Caracas Chronicles

For the last few weeks now, the government’s reaction to its loss of the National Assembly has followed a pattern that mixes contempt for the will of the electorate with a mad scramble to shift as much power as possible away from the National Assembly to the branches of government they still control. In Phil Gunson’s words, it’s been “shocking but not surprising.” That lasted until today. As we start to sort through the raft of new “decree-laws” Nicolás Maduro just unvelied after the end of his enabling law powers, we’re both shocked and surprised at how many zeroes Maduro wrote on that blank check of his.

We’re not even through reviewing all the new measures, but just the reform to the law governing the Central Bank of Venezuela is enough to give us the heebie-jeebies. @Econ_Vzla’s tweetstorm is a good place to start here. We’re looking more than simply bad policy. What they’re doing is insane.

As we all know, Venezuela has stopped publishing economic figures. These figures are important because companies and workers need them in order to plan ahead. For example, how can a union negotiate a pay raise when it has no idea what the inflation rate is?

The opposition-controlled legislature had vowed to bring the Central Bank directors to hearings, and eventually force them to publish statistics, as the Constitution enables them to do. It had also threatened to remove them (again, Constitution), vowing to investigate the extent to which the Central Bank is financing the government via inflationary monetary expansion – essentially, printing bolívares out of thin air, thereby fueling inflation.

In a huff of bravado shocking even by chavista standards, the reform of the law does away with the threats.

The directors of the Central Bank are now named by the President, with no legislative oversight. National Assembly members can no longer force them to give out economic information. The Central Bank is now allowed to freely finance the government, even though the constitution says explicitly it can’t.

Earlier today, Pedro Rosas mused about how the opposition’s control of the purse strings would force the government to negotiate in order to stay funded. But with the government in full command of the printing press – who needs purse strings?

This reform is a disaster. It decisively shuts the door on any possibility of meaningful economic reform. It dismantles the last shards of an institutional possibility of halting Venezuela’s slide into hyperinflation. The pain this will inflict on our country will take a generation to erase. It’s that serious.

The government’s “Thelma & Louise” tactics can only mean one of two things: they want to force the opposition into some sort of nuclear option quickly (i.e. a Constitutional Assembly or a Recall Referendum), or they simply want to destroy Venezuela. Because, make no mistake, Venezuela is very much the car in this analogy.

Whatever the reason, things are bad and getting worse. Gird your loins, folks.