Watching Venezuela Implode

Feeank wrote:

Well, let's say it with music

Singer was shot in the head last night, his condition is critical but he's still alive.

And yet, the government makes jokes and calls people complaining about insecurity deluded. f*ck them, for real.

Following the Dictator's Handbook step-by-step, the Chavez government bans the private purchase or sale of firearms or ammunition, restricting government and security purchases to the single state-owned manufacturer/importer.

Of course, even the Venezuelan government acknolwedges that one of the primary groups perpetrating the violence is ... the government itself:

Human Rights Watch[/url]]Violent crime is rampant in Venezuela, where extrajudicial killings by security agents remain a problem. The minister of the interior and justice has estimated that police commit one of every five crimes. According to the most recent official statistics, law enforcement agents allegedly killed 7,998 people between January 2000 and the first third of 2009.

Impunity for human rights violations remains the norm. In 2010, prosecutors charged individuals allegedly responsible for abuses in less than 3 percent of cases investigated.

Venezuelan prisons are among the most violent in Latin America. Weak security, deteriorating infrastructure, overcrowding, insufficient and poorly trained guards, and corruption allow armed gangs to effectively control prisons. Hundreds of violent prison deaths occur every year. In June 2011, at least 25 people were killed and over 60 seriously injured, including prisoners and National Guard members, after clashes between inmates in the El Rodeo prisons.

What's the Libertarian solution? Yeah, he's a dictator who is ruining Venezuela in very definite ways. The classical liberal approach would be to invade and topple him if it affected our interests, but otherwise to trade with them until enough countries complained, and then embargo. Conservatives would say "why should we interfere in another country when we have enough trouble here"?

What's Libertarian foreign policy like in this situation?

I suspect the policy would be to do nothing, letting citizens engage or not, to trade or not, as they chose. If the situation developed into an active threat to the country, then there'd be a significant and strong response. But if citizens were meddling over there and got in trouble, they'd probably be mostly on their own.

I doubt there would ever be an embargo unless a threat developed, and I think a military response would be much more likely. I don't know how accurately I understand Libertarianism, but I suspect the overall policy is live and let live, but if you bite us, we will stomp you so hard you'll never be able to do it again.

Aetius would be much more credible on this subject than I am, however.

Robear wrote:

What's the Libertarian solution?

A libertarian government (such as it might be) would likely just publicly denounce the aggression of the Chavez government, point out how his policies are actually very harmful, and encourage Venezuelans to peacefully make different choices in the future and resist the aggression of his government. Anyone who is peaceful would be free to trade and move back and forth - on the libertarian side, anyway. There would likely be an exodus of Venezuelans to the libertarian country, where they would be free to live and work and possibly become citizens like anyone else. The libertarian society simply would not consider invading Venezuela, and the impoverished Venezuela would not be a credible threat to the libertarian country, so there would be little need for military action (though it's likely that private military and security organizations from the libertarian country would find lucrative employment opportunities in destabilized Venezuela).

The classical liberal approach would be to invade and topple him if it affected our interests, but otherwise to trade with them until enough countries complained, and then embargo.

I'm not sure what definition of "classical liberal" you're using - such a response would be much more in line with a mercantilist or imperialist policy. Most classical liberals advocated staying out of foreign entanglements altogether and encouraged free trade as a means to produce peace and prosperity.

Conservatives would say "why should we interfere in another country when we have enough trouble here"?

Honestly, I can't think of any reasonably modern conservatives who would say that. The libertarian-leaning conservatives would be against invasion or embargo, and for free trade, but probably not free movement of peaceful people. The neocons would have no problem with your posited "classical liberal" invasion/subversion scenario - indeed, they would be chomping at the bit to take on more government debt and "go after those commies". The social conservatives would typically support the neocons in foreign policy, bringing God to the foreign heathens by force.

What's Libertarian foreign policy like in this situation?

There wouldn't be one, aside from the likely broad societal disgust with the aggression on display. There can't be a "Libertarian foreign policy" because that implies a government with granted authority over foreign policy, which largely wouldn't exist in a libertarian society. There would be as many libertarian "foreign policies" as there were individuals who interacted with Venezuela or Venezuelans - because to a libertarian society, government has no right to interfere with peaceful trading activities or emigration, nor a right to forcibly do anything to individuals in another country or society that lives differently from the libertarian society. The only time any government action might be necessary would be to resist direct aggression from the Venezuelan government or individuals, which is something that would either already be dealt with by the population's security arrangements in an anarchistic society, or a minimal voluntary military effort in a minarchistic society (a task made much simpler by the increasingly impoverished nature of the aggressor).

Hey look a thread about Venezuela.

Chavez again goes on a spending binge to boost his popularity ahead of the upcoming election, increasing government spending by 34% and boosting GDP by 5.4% year-over-year on his way to a 43% annual spending increase.

He's doing so with mostly with borrowed money and some created money. Inflation was 27.6% last year, and in the first six months of 2012 was 19.4%. The Chavez administration is also funding debt payments with additional debt despite the high price of oil and the resulting boost in revenue. The state-owned oil company increased its debt load by 40% last year to $35 billion.

Despite all the spending, electricity and basic consumer goods shortages continue to plague the economy. Even coffee, which was once a major export crop, is now almost impossible to find and what is available is imported.

Pray tell what was the inflation rate in Sudan (right?) when things went to crap there? Weren't food prices doubling a day or something?

Anyway, not saying this is anywhere as bad (yet), but it reminded me of that.

It was Zimbabwe, and it was much worse. But same sort of idea, yeah.

Let's be clear about it, though. Hyperinflation is not caused by increasing the money supply via taxation or borrowing (ie, issuing bonds). It is the case that governments issue money (and pull it back) via various means during normal operations, and these activities increase in crises. But until the government resorts to flat-out issuing money unbacked by *something*, hyperinflation is simply not in the cards.

Let's be clear about it, though. Hyperinflation is not caused by increasing the money supply via taxation or borrowing (ie, issuing bonds).

Taxation just moves money around, neither creating nor destroying it. However, because governments are considered creditworthy, government borrowing does have a small, ongoing inflationary effect, because banks lend money to governments, and then use those bonds as assets to create more lending against. So there's a definite inflationary effect while the bonds are being issued, and then a deflationary one while they're being repaid. If there's a default, you can get powerful deflation, which is what they're trying to avoid in Europe.

This isn't hyperinflation, though; hyperinflation happens when the government starts printing money to pay the interest on money it's already borrowed. The best definition I've personally seen for hyperinflation is that it happens when people are building inflation into their prices; if they know that replacements will be more expensive, they will price their stock higher than they otherwise would. This can snowball very, very quickly, where everyone is raising prices in anticipation of other people raising prices. It's extraordinarily destructive to an economy.

But until the government resorts to flat-out issuing money unbacked by *something*, hyperinflation is simply not in the cards

Heh, well, none of the governments in the world today actually back their money with anything whatsoever. Full faith and credit doesn't mean anything if you're not making an explicit promise about what you'll pay back.

Making a full-faith-and-credit promise to repay nothing on demand is precisely identical to an unbacked promise to pay nothing on demand.

Malor wrote:

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Making a full-faith-and-credit promise to repay nothing on demand is precisely identical to an unbacked promise to pay nothing on demand.

Unsuspended?!

Hi, Malor!

Heh, well, none of the governments in the world today actually back their money with anything whatsoever. Full faith and credit doesn't mean anything if you're not making an explicit promise about what you'll pay back.

Making a full-faith-and-credit promise to repay nothing on demand is precisely identical to an unbacked promise to pay nothing on demand.

Which explains why the US and the rest of the fiat world has suffered from hyperinflation over and over again in the last 80 years or so, I guess. Or, maybe, there's something wrong with your theory.

Robear wrote:
Heh, well, none of the governments in the world today actually back their money with anything whatsoever. Full faith and credit doesn't mean anything if you're not making an explicit promise about what you'll pay back.

Making a full-faith-and-credit promise to repay nothing on demand is precisely identical to an unbacked promise to pay nothing on demand.

Which explains why the US and the rest of the fiat world has suffered from hyperinflation over and over again in the last 80 years or so, I guess. Or, maybe, there's something wrong with your theory.

Well it's only in the last 20 years or so that Western economies have started seriously taking the hatchet to their reserve ratio requirements so, yeah, hyperinflation isn't ruled out.

Or, possibly, you still, after all this time, don't really understand what I'm telling you. You never have.

That post is a great example, right there. It makes very little sense. I'm saying 'full faith and credit is meaningless', and you're saying "Oh yeah? Well we haven't hyperinflated yet, so you're wrong!"

In other words, I said the sky is blue, and you just insisted that I'm completely full of crap, because tree trunks have bark on them.

Ahhh Malor... It's like you never left!

Malor wrote:

Or, possibly, you still, after all this time, don't really understand what I'm telling you. You never have.

That post is a great example, right there. It makes very little sense. I'm saying 'full faith and credit is meaningless', and you're saying "Oh yeah? Well we haven't hyperinflated yet, so you're wrong!"

In other words, I said the sky is blue, and you just insisted that I'm completely full of crap, because tree trunks have bark on them.

You are saying it is meaningless... He is saying it is meaningful and shows that it has worked for 80 years to back up that claim. He understands, I understand. We just disagree.

80 years is not good enough for you but it is exactly one lifetime.

It is fragile without institutions. But we have institutions to make sure hyperinflation does not happen. Destroy those institutions, hyperinflation will happen.

Welcome back

Or, possibly, you still, after all this time, don't really understand what I'm telling you. You never have.

Trust me, I follow you - you've explained it in great and sneering detail, with insults and psychic commentary, many times. I just disagree, based on what I can see and understand of economics.

That post is a great example, right there. It makes very little sense. I'm saying 'full faith and credit is meaningless', and you're saying "Oh yeah? Well we haven't hyperinflated yet, so you're wrong!"

Yeah, actually. If fiat currency worked the way you think it does, it would have blown up in the US and in many countries many times over the last 80 years. Or, alternatively, the danger is there, but it's so rare that it only happens in more than 80 years. Either way, it puts paid to your claim. In fact, fiat currencies are stable enough that we only see hyperinflation as a result of bad policies put in place in extreme situations, not as a natural outcome of fiat currency.

And I still invite you to reconsider your theory, on the basis that it's contradicted by, you know, history.

In other words, I said the sky is blue, and you just insisted that I'm completely full of crap, because tree trunks have bark on them.

Ironically, as Goman noted politely, you're showing you don't understand my argument at all. Think it through. If fiat currency is that weak - promises unsupported by anything - how has it lasted us this long without blowing up into hyperinflation?

Venezuela does this to people

Edit: Polarization, I mean : /

If fiat currency is that weak - promises unsupported by anything - how has it lasted us this long without blowing up into hyperinflation?

Because they haven't printed enough of it yet. Once they get to the point of printing money to pay the interest on the unserviceable debt load we're carrying, hyperinflation is the only possible outcome. Well, unless they choose to default, in which case we'll have a deflationary crash.

It's not a matter of if, it's a matter of when. One thing or the other will happen. The single strongest law in economics: things that can't go on forever, don't.

But we didn't really go off the gold standard until 1973. Up to that point, full faith and credit meant something. We actually were promising to pay gold in exchange for dollars, but we only honored that promise to foreign governments, not citizens. We broke that promise in 1973, and it is at that point that full faith and credit lost meaning. A full faith and credit promise to pay nothing is worth precisely the same as a street urchin's promise to pay nothing.

The serious monetary abuse didn't start until Greenspan's tenure, sometime around 1992. We had eight years of huge boom from money delirium, a near-crash, another five or six years of housing delirium, another much more serious near-crash, and now we're in what I believe is the final bubble, that of government debt accumulation.

The world has gone pear-shaped since 1992. It just gets sicker with each passing year.

This is why.

Because they haven't printed enough of it yet. Once they get to the point of printing money to pay the interest on the unserviceable debt load we're carrying, hyperinflation is the only possible outcome. Well, unless they choose to default, in which case we'll have a deflationary crash.

So, this is what I and others, including Cato, are saying - hyperinflation doesn't happen without some serious trigger to induce the massive printing of money, intentionally without backing, in an attempt to deal with a crisis. It's not the result of ordinary operations.

But we didn't really go off the gold standard until 1973. Up to that point, full faith and credit meant something. We actually were promising to pay gold in exchange for dollars, but we only honored that promise to foreign governments, not citizens. We broke that promise in 1973, and it is at that point that full faith and credit lost meaning. A full faith and credit promise to pay nothing is worth precisely the same as a street urchin's promise to pay nothing.

As for 1973, remember, you've defined the end of the Gold Standard as 1913 and also in the 30's. We've had numerous knock-down drag-outs as to why the US has been a fiat economy since those dates. If you're pushing it to 1973, are you backing off those earlier assertions - that we need an *actual*, 19th century style gold standard to come back? Or are you finally okay with the fractional reserve system that held from 1944 (Bretton Woods) to 1973? In the past, you've been adamant that the only functional gold standard is one that allows *citizens* to hold gold; you weren't okay with that privilege being given to governments instead.

Either you've made a big change in your thinking (which is fine, welcome even), or you're re-scaling to fit the argument at hand. But anyway, if we can agree that a trigger is needed for hyperinflation, then the argument on this point goes away.

Getting back on topic, you can add gasoline shortages to the list of problems Chavez's "reforms" have created. A combination of poor investment in refineries and accidents have hampered Venezeulan gasoline production, plus gas subsidies made Venezeulan gas cheap - cheap enough to create a burgeoning gasoline smuggling trade with Colombia, further reducing Venezeulan supply.

It is literally a textbook example of Hayek's fatal conceit. :\

Edit: And, for good measure, a handpicked audience of unionized steel workers breaks up a live Chavez speech by heatedly arguing with him.

http://www.bbc.co.uk/news/world-lati...

My ill-fated country is on the brink of collapse, hopefully whatever lesson there was for us to learn out of these 14-years will be learned.

Edit: some pics
http://www.noticias24.com/fotos/noti...

That looks like a lot more than two days worth of cleanup. Wow.

Can't help but wonder if the US isn't sort of nudging Venezuela toward dissolution. If you wanted to really hurt Venezuela, blowing up that refinery is one of the most effective things you could do.

Or perhaps government corruption and mismangement led to equipment failure. Incompetence is more common than covert action.

Yeah, I don't really buy that. They've been running their refinery just fine for umpty-ump years, and it's one of the most important pieces of their economy. Accidents do happen, but given the US's history in the area, well, let's just say that this is pretty darn convenient.

Don't forget Stuxnet. That kind of code could easily be aimed at the refineries of countries on the US's sh*t list.

I think you give the Venezuelan government too much credit. But it's impossible for us to know either way.

I don't see the white house ordering any action that would risk increasing oil prices in the short term.