
Definite red flag, debt piling up. Some employers do look at an applicants credit rating when hiring.
"Everyone is entitled to their own opinion, but not their own facts." - Daniel Patrick Moynihan

Re: Nothing Can Prepare You for Life With Hyperinflation

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lurker wrote: Sun Mar 31, 2019 10:35 am interesting. two of my grandparents fled the czarist pogroms in ukraine, cossacks were apparently not nice people. fiddler on the roof was not just a musical. they didn't look back when the bolsheviks came to power. my grandfather marcus came before ww1, and somehow my grandmother sarah made her way across postwar europe to america with my uncle, babe in arms. they missed that whole babi yar thing. my guess is, any kin still there in '41 didn't make it. i wish now that i'd been interested when they were alive.

it's sort of hard to take america for granted when that sort of recent memory is in your family.
I know exactly what you mean. One grandfather was sent to Siberia at 17 for handing out Socialist pamphlets. Came in 1901. Not sure when his wife, my grandmother came but I think it was the same time. Her mother was beaten so badly in a pogrom it killed her. Yeah, being a Jew in Ukraine has never been easy. My other grandfather was sent from Hungary to America in the late 1890's at 13 before the Austrian Kaiser could draft him into the army. Jews didn't do too well in the Austro-Hungarian army and Hungary is, again, not too hospitable for Jews.
"Even if the bee could explain to the fly why pollen is better than shit, the fly could never understand."

Re: Nothing Can Prepare You for Life With Hyperinflation

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CDFingers wrote: Sun Mar 31, 2019 10:23 am
SubRosa wrote: Sun Mar 31, 2019 10:10 am Grandpa Braun left Germany in '20, set up his biz in Grand Rapids. Eventually he made enough to build a duplex, rent half of it out, and be debt-free.

Grandma Frederika and the kids came over in '28 to a much better and stable life. The rest of the clan stayed, suffered through it all the way from worthless Marks to Nazis. I know the story first-hand.

SR
The ones of my dad's family who stayed lived in Dresden. The rest, as they say, is history.

Slaughterhouse Five, kids. Read it.

CDFingers
And so it goes....
"it's a goddamn impossible way of life"
"And so it goes"

Re: Nothing Can Prepare You for Life With Hyperinflation

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K9s wrote: Sun Mar 31, 2019 8:23 pm It is very unlikely to happen here, but it isn't impossible. Save what you can and be prepared for a natural disaster.
It's always unlikely, until it happens. I don't think there have been more than a half-dozen cases since the end of WWI, but I may well be wrong.
"Even if the bee could explain to the fly why pollen is better than shit, the fly could never understand."

Re: Nothing Can Prepare You for Life With Hyperinflation

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CDFingers wrote: Tue Feb 12, 2019 7:15 pm
A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis.Economists warn that this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.
https://www.washingtonpost.com/business ... g-economy/
Consumer credit scores have been artificially inflated over the past decade and are masking the real danger the riskiest borrowers pose to hundreds of billions of dollars of debt. That’s the alarm bell being rung by analysts and economists at both Goldman Sachs Group Inc. and Moody’s Analytics, and supported by Federal Reserve research, who say the steady rise of credit scores as the economy expanded over the past decade has led to “grade inflation.”

This means debtors are riskier than their scores indicate because the metrics don’t account for the robust economy, skewing perception of borrowers’ ability pay bills on time. When a slowdown comes, there could be a much bigger fallout than expected for lenders and investors. There are around 15 million more consumers with credit scores above 740 today than there were in 2006, and about 15 million fewer consumers with scores below 660, according to Moody’s.

“Borrowers with low credit scores in 2019 pose a much higher relative risk,” said Cris deRitis, deputy chief economist at Moody’s Analytics. “Because loss rates today are low and competition for high-score borrowers is fierce, lenders may be tempted to lower their credit standards without appreciating that the 660 credit-score borrower today may be relatively worse than a 660-score borrower in 2009.”
Car loans, retail credit cards and personal loans handed out online are the most exposed to the inflated scores, according to deRitis. This kind of debt totals around $400 billion, with nearly $100 billion bundled into securities that’s been sold to investors, data compiled by Bloomberg show.

What has analysts concerned is that cracks have already begun to show up in the form of a rising number of missed payments by borrowers with the highest risk, despite a decade of growth. And now with the economy showing signs of weakness, as seen with the recent inversion of the Treasury yield curve, those delinquencies could grow and lead to larger-than-expected losses for investors in riskier asset-backed securities.

“Every credit model that just relies on credit score now -- and there’s a lot of them -- is possibly understating the risk,” Goldman Sachs analyst Marty Young said in an interview. “There are a whole bunch of other variables, including the business cycle, that need to be taken into account.”
FICO acknowledges that the credit score alone may not be enough to make informed underwriting decisions, and other factors need to be considered.

“The relationship between FICO score and delinquency levels can and does shift over time,” said Ethan Dornhelm, vice president of scores and predictive analytics at FICO. “We recognize there’s a lot more context you can obtain beyond a consumer’s credit file. We do not think that score inflation is the issue, but the risk layering on underwriting factors outside of credit scores, such as DTI, loan terms, and even trends in macroeconomic cycles, for example.”

But according to Goldman’s Young, the change in scores helps explain why missed payments on auto loans have significantly risen in recent years despite low unemployment, increasing wages and a relatively strong economy.
https://www.bloomberg.com/news/articles ... real-risks
"Everyone is entitled to their own opinion, but not their own facts." - Daniel Patrick Moynihan

Re: Nothing Can Prepare You for Life With Hyperinflation

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The flood of refugees from Venezuela to Columbia makes ALL the refugees to the US and Europe seem like a decimal point. The hyperinflation has destroyed the economy and whatever possessions people have are all they can use for money across the border. With the money worthless, they cannot pay for gas for the cars to they walk, walk till their shoes fall off, walk till their feet bleed.
Despite being overwhelmed, the Colombians are far more humane to the Venezuelans than we are, a far larger and richer nation, but run by a closed-minded, ignorant, bigoted asshole who's busy whipping up rage against people fleeing some of the worst conditions on earth.

This is a good time to be ashamed of what we've let our nation become, of whom we've let take over, of their ineffectual cruelty and flat-out sadism.
"Even if the bee could explain to the fly why pollen is better than shit, the fly could never understand."

Re: Nothing Can Prepare You for Life With Hyperinflation

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The whole scenario reminds me of the last few rounds of a game of Monopoly. Ever play Monopoly? Sure you have.

At the end of the game one person owns all the stuff. The rest of the players are simply deciding who dies last while the one who controls Boardwalk and all the Utilities collects money every time you go round the board. It's over but it ain't yet done. Capitalism took over after Slavery and Feudalism burned out. And now Capitalism has burned out - reached the end of the Monopoly Game. It was inevitable and there is no surprise *except* that we have not prepared the world for Life after Capitalism. Communism = bad. Socialism = bad. It's all bad. Bad, bad, bad.

So what now? Fix Capitalism? Shuck it for Socialism? Give up and kill each other? We have not even initialized a conversation about where we go from here. "if ya don't work - ya don't eat!" Cool. AI and Robotics have eliminated 90% of the jobs and yer kids/grand kids dint work today. Sucks to be you! Off to the extermination camps they go! Buh bye. No jobs = no food, medical care, housing, education, clothing or survival.

What now? Capitalism has reached the end of it's run. what now? We eat each other?

VooDoo
Tyrants disarm the people they intend to oppress.

I am sworn to support and defend the Constitution of the United States against all enemies, foreign and domestic.

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