Tuesday, January 12, 2010

Extreme Makeover: Economic Edition

Good times in Venezuela: Hugo Chavez, President and noted Harry Belafonte idol, has taken a play from the Marxist handbook and in one fell swoop demonstrated why government interference in markets usually ends in misery.

His latest plan to bring prosperity to his people is to devalue his currency by 50%. Yay! Everything costs half as much as it used to! Of course, the cost to manufacture these things hasn't changed since most products in Venezuela rely on imports to build. If you were a business owner faced with this development, would you:

(a) Double your prices to restore your profit margin
(b) Go out of business

If you chose (a), congratulations! Your business just got taken over by the government. If you chose (b), congratulations! You're on welfare. In Venezuela.

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