Venezuelan inflation was not caused by over-printing money

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Some of the Guardian's economics team really do need to learn some basic facts. This was published  this morning as part of an explanation for hyperinflation in Venezuela:

Hyperinflation is the term used to describe prices spiralling out of control, accompanied by plunging currency values – leading consumers to require wheelbarrows full of money to buy everyday essentials.

In theory, prices should always fluctuate depending on supply and demand. Inflation is the term for rising prices, while deflation describes prices falling. Hyperinflation occurs when prices rise so wildly as to render the concept of inflation absurd.

The problem comes when the supply of paper money in an economy outstrips demand for goods and services, causing the value of the currency to fall. This occurs when governments create new money to finance spending above their income from taxation.

First,  someone has to realise that paper money is no different from electronic money, and electronic money is more important in just about every economy in the world now than anything printed on paper.

Second,  as a result, wheelbarrows are not essential. They can be used, but the Weimar allusions are just that.

Third, the theory referred to is also just that. It's a theory, and not a very good one. The reality is that prices fluctuate as a consequence, or not, of the attempts of government to regulate them.  And if the government is either prevented from regulating those prices, or fails to do so, or those prices are subject to an external shock, then inflation can spiral out of control.  But to pretend that supply and demand are the major factors in this equation is just wrong: someone needs to get beyond their first-year economics textbook.

And the last claim - that inflation is caused by a government creating new money to finance spending above the income from taxation - is absurd. Any government can spend beyond their ability to raise money by taxation: the UK has since 1694, and has prospered greatly as a result. So this generalisation is another drawn from the undergraduate textbook that is, simply, incorrect because it ignores so many causes for inflation, many of which are external to any economy. What it also ignores is the fact that a government may want to spend in this way to boost economic activity. In other words, the comment ignores the whole of the understanding of fiscal policy based upon Keynesianism.

There are moments when I despair of the mainstream media and its ability to comment intelligently. This was one such occasion.

There is, of course, a  hyperinflation problem in Venezuela. But it did not result from printing too much paper. And it's crass to say it is. I am not, when saying so, also suggesting that the government has no part in the problems the country faces: it obviously has. But let's have a mature debate and explanation, and not this nonsense that suggests the printing press is the route to hell in a monetary handcart.