[phyller]

He might have raised the quality of life temporarily (I'm not sure even about that), but what is happening now in Venezuela was practically inevitable. You might be warmer for a little while as you take apart your house and burn it piece by piece, but in the end you will more assuredly freeze. In my opinion, it was a great tragedy that Chavez is not still alive today. Now people can say ridiculous things like this. If he was alive today, Venezuela would still be collapsing and it would be clear whose fault it was.

[balthasar]

Yes. Perhaps it was inevitable. For what reasons though?

[protoplant]

Economists believe that hyperinflations are caused by large persistent government deficits financed primarily by money creation (rather than by borrowing or by increasing taxation). --wikipedia.

Eli5 Their economy was mostly oil, they seized assets of oil companies extracting it. People left then oil crashed and they had too many promises to pay for

[balthasar]

Indeed nationalization of national resources as an explanation of economic collapse is something a five year old would say.

[protoplant]

It was not simply that they "nationalized oil" in my example, as the resources we're already state owned. You seem to not be serious with your comments.

[balthasar]

Sorry I'm just trying to understand the five year old's argument. "Their economy was mostly oil, they seized assets of oil companies extracting it." Who is "they" in this sentence and how was all this inevitable?

[protoplant]

Okay a good page that goes into depth is history of Venezuela oil Wikipedia

https://en.m.wikipedia.org/wiki/History_of_the_Venezuelan_oi...

The Chávez administration used high oil prices in the 2000s on his populist policies and to gain support from voters. The social works initiated by Chávez's government relied on oil products, the keystone of the Venezuelan economy, with Chávez's administration suffering from Dutch disease as a result.

When prices collapsed they had all eggs in one basket.

Now what was seized and not discussed in the wiki was oil platforms from foreign companies. Sometimes instead of Chavez paying a debt, he would seize the platform and "nationalize it" so this caused foreign companies to be wary of investing.

https://books.google.com/books?id=TFY_DwAAQBAJ&pg=PA116&lpg=...

On to hyperinflation

To assuage the oil price decline which began back in June 2014 and continues through to today, President Maduro printed more currency,

[phyller]

First ad hominem attacks don't help your point. Second, Google can help you out with some of your questions. Third, "they" is Chavez and his government. Chavez was socialist, socialism implies that the government takes over production from capitalists.

How was all this inevitable? When a government doesn't like that private companies are making money, and steal their property then replace skilled managers with party cronies, maybe things aren't going to work out so well. Maybe other companies will be afraid to invest in the country. So yea, the country gets a short-term boost from acquiring billions of dollars of assets, then all the profits that used to go to the company go to the state. But then it doesn't grow or handle problems properly because no one has the same incentive to work hard and innovate.

If the price of toilet paper is high in America, there are dozens of companies that are going to compete to get that profit, supply will rise and the price will drop. In Chavez's Venezuala, the toilet paper companies get nationalized, and government bureaucrats do their best to make and distribute enough toilet paper. Or maybe they don't and just report that they are doing a good job.

Here's a short list from 2012 https://www.reuters.com/article/us-venezuela-election-nation... and you can be sure there were many companies that bent over backwards to comply with governmental demands to avoid being nationalized. It turns out the Venezuelan government, like most other governments, is not good at managing production and providing a prosperous economy without a free market. And when regulations mean a company (for example a toilet paper company) can't make a profit to create what they are selling, they can't make enough of it, and soon they won't be able to make any of it.

It's all about human nature and incentives, and yes most 5 year olds understand that.