Indexing the economy step by step (I) | Pasqualina Curcio

As long as imperialism continues to manipulate the exchange rate and induce hyperinflation in this way, the indexation of the economy is urgent as an urgent measure to neutralize the effects of the attack on the bolivar, namely: pulverization of the purchasing power of the working class, decrease in household consumption levels, insufficient public spending, deterioration in the provision of public administration services, fall in national production and invasion of the US dollar.

Steps to index the economy:

Step 1. Establish a unit of account: the petro

The first thing that is required is to establish a unit of account that allows all the monetary expressions of the economy to be referenced: the prices of goods and services, wages, public spending, the amount of money, etc.

We propose the Petro (Pt) as the unit of account whose relation to the bolivar is obtained by multiplying the value of the petro (60 US $) by the exchange rate of the day. Today, that ratio according to the BCV is 231.858.677 BsS / Pt (60 US $ / Pt for 3.864.311 Bs / US $).

The unit of account is used so that all monetary expressions expressed in petros remain unchanged regardless of the daily manipulation of the exchange rate. A unit of account may or may not be a means of payment. What is proposed here is not new, the petro as a unit of account was announced by the national government in August 2018, however, this measure was in force for just 3 months as a consequence of the class struggle in which, on that occasion, the capital.

Step 2. Reference all monetary expressions to the petro

Once the petro has been established as a unit of account, all monetary expressions will have to be referenced to that unit. Thus, for example, if the price in bolivars of 1 kg of corn flour is 4.000.000, in petros it will be 0,017 Pts. (It results from dividing 4.000.000 by 231.858.677 BsS / Pt); if the minimum wage is BsS 7.000.000, in petros it will be 0,03; if the price of the basic basket is BsS 1.483.895.532, in petros it will be 6,4 Pts; if according to ECLAC estimates, the GDP is BsS 160.304.505.261.110.000 in petros, it will be equivalent to 691.388.855 Pts .; the approved public spending for 2021 that adds BsS 3.972.000.000.000.000 will be 17.131.125 Pts .; and the 2.166.898.704.103.480 bolivars that circulate in the economy will be equivalent to 9.345.773 Pts.

So, if tomorrow it occurs to imperialism to intensify the attack on the bolivar as it usually does when there are electoral campaigns and changes the monetary scale of the bolivar by marking on its web portals an exchange rate of, for example, 10.000.000 BsS / US $, automatically the unit of account will become 600.000.000 BsS / Pt (the result of multiplying 60 US $ / Pt by 10.000.000 BsS / US $) instead of 231.858.677 BsS / Pt. As all prices and monetary expressions are referenced to the petro, their amounts in bolivars will be automatically adjusted depending on this new criminally manipulated exchange rate. The Kg of flour that is equivalent to 0,017 Pts will now become 10.351.132 BsS / Kg (it results from multiplying 0,017 Pt / Kg by 600.000.000 BsS / Pt) which is not surprising because the prices of goods with or without indexation are always adjust according to exchange rate variations, like the entire basic basket which will become BsS 3.840.000.000, but the monthly minimum wage will also be adjusted automatically without waiting for any presidential decree and will go from BsS 7.000.000 to BsS 18.114.482 (resulting from multiplying 0,03 Pt by 600.000.000 BsS / Pt).

Likewise, public spending will be automatically adjusted without waiting for modifications by the National Assembly and will become, in bolivars, 10.278.675.056.875.300. For its part, GDP will become BsS 414.833.313.124.900.000 instead of BsS 160.304.505.261.110.000, not because we will produce more overnight but as a consequence of the new monetary scale imposed by imperialism when manipulating the exchange rate from 3.864.311 BsS / US $ to 10.000.000 BsS / US $ overnight. The quantities produced remain the same but multiplying them by higher prices will result in a higher GDP.

In this case, the amount of bolivars circulating in the economy must also be adjusted automatically based on this new monetary scale and must go from BsS 2.166.898.704.103.480 (equivalent to 9.345.773 Pts) to BsS 5.607.464.164.311.120,00, 9.345.773 (resulting from multiplying 600.000.000 Pts by XNUMX BsS / Pt).

This “additional” amount of bolivars will not generate inflation, among other reasons because it is varying in the same proportion as the prices of all goods and services, salary, budget and GDP. In fact, the percentage of bolivars that circulate in the economy with respect to GDP will remain the same, that is, 1,35% that results from dividing BsS 5.607.464.164.311.120 by BsS 414.833.313.124.900.000, or 9.345.773 Pts between 691.388.855 Pts, or BsS 2.166.898.704.103.480 between BsS 160.304.505.261.110.000, however you like it, it will always give you 1,35%).

When indexing, everything will remain the same in the economy, the proportion between the minimum wage and the basic basket will remain the same, that is, the salary will reach for the same 0.4% of the basic basket (it results from dividing the minimum wage equivalent to 0,03 , 6,4 Pts between the basic basket equal to 2,5 Pts); Public spending will continue to represent 1,35% of GDP and the amount of bolivars will continue to be XNUMX% of national production, with the only difference that, in bolivars, there will be several more zeros to the right depending on the intensity of the attack on our currency within the framework of this unconventional war declared against the Venezuelan people.

The issue of the highest number of leading zeros is a matter of concern for many, including myself, however there are several aspects that we must point out. First, we will have the zeros on the right with or without indexing since this depends on the degree of criminality of imperialism, to the tests of these 9 years I refer in which we have added 10 zeros, incidentally confessed by Republican Senator Richard Black. Second, between the concern of the zeros and that of guaranteeing that purchasing power does not continue to deteriorate each time the bolivar is attacked, we do not hesitate to prioritize the protection of wages and public spending over the zeros. Third, the concern about the zeros is attenuated because our economy, according to private surveys, is 100% banking, at least one person in each Venezuelan household has access to bank accounts and digital money, which means that the use of cash.

In addition to indexing, it is necessary to take measures to reverse the distortions that have accumulated during these years as a result of the attack on the bolivar, among them, the pulverization of the monthly minimum wage that only reaches 0,4% of the basic basket, the drop in public spending to levels of 2% of GDP, the historical average being 33% and the low amount of bolivars circulating, which is equivalent to 1,3% of GDP, and should be at least 50%. The other 4 steps to reverse these distortions will be developed in the next installment.

 

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