Chip Sylverne
Final Approach
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- Jun 17, 2006
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Quit with the negative waves, man.
Venezuela is a terrible example though. They tied their entire economy to a single commodity and structured their long-term fiscal policy on oil prices remaining about $100 a barrel. When OPEC decided to screw Iran by tanking the price of oil by flooding the market Venezuela went belly up. That is the main inflationary factor for Venezuela and it's a fairly unique situation.
An extreme example, but the point still stands. If a central government can only increase the money supply, minus the ability to take money out by selling debt, there's no way to put a lid on inflation and keep it at a target rate. A treasury that finances expenses with printed money can't take that money back out of the money supply.