Eli5: The Venezuelan crisis


I know things are absolutely terrible in Venezuela, but I don’t understand how it got this bad.

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Venezuela is a very oil-rich country. When oil prices were high, they spent lavishly on domestic projects, issuing a great deal of debt on the promise that the debt would be easily repaid thanks to their future earnings from oil (the oil companies were state-sponsored, so the government got that revenue directly). There was also massive corruption and graft, but it didn’t matter that much as there was more than enough money to go around.

Then, of course, oil prices fell. The tap was shut off and the free flow of money stopped. Debt still needed to be repaid, which lead to choaking the funding for domestic spending. This wasn’t enough, so the government started printing currency, leading to inflation. The economy collapsed under the weight of its own inefficiencies and corruption.