Watching Venezuela Implode

MrDeVil909 wrote:

I don't doubt there are plenty of hardships, but I thought this discussion would benefit from a few numbers.

As I said before, any stats provided by a government-run agency like the quoted INEC (Instituto Nacional de Estadísticas y Censos / National Statistics and Polls Institute) or the Venezuelan Central Bank (also not independent) are suspect, wrong or doctored, probably all at once, and even more so, manipulated to portray Venezuela as a beacon of justice and equality.

Truth is, when Chavez assumed office back in 98', Oil prices were at an all time low, and shortly after prices sky-rocketed for reasons hardly related to him. So we went from having to make do with what little budget we had back in the 90's to literally, for 14 years non-stop, be drowning in Oil money. And yet 14 years later we're still a country without a proper health system, with the highest homicide rates in the world and a large % of the population dependant on public spending and the whims of the ruling party. What happened to all that Oil money? Chavez gave it away, to support his regime he bought consciences in and out, and what little was left he used it to apply populist measures.

When you're drowning like most low-class Venezuelans are, if someone pulls your nose out of the water to catch your breath you think that's the best thing ever. Please try to understand this: The opposition didn't oppose Chavez because he had the low-class vote, or because he was Fidel Castro's biggest fan, they opposed him because he had all the tools and resources to turn the country around and put it in the path of progress and development, and yet he deliberately chose to keep it poor and gullible. He had the chance to pull the country as a whole out of the water, to make everybody's life standards "better" but he decided instead that he could just do enough to look like he was helping the poor while using most of that money to fund and empower leftist support in all the region while promoting polarization and social division inside.

Inspiring words from Venezeula's new leader.

I actually find it a little refreshing when politicians just let the batsh*t crazy out during their pandering.

Some numbers from Steve Hanke at Cato, with an estimate of the actual rate of inflation culled from black market exchange rates and figuring in shortages caused by the price controls.

IMAGE(http://www.cato.org/sites/cato.org/files/wp-content/uploads/venz_scarcity.png)

IMAGE(http://www.cato.org/sites/cato.org/files/wp-content/uploads/venz_inflation.png)

Two links:

http://www.forbes.com/sites/forbesle...

http://www.today.com/video/today/519...

Good luck trying to convince the world you have "the most advanced, tamper proof" electoral system ever.

That Forbes article reads like pure propaganda, both on behalf of the elected government and the company which provided the system. It's not far off in tone from some of the blatant ads disguised as articles in trade journals.

Something's about to happen, twitter is burstling with anticipation to some rumored big-wigged government official coming clean in the following hours with some pretty damning revelations, we'll see.

Things are getting ever more fun in Venezuela:

Venezuela to use fingerprint gadget against travel scam

Read that article to see just how f*cked up that economy is getting -- widespread shortages caused by price controls and limits on money flow, and the methods people are trying to use just to stay alive.

This is what printing money does to an economy.

There's always an outside cause (ie, something beyond the basic monetary system) for hyperinflation, though, even if it's just stupid policy. Fiat money itself is not enough to cause the problem, or else the world would have switched off of it decades ago as country after country fell. Countries routinely use issuance and removal of money from the money supply to change the behavior of the economy, and that happens without real risk of hyperinflation, and has for a century or so.

Zimbabwe and Venezuela (and other countries in the past) have been through decades of poor policy and economic and social/political shocks. Those non-monetary factors have to be taken into account when considering their fiscal problems.

There's always an outside cause (ie, something beyond the basic monetary system) for hyperinflation, though, even if it's just stupid policy.

No, actually, there isn't. Witness Zimbabwe, where they blamed every possible thing for their hyperinflation. But it went on and on and on, no matter what they did, until they started using American dollars.

Suddenly, they couldn't print their currency, and hyperinflation stopped instantly. All the rest of their stupid policies continued, and they had just as much corruption and outside influence as ever, but their economy started to recover immediately.

Basically, Robear, you're looking for reasons to discount the fact that we made a nearly perfect prediction of what would happen in Venezuela, and why.

I think you two are talking about two different things: the ability to print as much money as you want and actually doing so.

Policy is an outside factor to the nature of the economic system. And no, I wasn't referring to predictions about Venezuela; heck, I knew they were falling apart years ago, that didn't take any special knowledge. What I'm saying is as Yonder pointed out - hyperinflation comes about because of outside influences, including policy, on the issuance of currency.

But the primary factors in Zimbabwe were the extended civil war, and the redistribution of the agricultural sector, so my point stands. They would not have chosen those fiscal policies without the economic collapse caused by those events.

Malor wrote:

Basically, Robear, you're looking for reasons to discount the fact that we made a nearly perfect prediction of what would happen in Venezuela, and why.

BTW, are you aware how condescending this kind of mind-reading is? You just impute motives to people based on nothing they've said. It's strange and disappointing that you need these codas to your posts.

Malor wrote:

No, actually, there isn't. Witness Zimbabwe, where they blamed every possible thing for their hyperinflation. But it went on and on and on, no matter what they did, until they started using American dollars.

Funny true story:

A guy I know used to work for an American company that printed currency for countries that didn't have their own ability and didn't want to invest in the capability. They basically had the big-ass printers, fancy paper and good artists/engravers. He worked in sales and client relations. So Idi Amin contracted them to print their currency and he drew the short straw to go over there with the first batch to get approval and payment for the order. When he asked for the money the Finance Minister grabbed a bunch of the currency he'd brought over and said "No Problem!". My friend had to - gently - explain that payment had to be in US Dollars!

And then he went to his room and changed his pants. Twice.

Robear wrote:

And then he went to his room and changed his pants. Twice.

Pretty much!

Heck, Idi Amin was scary when he was over there and I was thousands of miles away. I can't imagine what it would be like dealing with his government officials. The stories were horrific...

Again, that's what happens when you print money to try to 'solve' economic problems. It hides them, but it makes them worse, not better.

It's like taking morphine for cancer. You may feel wonderful, but you're still dying.

Just to be clear Malor, what is it that you think Venezuela did wrong with their monetary policy?

And you do or don't think that other countries can learn from their example?

It would laughable if it wasn't so sad.

Venezuela is now suffering from shortages of everyday staples such as flour, oil, and sugar.

The Central Bank’s latest report delivers a stark portrait: 71 percent of grocery stores were voided of flour; 86 percent of milk; 85 percent of sugar. Supermarket managers are not allowed to hold stock of any products, lest the government fine them. As soon as new cargo arrives, it has to be sold in one day. This is usually not an issue, since storeowners more often need to impose sales quotas on certain items.

President Nicolás Maduro insists that he is victim of an “economic war” in which businesses refuse to produce the necessary amounts to meet demand, and the opposition leads campaigns to promote consumption that cannot be met.

The minister of food, Carlos Osorio, said on Thursday that during the next several months more than 400,000 kilos of produce will be imported from Nicaragua, Argentina and Brazil.

Crazy governments eventually fail.

President Nicolás Maduro insists that he is victim of an “economic war” in which businesses refuse to produce the necessary amounts to meet demand.

Yep, that sounds like a common business practice to me!

Robear wrote:

Crazy governments eventually fail.

And one of the definitions of insanity, in terms of government, is printing money to try to "solve" economic problems.

Yonder wrote:

President Nicolás Maduro insists that he is victim of an “economic war” in which businesses refuse to produce the necessary amounts to meet demand.

Yep, that sounds like a common business practice to me!

Oh, it's totally a conspiracy. Those damn businessmen refuse to run at a forced loss.

Malor wrote:

And one of the definitions of insanity, in terms of government, is printing money to try to "solve" economic problems.

Which is different from creating, destroying and borrowing money as a natural course of fiscal management.

Which is different from creating, destroying and borrowing money as a natural course of fiscal management.

Heh, as if we understood anything about how to manage an economy.

Nobody knows how to do that. They pretend to -- and things get more f*cked up with each passing year.

So... if nobody knows how to do that, it follows that your ideas about what works and what doesn't are also completely speculation, yes?

I tried that argument years ago, Hypatian. You'll find the answer interesting.

So... if nobody knows how to do that, it follows that your ideas about what works and what doesn't are also completely speculation, yes?

No, that doesn't follow. We f*ck up the economy when we try to control it, when we try to pick winners and losers. We refuse to let the creative destruction process happen, and that is what makes capitalism work. Bad ideas need to go away, and instead we back the worst of those ideas with unlimited piles of cash from thin air.

Without creative destruction, with central control and bailouts and attempts at managing the economy, you end up with what we have now, an economy that cannot properly correct itself, and which will eventually descend into total failure. See also: Greece. See also: Zimbabwe. See also: Venezuela.

You can't have "Capitalism: The Good Parts." It doesn't work that way.

It is very important to note that our predictions on outcomes in Venezuela have been very accurate, in broad terms.

Oh, right, that was the argument. I forgot that I've been here before, too. Not enough energy to dispute it again, though. Whee.