Venezuela Could Be a Crystal Ball for America

A lot of mainstream analysts will tell you that hyperinflation and currency collapse can’t happen today in an established economy, and they discount warnings about the dollar’s future by people like Peter Schiff.

But one only needs to look to the south to see that it not only could happen, it is.

Venezuela was once the premier South American economy and enjoyed the highest standard of living in Latin America. But mismanagement and socialist policies drove the once prospering economy into the ground. Today, Venezuelans face rampant inflation, with the bolivar now practically worthless.

The Associated Press called it “economic chaos.”

[The bolivar] has lost more than half its value this year, plunging to 400 per dollar on the free market as Venezuelans scramble to convert their savings into a more stable currency. Desperate, people are selling bolivars for a rate 60 times weaker than the strongest of country’s three official exchange rates.”

According to a Forbes report, “It’s been five months since Venezuela published inflation data. The most recent figure of 68.5% is the highest in the world.” And Barclays economist Alejandro Grisanti estimates the inflation rate now stands over 100%.

It’s gotten so bad that major companies are finding ways to avoid doing business in Venezuelan currency. Several major airlines have stopped booking tickets in bolivars, and Ford Motor Company reportedly just reached a deal with government officials to sell trucks for US dollars only.

Production at Ford has fallen by 90 percent as the company struggles to gain access to dollars needed to import parts. Customers will now transfer Ford dollars in advance to pay for the import of the parts needed to assemble the cars in Venezuela, according to union officials.”

People in the private sector are also seeking ways around the worthless Venezuelan currency.

It’s not just businesses chasing greenbacks. Real estate contracts are still drafted in bolivars to satisfy a requirement imposed by late President Hugo Chavez, but in upscale neighborhoods most owners operate outside the law and sell and rent in dollars only. A group of realtors in tony eastern Caracas has established a password-protected website for listings in dollar prices.”

As the Venezuelan economy continues its freefall, mainstream analysts go right on pretending it just can’t happen, at least not here. They point to various economic reports out of Washington to justify their faith in US stability. But what happens when you can’t trust the numbers?

According to Forbes, that’s a big part of the problem in Venezuela.

But for economists and analysts trying to get a picture of just how serious Venezuela’s economic problems are, the lack of solid data makes the job extremely difficult. Venezuela’s economy is faltering but the absence of reliable and up-to-date information makes a precise diagnosis next to impossible.”

Bank of America and Barclays have created their own measures of the Venezuelan economy. “I feel like a private detective. You have to try to find the data. At least the police have power to gather evidence — I don’t have any,” Francisco Rodriguez, a Venezuela analyst at Bank of America told Forbes.

The same type of thing is already happening in the US. Simply comparing unemployment news released by the US government to the reality in the job market gives us plenty of evidence to believe the feds are cooking the books.

What happens when creditors like China stop trusting the figures released by the United States?

And with the current US debt load standing at $58.7 trillion – 3.3 times GDP – the Chinese certainly have reason for concern. If they were to unpeg the yuan from the dollar, it would drastically devalue the US currency and the America would suddenly look a lot like Venezuela, despite what the mainstream analysts tell you.

Gold and silver provides an avenue for protecting your wealth should the US economy continue down the road Venezuela has traveled.

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