Question

explain why you think Venezuela is experiencing hyperinflation? (1,000,000% -- that's absurd!) Where did the country go wrong in terms of the source of hyperinflation? If you were a policy maker, what would you recommend they do to tame hyperinflation? Can your suggestion(s) be easily implemented? Identify at least two obstacles you would face in implementing the policy.

Thank you for your answer, clear writing or electric form is better.

Answer 1

Why Venezuela experiencing hyperinflation?

• The government used the oil boom that started in 2004 to disempower society and enhance state control over production and market, while borrowing continuously from international market.
• By 2013, this excessive borrowing caused it to lose access to international capital markets, which made starting of recession.
• In 2014, the price of oil fell sharply, making the previous import level unsustainable leading to collapse.
• Humanitarian assistance offers were declined. With imports, output and tax revenues on the verge of collapse the government opted to print money needed to cover the fiscal deficit, which ultimately led to hyperinflation .

Suggestions

1. The requirement of collaboration is needed between Venezuelan Democratic Forces and International Community
2. Already political parties, trade unions NGOs, universities, Catholic Church have come together in an initiative called Venezuelan Libre. It may help.
3. Targeted Sanctions should be imposed so as to overthrow the corrupted government.
4. Venezuelan National Assembly should rejoin Rio Treaty, an international pact which give legal ground to regional military action to oust Nicolas Maduro from Power .
5. Replace the Bolivar with a hard currency such as US dollar or currency board. The currency board should be pegged to a hard currency, and backed by reserves denominated in that hard currency like government bonds.
6. Decentralized and anonymous Crypto currency

Why its difficult to implement ?

• Growing authoritarianism of Maduro
• Dollarization and adoption of Currency board are not acceptable to Maduro's socialist government .