The Venezuelan Crisis and the Political Costs of Reforms

by Pablo Duarte*

Venezuela is in deep political and economic crisis. According to Reuters – quoting a leaked document from the Venezuelan Central Bank – output fell 19% and prices increased 800% during 2016. Even though the “Socialism of the 21^st Century”, the political program initiated by former President Hugo Chavez, has been losing support in other countries, in Venezuela it is still alive. The government has responded to people’s discontent with violence rather than with economic reforms. One reason for the reluctance to reform can be that the government would have to assume high political costs if it wanted to solve the current economic crisis.

Thomas Mayer: “I am an Austrian in Economics”

by Andreas Hoffmann

In today’s publication Thomas Mayer writes that he is “an Austrian in economics.” Mayer is the chief economist of Deutsche Bank Group and head of Deutsche Bank Research. Mayer argues that Austrian theory fits recent events well.  He suggests that

“Failure of the liquidationists to overcome the Great Depression of the early 1930s prepared the ground for an era of interventionist economic policies. Modern macroeconomics and finance nourished the belief that we can successfully plan for the future. But the present crisis teaches us that we live in a world of Knightian uncertainty, where the ―unknown unknowns dominate and our plans for the future are regularly thwarted by unforeseen and unforeseeable events.

The bailout is not supposed to help you

by Roger Koppl

The Los Angeles Times reports that the “Federal bank bailout isn’t trickling down.”  No kidding.  I remember Dušan Mramar telling me years ago that the purpose of privatization in the old Soviet block was restribution, not economic efficiency.  We’re looking at something similar with the bailout.  The purpose of the bailout is redistribution, not economic recovery.  A Reuters report flagged by TheAustrianEconomists supports this view.  The report says what Bob Higgs and others have been arguing, namely, that credit is flowing abundantly contrary to what Paulson says.  The crisis is real enough if you’re a normal working person losing your house or your job.  If you are, however, the bailout is not meant to help you.