In previous publications, I have touched on issues related to what happens in Venezuela in the economic sphere and its impact on society; Today I want to talk about a term that is a must in any economic conversation both of the ordinary Venezuelan and of the financial experts; either to use it as a design for the economic ills that affect us, or to sustain or support certain economic movements in a relatively subtle way. This term is SPECULATION.

Speculation refers to the investments made without having any control over the management of the assets in which the investment is made. And it is defined as the set of commercial or financial operations aimed at obtaining an economic benefit, based exclusively on price variations over time. This includes any investment, whether made in tangible assets, intangible assets or financial assets.

The structural characteristics of the Venezuelan economy serve as a platform to make the market for goods and services have a high speculative influence. When entrepreneurs and traders lose confidence in economic policy, which in this case is closely related to the exchange aspects, pricing directly depends on expectations, and this makes the economic circuit transcend inflation to hyperinflation.

The economic chaos that exists in Venezuela has encouraged speculation, which is mainly due to the profit expectations of businessmen and merchants, to its monopolistic structure, and to the inefficiency of the State to apply the necessary corrections through tax and fiscal instruments, making that the life of the Venezuelan is every day more uphill. The average Venezuelan lives every day in a constant struggle to survive in an increasingly hostile field, where the persistent and constant appearance of inflation, which has not been overcome in the last 30 years, has destroyed the salary and purchasing power of the common citizen, and therefore, their quality of life.

Within the studies of inflation mention is made of the lack of production and productivity of the country, but very few speak of the expectations of the economic agents, that is, the businessmen and traders, and the effect of transfer of the exchange rate on the prices. In simple words, we talk about inflation due to the lack of production and inefficiency of the government, which, although it is true, is not the only cause, but also the selfishness and unrestrained ambition of some people, which has turned this society in a real battlefield, where those who manage to survive are those who have learned to move to the rhythm of foreign currencies and cryptocurrencies.

The situation of prices in Venezuela is due to several multifactorial elements, but in the precise case of expectations, businessmen and merchants, which are basically price fixing agents, will need to recover confidence in economic policy, that is, trust in the national currency, exchange rate and legal security, to adjust the costs to the real transactions of the goods and services, and thus, these economic agents, seeing an economic policy that generates confidence, will prefer to wait for results before proceeding to change prices. However, this optimistic scenario, so longed for by the inhabitants of Venezuela, does not seem very feasible in the short or medium term due to the political situation of the country, since the government is in itself the element of bar for the flow of trust and stop the malign and perverse speculation that occurs in Venezuela.

But is speculation really perverse or is it rather a stigmatized word?

When we resort to economic theory and different financial texts and postulates we can see that everyone agrees that thanks to speculation prices are stabilized, liquidity is increased to assets, uncertainty is reduced, the market becomes more dynamic and greater are generated sources of employment. In other words, speculation helps gauge the supply and demand of many goods beyond the short-medium term and contributes to the relative stability of economic life. The efficiency of the market increases thanks to the action of the speculators.

Yes this is really so, then, what is happening in Venezuela? The answer is not simple to elaborate and less to translate into a single paragraph. It is, on the contrary, an arduous subject that requires to continue being studied and researched and that surely will contribute sufficient material for more than one post dedicated to the subject