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Something is rotten in Venezuela

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Postby TechJunkie on 23 Nov 2013 17:54

Something is rotten in Venezuela

The value of Venezuela's currency, the Bolivar, has been plummeting:

venezuela_chart_1.png
venezuela_chart_1.png (84.93 KiB) Viewed 2580 times


The implied annual inflation rate in Venezuela is actually now in the triple digits, coming in at a whopping 283%, as shown in the chart below.


venezuela_chart_22.png
venezuela_chart_22.png (51.6 KiB) Viewed 2580 times


The implied monthly inflation rate is now at 54% per month, above the hyperinflation threshold of 50% per month. Venezuela is now the world's 60th example of hyperinflation.

Screen Shot 2013-11-23 at 3.44.41 PM.png


Like any socialist regime, the Venezuelan government's solution to this problem is to simply outlaw inflation. To make inflation illegal.

How do you make inflation illegal? They're using an increasing number of tactics. First, they have an "official" exchange rate between the dollar and the Bolivar, and it's illegal to exchange dollars for Bolivars at a rate based on the true value of the Bolivar. Part of the enforcement of the government's currency-exchange controls is to try to prevent people from learning the true value of the Bolivar, known as the "black-market" exchange rate. Last week, for example, they demanded that Twitter block tweeters who announce the black-market rate. People were using the URL shortener bit.ly to bypass the government's Internet censorship, so they blocked all of bit.ly last week. (Google Translate URL for that last citation for y'all who don't hablasteis Español.) (Also take a look at this, if you want to see into the mind of a "Freedom Fries!" chauvinist in Venezuela. [Google Translate])

But trying to maintain the fiction that there is no inflation isn't working. Venezuela's economy is crumbling, and the country is not self-sufficient in most areas of agriculture. They have to import two-thirds of their food needs, and more than half of their consumer goods. Those imports must be purchased in dollars, not Bolivars with a fictional value that only applies within Venezuela. That means that for any business to stay afloat, they have to price goods based on their value in dollars. So the prices on consumer goods in Bolivars appears to be skyrocketing, because the value of the Bolivar is plummeting.

The Venezuelan government's response has been to blame the business owners for "usury", for pricing goods based on their actual cost. For not maintaining the fiction that there is no inflation. Instead of attempting to address their inflation, they're burying their heads in the sand and pretending that there really is no inflation. They're trying to control prices, just like during the New Deal, and the gasoline crisis in the 70s. Fixing prices at below market prices prevents the market from doing its job, and the result is always shortages. In the last year, Venezuela has had shortages of butter, sugar, flour, toilet paper, nearly every consumer good. The government's response has been rationing. The people's response has been natural: hoarding. Just like with gasoline in the 70s in the US. The country is plagued by crippling blackouts due to a crumbling infrastructure, that further inhibit economic growth. Especially for the technology sector, like my engineer.

They need a scapegoat, so they're blaming the "hoarders". And increasingly they're also also scapegoating business owners for waging an "economic war" against the government. On Tuesday, President Maduro was granted decree powers to fight this war. We had a War On Drugs and a War On Terror. Venezuela is fighting a war against its own economy. The country now has no parliament and no supreme court to put checks on the insane economic policy.

Last weekend, to buy votes ahead of the upcoming local elections, President Maduro ordered the largest electronics retail chain in Venezuela to lower its prices to reflect the fictional official exchange rate. The government sent troops to enforce "fair" prices. He told the people to "leave nothing on the shelves".

Venezuelan President Nicholas Maduro wrote:We will guarantee everyone has a plasma television.


This was the result:



Government-sponsored looting:



Kind of reminds you of this, right?

After that, the government expanded its economic war, targeting textiles, shoe stores, toy stores, hardware stores and automobiles. Soon after that, Maduro announced a legal limit on the profit that a business can make, of 30%. The limit is based on the fictional value of the Bolivar that does not account for inflation, and so that means that doing business is now illegal in Venezuela.



Obviously, nobody is going to import electronics after what happened last week. Nobody is going to import shoes. Toys. Textiles. Hardware. Automobiles. Venezuela will soon be like Cuba, where people still drive cars that were built in the 1950s. Fidel Castro also waged an economic war against its own private sector. We all know how that turned out.

But wait -- the benevolent socialist regime is looking out for the people. Everybody deserves a plasma TV, right? Venezuela is entering into a joint venture with Samsung to build television factories in Venezuela. They're going to also need to build a lot of shoe factories, toy factories, hardware factories, textile mills, automobile factories, and more. Very quickly. But the government's cash reserves are down to $1.2 billion in liquid cash. So they're selling gold to Goldman Sachs, who will pay in dollars.

You can't simply outlaw inflation. We're going to see exactly why soon, as Venezuela slips into an economic depression. And we're also seeing a lesson on the Occupy-Wall-Street fallacy of scapegoating the "Bourgeoisie" for a country's economic problems.
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Postby Wayne S. Noches on 23 Nov 2013 19:19

Re: Something is rotten in Venezuela

Very nice write-up. I saw yesterday where the government took definitive action to address the problem by nationalizing a toilet paper factory.
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Postby coach on 24 Nov 2013 00:26

Re: Something is rotten in Venezuela

TechJunkie wrote:Like any socialist regime, the Venezuelan government's solution to this problem is to simply outlaw inflation. To make inflation illegal.

So, this is the problem with every single one of these conversations that I have been involved in, the problem is not socialism, the problem is the massive corruption and profiteering of the upper class. Discussing the relative merits of socialism using Venezuela as an example is preposterous because Venezuela is not a socialist state, it is a despotic feudalistic outlaw state. So, if you want to discuss the merits of despotism (we know where Pod falls in that argument), then we can do that. But, if you want to discuss the merits of socialism, you have to choose an example that is a real socialist regime in more than just name.
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Postby TechJunkie on 24 Nov 2013 00:39

Re: Something is rotten in Venezuela

Venezuela is not a socialist state? By what definition of "socialist"? Socialism is when the people own the production and management of their economy, yes? Venezuela is nationalizing industries. The people are taking ownership of the means of production. You read about the Samsung deal? The people are taking over the management of the economy. You read about the 30% profit limit?

Witness socialism in action:





Here's video of state (people) sponsored looting of a small local bodega (the upper class):



Here's another example of the evil upper class getting punished:

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Postby coach on 24 Nov 2013 16:26

Re: Something is rotten in Venezuela

TechJunkie wrote:Venezuela is not a socialist state? By what definition of "socialist"? Socialism is when the people own the production and management of their economy, yes? Venezuela is nationalizing industries. The people are taking ownership of the means of production. You read about the Samsung deal? The people are taking over the management of the economy. You read about the 30% profit limit?

It's a despotic and corrupt regime, those are bad no matter what they try to pretend their economic formula is. By what definition do you not call it despotic and corrupt?
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Postby TechJunkie on 24 Nov 2013 18:29

Re: Something is rotten in Venezuela

coach wrote:
TechJunkie wrote:Venezuela is not a socialist state? By what definition of "socialist"? Socialism is when the people own the production and management of their economy, yes? Venezuela is nationalizing industries. The people are taking ownership of the means of production. You read about the Samsung deal? The people are taking over the management of the economy. You read about the 30% profit limit?


It's a despotic and corrupt regime, those are bad no matter what they try to pretend their economic formula is. By what definition do you not call it despotic and corrupt?


The Maduro government is certainly despotic and corrupt. It's also socialist. That's part of the point here. Under socialism, "the people" equals "the government". When "the people" take over industries, really it's the government taking over industries. That's definitely what you would call corruption and despotism.

Even without Venezuela's rampant government corruption, we still have an example of why scapegoating the rich is futile. You can't improve your economy by attacking your own economy. Attacking your own business owners and forcing them out of business through regulations that defy market forces is a recipe for disaster. We are seeing why now. We have front-row tickets to watch the beginning of the economic depression.
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Postby JMT on 24 Nov 2013 19:16

Re: Something is rotten in Venezuela

Every once in a while, Tech and I are in agreement. This is one of those times.

Massive "regulations" have destroyed their economy, but coach's solution is always more regulation.
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Postby TechJunkie on 24 Nov 2013 19:54

Re: Something is rotten in Venezuela

JMT wrote:Every once in a while, Tech and I are in agreement. This is one of those times.


You know I did that on purpose right? You can choose to keep bickering over idiotic crap, like in the manufactured police brutality thread, or you can choose something else. (Always making the same choice would be boring.)

About that police brutality thing... Some people in the US waste a lot of time blaming cops for the fraction of a fraction of a fraction of encounters where they make serious mistakes, or for the fraction of a fraction of a fraction of cops who truly are bad. People who do that come from a perspective of not understanding what it's like when a society does NOT have effective police to protect it.

Here's an example. People are looting this electronics store. Nobody is stopping them. Who would stop them? Police. You can see the weak police show up at the one-minute mark. They stick around for one minute and then they leave without even going to the store that was looted. Too late anyway, the inventory is gone.



For the people who bitch about US law enforcement, I really want to know: is this what you would prefer?

Venezuela, More Deadly Than Iraq, Wonders Why

CARACAS, Venezuela — Some here joke that they might be safer if they lived in Baghdad. The numbers bear them out.

In Iraq, a country with about the same population as Venezuela, there were 4,644 civilian deaths from violence in 2009, according to Iraq Body Count; in Venezuela that year, the number of murders climbed above 16,000.

Even Mexico’s infamous drug war has claimed fewer lives.

Venezuelans have absorbed such grim statistics for years. Those with means have hidden their homes behind walls and hired foreign security experts to advise them on how to avoid kidnappings and killings. And rich and poor alike have resigned themselves to living with a murder rate that the opposition says remains low on the list of the government’s priorities.

more...


This is what my best engineer had to say yesterday about that NYTimes story:

Yes, part of that was what caused my brother's death, and its why I have 2 weeks without leaving my house, (not even a step outside my front door).
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Postby slamminshaun on 24 Nov 2013 21:03

Re: Something is rotten in Venezuela

TechJunkie wrote:
JMT wrote:Every once in a while, Tech and I are in agreement. This is one of those times.


You know I did that on purpose right? You can choose to keep bickering over idiotic crap, like in the manufactured police brutality thread, or you can choose something else.


196 countries in the world, and there's hyperinflation going on in one of them. This is just an isolated incident, a fraction of a fraction, an innocent mistake. Nothing to see here. Move along.
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Postby coach on 25 Nov 2013 00:21

Re: Something is rotten in Venezuela

JMT wrote:Every once in a while, Tech and I are in agreement. This is one of those times.

Massive "regulations" have destroyed their economy, but coach's solution is always more regulation.

I did not present a solution, I dispute the cause of the problem. Tech says it's socialism, I say it's corruption. Arguing that socialism doesn't work because the regime is currupt is like saying bike races don't work because Lance Armstrong does drugs. I guess according to you guys, if we got rid of the socialism, the corruption would be okay.

The point is, socialism is about sharing the wealth with the populace. If the government claims to be socialist, but then does not share the wealth, then it is not socialist, it is despotic or feudalistic.
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