Today’s episode is the story that started for me back in 1974. For two years in a row in 1974 in 1975 I visited Caracas Venezuela. I was 11 years old and I was struck by the huge contrasts in the city of Caracas.
The city is in the centre of a valley surrounded virtually on all sides by tall steep hills.
In the centre of the valley floor was a bustling modern city with freeways, and tall modern buildings.
Surrounding the city lining the Steep hill sides were thousands and thousands of makeshift shelters where the poorest people were living in absolutely horrible conditions.
Our family became friends with an older couple who lived in Caracas and we traveled with them on several trips over the subsequent years. One of the frequent topics of conversation at that time was the inevitable social, economic and political unrest that would likely result if the economic disparity in the society was not properly addressed.
Fast forward to today and Venezuela is in economic collapse. The gross domestic product has fallen by more than 60% in real terms. The government has been trying to solve its financial problems by printing money. Inflation has been replaced by hyperinflation. In January of 2019 alone, inflation was 345%.
Today a school teacher earns enough money in one month to afford a carton of eggs and 2 litres of milk. About 3M people have left the country. Those who have left are sending money back to family members who have remained in the country. On average, the Wall Street Journal is estimating that the average money going back to family members is about $80 per month. But those funds are in US dollars which is rapidly becoming the black market currency of choice.
It took 45 years for the economic collapse to happen. We foresaw saw it back in 1974. Venezuela was a relatively vibrant country with lots of natural resources.
It’s really easy to be complacent and dismiss Venezuela or Zimbabwe as distant lands with their own issues.
Zimbabwe was previously Rhodesia. My family lived in Rhodesia before things became politically unstable there. We need to be students of history. Every time a country has debased its currency, it has ended in disaster. It happened to the Roman Empire. It happened in Germany. It happened in the United States prior to the signature of the US constitution.
It has happened in Zimbabwe, Argentina, and now in Venezuela. The headwaters of those disasters look just like the conditions in the US, Canada, and the European Union.
I don’t know if we have 45 years until the runaway train of inflation and economic contraction happens here in North America.