Chavez's Keyensian economy imposes price controls because inflation is rising too fast. Governments blame this rise in price on private companies, making them out to appear greedy. The government hopes that its central banking money-printing and its consequences doesn't get revealed. This way they can hide their role in causing inflation. What causes inflation? Governments printing money and dispersing it through the economy. Prices would remain stable if government stayed out of the economy with the only tool they know--money manipulation. Price controls lead to product shortages because the producers of those goods look for better markets than the poor ones created by governments.
According to Robert Wenzel at Economic Policy Journal, Hugo Chavez's central bank has increased that country's money supply by an astounding 57%. No wonder prices are climbing. He explains:
The Venezuelan government has put price controls into place in the country, as a result of climbing prices. But the cause of the soaring prices is out of control money printing by the Venezuelan central bank.Venezuelan M2 money supply has grown by 57% over the last year!
With that much new money chasing goods, it is not surprising that price inflation is soaring. You can't fix the problem by decreeing less money should be spent on goods, when there is a lot more money in the system chasing those goods. It simply results in shortages. If a government, say, decrees that Rolls Royce automobiles must be sold for $100, Rolls Royce dealers will be sold out of cars within 15 minutes, the showrooms will be empty and Rolls Royce won't be supplying any more cars to that market.
Decree that farm prices should be below market prices and farm products will disappear from shelves, with farmers less willing to supply more product. Long lines ensue as the method of rationing what food does come to market.
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