Are you tired of the delays in the publication of official economic statistics?
Do you feel a desperate urge to measure the magnitude of the economic crisis?
We bring you the solution. Here are our tips on how to create your very own set of economic indicators.
- Step 1: define what you want to measure. Inflation and scarcity seem to be pretty popular these days, but why stop there? You could also measure, for example, the levels of commercial activity.
- Step 2: choose your benchmark. It can be in monetary terms, in the amount of goods and services, hours. The rule here is to be creative, and arbitrary at the same time. You should choose a benchmark that is accurate and offers consistent information over time; credible, so we can rely on the validity of the information; and easy to interpret. Go out on a limb – it’s not like there are official statistics out there to contradict any claim you make. Your educated guess is as good as anybody’s.
- Step 3: register the variations on a weekly or monthly basis.
- Step 4: Voilà! You have created your very own economic indicator. Now you can show it off to your friends. Or you can sell it to bond investors.
Here are some DIY economic indicators you can begin building today:
- The price of a certain product. Try to choose a specific brand, so that you can control for variations. Fast food joints are a good choice. You could choose the price of the McDonalds french fries… No fries? Maybe that should go in a different index, or maybe you can use the yuquitas instead.
- The amount of product you can buy with a BsF 100 bill. It should be the same product and brand overtime. Chucherías in the kiosk in front of your office are always an easy pick.
- Number of supermarkets or drug stores you have to visit in order to find a specific product. It’s equivalent to the number of times you’re told no hay.
- Number of supermarkets or drug stores you need to visit to restock on groceries.
- Number of empty shelves in a supermarket or drug store. Try to pick shelves of a specific product. If the shelves are filled with a different products, you should register it as empty. For example, if the shampoo shelf is filled with mouth wash, then it’s empty.
- Number of different brands of the same product. This is more of a diversity indicator, but valid nonetheless.
Level of commercial activity
- Hours of operation of commercial premises: if they open later and close earlier; or if they open at all. This should be registered on a daily basis.
- Number of closed santa marías, the metal protection screens for display windows. You can choose a street you have to cross to get to work or a floor of a specific mall you like to visit regularly
If you don’t have the time (or discipline) to build your own economic indicators, you can always identify “signals” of economic instability. The signals are less precise, but valid nonetheless. For example,
- The length of the lines outside supermarkets are a clear sign of scarcity or that the Ariel or milk have arrived. In the case of drug stores, maybe it’s because the shampoo or diapers just came in.
- The level of boredom (don’t confuse with poor service or clumsiness) of the shop clerk tends to be correlated to the number of hours doing pretty much nothing, so it can be used as a sign of low commercial activity.
- The number of items missing from the menus in your favorite restaurant. For example, it’s pretty sad when you get the “we don’t have anything with chicken or beef.”
- When restaurants have plastic menus with prices written with markers so they’re easier to adjust.
- When you spot a car dealer that is completely empty. (Um, that would be all car dealers in Venezuela)
- Having to resort to bartering.
Many are already using their own DIY economic indicators. Our favorite one is the Rotisserie Chicken Index:
If you have already created your very own economic indicator, share it with us in the comments section below.
24 thoughts on “Economic Indicators for Dummies”
Miguel posts an Arepa Index every now and then:
Also worth mentioning is the now-famous (and absolutely serious) Big Mac Index:
I love how Argentina recently forced McDonald’s to lower their Big Mac prices so the country would rate higher.
Oh, yeah, Caracas comes in next to the worst for numbers of minutes needed to work to buy a Big Mac. Just above Nairobi.
Yes, please report how much a big mac costs in Venezuela now. I have used this concept for 14 years to gauge the true exchange value of the B.
Wish I could Luis, but I am presently in Boston with 2 feet of snow in the front yard.
Island Canuck is deeep into this.
Unprecedented, Astronomical Corruption and Theft Indicators:
NASA declined the task.
Dead voters vs. Still Alive ratio: 2/5
How good is the data from the Billion Prices Project for Venezuela(the professor is a Venny)?: http://bpp.mit.edu/
Dudes, the cigarettes. The price of a pack of Belmont. I just quit smoking and I was thinking…
2005…900 old bolivares
2007… 2000, 2300
2008: 3 FUERTES
2009-2011 (I was out of Venezuela and don’t recall)
2012…35 bolivares… back in Venezuela, got a job here.
2013: 50 then 60 bolivares
2014…70, 75 and then 90 bolivares
2015: 170 as of April 1 and 2015 as of September 1.2015. That is approx 3% of minimum wage, a heavy smoker that smokes a pack a day would need 1.2X minimum wages to support the vice.
I am glad I quitted, certainly the revolution impoverished me so much it helped my decision. When I took that job just after Chavez got elected in 2012, my salary was $1050 in the black market (bs. 14 in Dollar Today the day after Chavez won). A pack of cigarrettes was 0,31% of my salary….. Even though I work in a multinational company that has raised my salary twice of thrice a year, up to 120% more than when I started, my salary is now of $95. A pack of cigarrettes is now 0,77% Needless to say I will leave the country again in May, this time I think for a long, long time.
* Bs. 205 for a pack of Belmont as of September 1
Oh dear. We have here a government running on fumes, neglecting to import vital hospital/medical supplies and limiting food importation because of lack of foreign currency. Well, guess what, their scarce dollars just got less. A court in DC, today, just found Venezuela guilty of default for non-payment of 870 million dollars to Gold Reserve, putting all of the 112 billion dollar of Venezuelan bonds in jeopardy as well. Is an Argentina-style default just around the corner?
Dr Faustus as I read the Gold Reserve comunique I find the following paragraph : “After close of business on March 27, 2015, the same day that the default was entered, U.S. counsel appointed by Venezuela (the same counsel in the ICSID arbitration) entered an appearance for the purpose of opposing the entry of default and requesting that it be set aside. The Company has responded to Venezuela’s opposition on March 30, 2015, and THE MATTER WILL BE DECIDED BY A JUDGED IN THE NEAR FUTURE .”
If my reading of this paragraph is correct the collection of the ICSID awarded indemnity wont be enforceable until a judge decides on the formal question of whether the Venezuelan State has been duly served , something that may entail the conduct of a trial on this specific subject and of course more time to be spent on legal proceedings . However, its clear that whatever time it takes the financial noose is tightening ever more tightly arround the neck of the Regime until the combined pressure of all these financial pressures cause it to enter into a situation of financial default .!!
The open question after that happens of course is, what then ??
An excellent analysis. I couldn’t agree more. Nobody knows the ‘when’ yet, but the noose is indeed tightening.
This is an excellent (yet kinda depressing) mental exercise to develop in a country experiencing early signs of hyperinflation.
My own economic indicator (I’ve used for several years now to gauge the approximate “real” exchange rate in PPP terms) is the price of a 2 liter bottle of Coke. Last time I checked in, it was around 75 VEF. I think it does an amazing job because it’s a standardized product with lots of different inputs, even including a small component of overseas dividends; but mostly because its price isn’t regulated, a true rarity nowadays.
The most curious part about it was that it tracked the black market dollar pretty good up until 2010 or so: the Coke became even more expensive than the greenback at that point. Needless to say, the relationship was lost starting from late 2012 with the acceleration in black market deval; and at this point I’m not really sure how to interpret it: is it the “fair” price of the dollar? The one that would clear markets? The one that would make sense if we had a nor malfunctioning economy? Or is it just another fantasy?
I’d be glad to receive some feedback. Regards!
It is very interesting you ask that question. I think the answers goes as follows. The price of a product in Venezuela depending on imports was fixed to the marginal return price. Which means that the product you sell today with goods you bought previously, has to give you enough income to buy tomorrow’s. Now the problem is that you don’t now if the government was going to give you cadivi. So the safe assumption for unregulated products was positing that you would never have cadivi and so you should stick to the black market. And since people were earning higher incomes, you could pay twice for a coca cola since let’s say rice and meat were regulated (this for low income families and for middle income families you don’t care that much).
The fundamental problem is that if you forecast your margins based on the black market dollar (that has rocketed from 10 to 200 – times 20 – in three years) you make a product that is to expensive for the average consumer, let alone the poor one. So you forget about the black market and you set the price you think people will be able to pay. This answers your question I think.
Now, the problem with this is that in order to detach yourself from the black market, you have to assume that, at some point you will have access to cencoex or sicad. At that is not given. Therefore you reduce your exposition (you reduce your output) and if offer falls, and demands stays the same you can still ask for ridiculously high prices for a Coca cola. Now, you have also to take into account that FEMSA distributes other products that they carry in big coca cola trucks filled with other goods. So you can detach some products (like coca cola) from the black market and peg others (like juice for children, or cookies) to it. But what this rise in the black market dollar does is essentially diminishing the output companies are willing to sell. This is a downward spiral.
How about the price of gasoline divided by the price of milk. Oops milk cannot be purchased at any price.
Okay then how about the price of a new car divided by one bus fare. Oop new cars cannot be purchased.
How about money spent on Russian Mig fighter planes divided by money spent on hospitals in Vzla?
How about fireworks?
Speaking of expensive fireworks…
Maduro doublespeaking, March 30 2015:
“Somos un pueblo de paz, no queremos violencia ni guerra. Ahora, ejército bolivariano, Fuerza Armada, Aviación, milicia, pueblo de Venezuela… tienen que estar alerta. Todo el mundo pendiente de que las aguas y tierras de este país no sean tocadas por las botas del extranjero imperialista. Y que en eso se nos vaya la vida. Los problemas de los venezolanos los resolveremos aquí”.
“We are a people of peace, we don’t want violence or war. Now, bolivarian army, armed forces, aviation, militia, people of Venezuela… must be alert. Everyone alert so that the waters and lands of this country are not touched by the boots of the foreign imperialist. And that we lose our lives that way. The problems of the venezuelans we will resolve here.”
He also declared that they would continue signing agreements with Russia and China, so that the armed forces are prepared to protect the people and improve the defense of the country.
I just ran into this scientific paper:
Figure 2 is a world map, showing deforestation and reforestation areas. If you look closely, Venezuela is deforesting the Páez district in Apure and southern Táchira (rather severely) as well as the tropical forests of Amazons and Guyana. Although there is gain in Portuguesa and Lara.
To be fair, the deforestation is minor compared to what Brazilians, Bolivians and Argentinians are doing to their country.
Nonetheless it is worthy to take this into notice, since there are other ecological disasters unfolding, such as the accumulation of oil-refining bi-products (reported in this blog) and the multiple accidents occurring in what used to be PDVSA.
The price Venezuelans will pay for mismanagement, negligence and simple criminality will be high, and the reparations slow to be completed.
This may well be the only positive thing I’ve ever heard about Chabrutismo: less deforestation (not willingly, of course, accidentally due to the paralyzed economy).
but is that really true?, I recon there was a project that existed since the 60s to develop a big forest,t he project was called uverito and to my understanding it was going on until this government, and I also seem to recall it being called one of the biggest man made forests. Unless they were deforesting some other forests at n even faster rate than they were creating uverito…
The forest consisted of tropical firs which grew very quickly and when they reached a certain age and only then could be cut down to be made into pulp products , the forest was built but the trees were allowed to grow after they reached the age at which the pulp from the trees could be commercially exploited so they became unexploitable. The forest is still there , criss crossing it are dozens of long very straight roads communicating different oil producing holes . It lies east of the famous Cerro Negro oil fields .
I measure average billfold thickness
Thank you for this reassurance that we are not slaves to the experts and the tv news on economic matters…
I got a good one: chlorine tablets for pool cleaning. February 2014: 7.300bs for 50kg, that’s what I need for approx. one year. March 2015: 75.000bs!!! That was 2 weeks ago, a friend told me now it’s 90.000…
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