Inflation Is Among The Costs Of Venezuela’s War On The Private Sector

By Steve H. Hanke

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

Venezuela is engaged in a multifaceted “war.” The Bolivarian Republic of Venezuela’s main enemy is the private sector of the economy (read: those who hold title to private property) and anyone else (internal or external) who opposes Chavismo (read: socialism).

Wars always wreak havoc; life, property, and dreams are destroyed. In the process, wars – like Venezuela’s – progressively consume a country’s accumulated capital stock, too. In other words, as wars rage on, the destructive war economy gradually eats away at productive assets like land, factory capacity, and raw materials. Just where this process leads was well illustrated by the great Austrian economist, Prof. Fritz Machlup, in a 1935 article about Austria’s World War I inflation:

A dealer bought a thousand tons of copper. He sold them, as prices rose, with considerable profit. He consumed only half of the profit and saved the other half. He invested again in copper and got several hundred tons. Prices rose and rose. The dealer’s profit was enormous; he could afford to travel and to buy cars, country houses and what not. He also saved and invested again in copper. His money …read more

Source:: ZeroHedge