New Venezuelan FinMin: Inflation Doesn't Exist

Guerra economica and ever after.

The late Venezuelan President Hugo Chavez was once described as a "Narcissist-Leninist" by a number of economic commentators. As we've subsequently learned, self-ingratiating policies for the alleged benefit of the global workingman worked a lot better when oil was at $100/barrel instead of less than a third of that. In the latter situation which Chavez's successors find themselves, the scope for the Venezuelans spreading their largesse from oil revenues is greatly diminished since, well, the country is now faced with empty coffers selling the stuff at below cost for months on end.

Enter Venezuela's new finance minister, Luis Salas. It's not a good start that he's not an economist by training but a sociologist, but it only gets more interesting. Recently, he declared that inflation does not exist:

Venezuela's new economy czar Luis Salas is tasked with controlling what is believed to be the world's highest rate of inflation, but comes to the job with an unusual perspective: that inflation does not really exist.

President Nicolas Maduro on Wednesday tapped the 39-year-old sociologist as vice president for the economy amid soaring consumer prices and chronic product shortages, signaling a move toward orthodox socialism in the OPEC nation struggling under low oil prices.

Essays written by Salas describe scarcity and spiraling prices as the result of exploitation by businesses rather than government policy, offering an academic underpinning to the "economic war" explanation that Maduro uses to describe the current malaise of recession, runaway prices and widespread product shortages.

"Inflation does not exist in real life," he wrote in a 2015 pamphlet called "22 Keys to Understanding the Economic War." "When a person goes to a shop and finds that prices have gone up, they are not in the presence of 'inflation.'"

Salas has argued against the idea that excessive printing of money causes inflation - an almost universally accepted tenet of macroeconomics. He insists prices rise primarily because corporations seek excessive profit margins.

He also goes on a tired rather than proffer any explanation of how to deal with inflation (which you wouldn't have to deal with to begin with if it didn't exist):

Salas' numerous online essays are written in flowing academic prose featuring caustic turns-of-phrase such as "speculative-parasite-vulture capital" or "global war of the planetary plutocracy."

Few offer specific policy proposals. One list of ideas for economic policies for 2016 published on Salas' blog includes a recommendation that economic policy should be "coherent" and "should not be passive but rather active and on the offensive." 

Going back to the father of socialism, did Marx also deny the existence of inflation? Actually, no. From Das Kapital:

If the paper money is in excess, if there is more of it than represents the amount of gold coins of like denomination which could actually be current, it will (apart from the danger of falling into general disrepute) represent only that quantity of gold, which, in accordance with the laws of circulation of commodities, is really required and is alone capable of being represented by paper. If the quantity of paper money issued is, for instance, double what it ought to be, then in actual fact one pound has become the money name of about one-eighth of an ounce of gold instead of about one-quarter of an ounce. The effect is the same as if an alteration had taken place in the function of gold as a standard of prices. The values previously expressed by the price ’1 will now be expressed by the price £2. 

Why is it that today's socialists deny Marx's insights? If anything, this guy is even worse than Chavez--a "Fantasist-Leninist" [!] I'll stick with "inflation is always and everywhere a monetary phenomenon" which sounds rather more likely than "inflation doesn't exist."