Watching Venezuela Implode

Pages

It would laughable, if it didn't negatively affect millions of people. The man seriously believes that changing the exchange rate and devaluing the currency will bring prosperity, despite the uniformly negative historical record of such actions.

I don't think he actually believes that his changes will bring prosperity, he's just trying to minimize impact of devaluation on the poor. Also, there's an easy solution to curbing the black market dollar exchange - just lift the unnecessary regulations that cause the black market to flourish in the first place. This would of course mean that Chavez's grip would be shaken, so it's a no-go, of course. I'm pretty interested how it will eventually turn out, all this nationalization and economic stupidity has to backfire sometime (I hope).

Wrong. This is good for Venezuela economically. Real capitalists know.

Here is a better non political article.

http://www.bloomberg.com/apps/news?p...

The devaluation will cut the budget deficit in half by giving the government more bolivars for each dollar of export revenue from state oil monopoly Petroleos de Venezuela SA, according to Boris Segura, an analyst with RBS Securities Inc.

The deficit will equal 3.2 percent of gross domestic product this year, rather than the 7.4 percent of GDP it would have equaled without a devaluation, according to RBS forecasts.

The country’s 27 percent annual inflation rate is already the highest among the 78 economies tracked by Bloomberg. Finance Minister Ali Rodriguez, who has been forecasting 2010 inflation of between 20 and 22 percent, said the devaluation may add as much as 5 percentage points to the rate while Chavez, 55, threatened yesterday to seize any stores that raise prices.

Sounds great.

If the theme that inflation is going to kill the Venezuelan economy, it would have been dead by now.

2008 - 30% inflation
2009 - 25% inflation.

Forecast for 2010 - 22%. (It would have been 17% without this devaluation)

BTW - pre-Chavez inflation peaked at 100% in 1996.

Inflation is systematic to Venezuela because of institutions that have nothing to do with Chavez.

goman wrote:

If the theme that inflation is going to kill the Venezuelan economy, it would have been dead by now.

2008 - 30% inflation
2009 - 25% inflation.

Forecast for 2010 - 22%. (It would have been 17% without this devaluation)

BTW - pre-Chavez inflation peaked at 100% in 1996.

Inflation is systematic to Venezuela because of institutions that have nothing to do with Chavez.

Are there still institutions that have nothing to do with Chavez? You should let him know so he can undermine them.

goman wrote:

If the theme that inflation is going to kill the Venezuelan economy, it would have been dead by now.

2008 - 30% inflation
2009 - 25% inflation.

Forecast for 2010 - 22%. (It would have been 17% without this devaluation)

Just because it takes a few years to destroy what economic gains have been made in Venezuela doesn't make it any better.

BTW - pre-Chavez inflation peaked at 100% in 1996.

Hey, when the bar is that low, how can one fail?

Inflation is systematic to Venezuela because of institutions that have nothing to do with Chavez.

Really? How can it not have anything to do with the government when the government controls the currency and the banks through threats and nationalization? Who exactly are the institutions causing inflation?

Average inflation 1990s - 44%
Average inflation 2000s - 21%

Average growth rate per year 1990s - 2.5%
Average growth rate per year 2000s - 4.0%

Chavez was first voted into office in 1999.

Aiteus - I said Chavez not the government.

Also there is backlash from older pre-Chavez policies that has effected Venezuela to this day. From 1961 to 1983 the Bolivar was pegged to the Dollar at the same rate.

Obviously that could not last forever, so one day the Venezuelan bankers closed all banks, and the government was forced to devalue the bolivar. Relatively High inflation and devaluation of currency has been norm since that time.

goman wrote:

Aiteus - I said Chavez not the government.

Ummm ... ok. He's almost to dictator status, so I have a hard time differentiating the two. My bad.

I am aware of the miserable history of the Venezuelan economy. It's full of really dumb decisions like this one, attempts to deny economic reality. There's a reason the black market rate is 6-to-1 and even the devalued rate is 4-to-1 (versus dollars). And threatening to seize businesses if they raise prices? What're they supposed to do, starve? Obviously, the answer is yes.

Hey, devaluation and price controls totally worked for Zimbabwe. Totally.

Aetius wrote:
goman wrote:

Aiteus - I said Chavez not the government.

Ummm ... ok. He's almost to dictator status, so I have a hard time differentiating the two. My bad.

I am aware of the miserable history of the Venezuelan economy. It's full of really dumb decisions like this one, attempts to deny economic reality. There's a reason the black market rate is 6-to-1 and even the devalued rate is 4-to-1 (versus dollars). And threatening to seize businesses if they raise prices? What're they supposed to do, starve? Obviously, the answer is yes.

Well stop with the dictator charge then you might see what is really going on. The multinational corporations propagandize just as much as Chavez does.

Actually he is trying to protect the poor from starving by instituting price controls. The government is subsidizing the companies that sell foreign food by having a lower currency exchange than the "non-essential" rate. So his only recourse is to threat nationalization.

The devaluation is much needed in Venezuela. It would probably be better if they let the Bolivar float though. But I never said Chavez and Venezuela (look at their history) are brilliant at economics. I said Chavez on average was better than what came before him.

Malor wrote:

Hey, devaluation and price controls totally worked for Zimbabwe. Totally.

Fixed rate is worse. Since you will have to devalue eventually.

This article is crap revisionism (see my post above about inflation and gdp) but it has some interesting facts in there.

http://www.bloomberg.com/apps/news?p...

Caracazo’ Riots

In 1983, President Luis Herrera Campins devalued the bolivar and established a multi-tiered exchange system, known as Recadi, after oil prices plunged. Inflation soared to 40 percent in 1987 from 7 percent in 1983 as capital flight led Herrera Campins’s successor, Jaime Lusinchi, to devalue the currency further.

By the time Perez replaced Lusinchi in early 1989, the system had collapsed -- the country was running out of foreign reserves and food shortages were mounting. Perez eliminated the multi-tiered system, unifying the currency at the free-market rate, and lifted price controls. Consumer prices soared 21 percent in one month alone, leading to the “Caracazo” riots that killed hundreds and spurred Chavez, then an Army officer, to accelerate his coup plans.

Segura said Latin America’s debt defaults and recessions in the “Lost Decade” of the 1980s were caused in part by these government controls over markets.

The risk “is corruption and bureaucracy,” Segura said. “You’re going to have exporters under-invoicing exports, importers over-invoicing imports. I’m thinking about Latin America in the 1980s and it was a mess.”

The lesson from that, goman, is that if you f*ck with the money to steal wealth out of the economy, the economy gets poorer, and it continues to get poorer for a long time thereafter, due to destabilizing effects. The economy reorients itself to service the people who are being given the money.... people who have vouchers claiming that they've put wealth into the system, but who haven't actually contributed anything. Do enough of that, and the economy collapses.

Further, the economy becomes dependent on the money from nothing, and if the government STOPS printing, the immediate pain can be very dire. But if they DON'T stop, the underlying damage keeps accumulating, as the economy orients itself more and more to try to grab the cash from the money spigot, instead of producing real wealth.

The longer they keep it up, in other words, the worse the pain gets, and the worse STOPPING gets.

4% growth in a developing market like South America, loaded with resources, is pretty terrible... and in in the face of 20% inflation, I question very seriously whether most measurements of economic output would be very informative. It's hard as hell to even measure inflation, because it affects different parts of the economy at different times; trying to also measure productivity against that backdrop would be harder still.

Further, in your own numbers, cutting inflation by half correlated with a 60% improvement in growth rate.

Well stop with the dictator charge then you might see what is really going on. The multinational corporations propagandize just as much as Chavez does.

Actually he is trying to protect the poor from starving by instituting price controls. The government is subsidizing the companies that sell foreign food by having a lower currency exchange than the "non-essential" rate. So his only recourse is to threat nationalization.

Hahha yea, he's a real champion of the poor. Thank god for Chavez, the quality of life is tops down there. He IS a dictator, I'm not sure who you think has power down there, but it's him. He's a mean spirited man who won't ever let go of his power. I don't usually agree with Malor on economic issues, but he's right. Chavez is on the express train to Mugabe town.

MaverickDago wrote:

Chavez is on the express train to Mugabe town.

Well put. Strict regulation of economics means that you're making it less effective, hence making everyone (or more usually everyone but ruling clique and their friends) worse off. Venezuela is basically an Arab emirate - country with autocracy dependent on oil exports - and Chavez fits right in as an autocrat.

MaverickDago wrote:
Well stop with the dictator charge then you might see what is really going on. The multinational corporations propagandize just as much as Chavez does.

Actually he is trying to protect the poor from starving by instituting price controls. The government is subsidizing the companies that sell foreign food by having a lower currency exchange than the "non-essential" rate. So his only recourse is to threat nationalization.

Hahha yea, he's a real champion of the poor. Thank god for Chavez, the quality of life is tops down there. He IS a dictator, I'm not sure who you think has power down there, but it's him. He's a mean spirited man who won't ever let go of his power. I don't usually agree with Malor on economic issues, but he's right. Chavez is on the express train to Mugabe town.

I don't know about Maverick, but this being true does not at all imply (for me) that multinational corporations are somehow innocent or without blame for the situation. There's been plenty of ridiculous stuff going on in Venezuela for decades, and there's loads of room for more than one villain. But screwing with the money supply is a purely government thing now that Chavez has his thumb on the banks, and it'll do more economic damage than even the biggest, greediest corporations - who do, after all, contribute at least some productivity and growth. And note that it's not the adjustment that's the problem - it's the reason the adjustment was made, and the failure to accept the real exchange rate (black market minus illegality markup) that is the problem. He's been printing money, which is stupid, but he's also trying to block the results of that printing, which is beyond stupid. Price controls don't make things cheaper for poor people, they simply cause shortages. If something isn't economically practical, guess what? It tends not to happen.

Venezuela soldiers shut shops accused of profiteering

Oscar Meza, director of a Venezuelan economic think tank, Cendas, predicted the move would push annual inflation above 33%. "It's impossible for prices not to be adjusted," he told the Associated Press. "If they aren't adjusted, they'll disappear."

BTW - for those that want to know where I got my numbers from. Here

http://www.indexmundi.com/venezuela/...

MaverickDago wrote:
Well stop with the dictator charge then you might see what is really going on. The multinational corporations propagandize just as much as Chavez does.

Actually he is trying to protect the poor from starving by instituting price controls. The government is subsidizing the companies that sell foreign food by having a lower currency exchange than the "non-essential" rate. So his only recourse is to threat nationalization.

Hahha yea, he's a real champion of the poor. Thank god for Chavez, the quality of life is tops down there. He IS a dictator, I'm not sure who you think has power down there, but it's him. He's a mean spirited man who won't ever let go of his power. I don't usually agree with Malor on economic issues, but he's right. Chavez is on the express train to Mugabe town.

Actually it was Perez in the 1990s that was on the Mugabe train. See my post above about inflation. But he was backed by the USA and multinational interests. As you can see in my posts above Chavez has been better. The poverty rate has gone down.

So I posted the facts, and propaganda still peruses your posts and others from the first post down. Venezuela will not implode because of this devaluation. It is just one of many that Venezuela has had to deal with in the past 30 years.

Poverty and crime was and has been rampant pre and post Chavez. Don't delude yourself on that for propaganda points.

Imagine - Even after 10 years of dictatorship/communism stores are still not owned by the government.

Chile 14,000
Argentina 12,500
Venezuela 12,300
Uruguay 10,700
Brazil 9,400
Suriname 8,200
Colombia 8,200
Peru 7,300
Ecuador 7,100
Bolivia 4,200
Paraguay 3,900
Guyana 3,600

GDP per capita

Real Capitalists know these facts and don't let propaganda get in the way. There are opportunities abound in South America.

Real Capitalists know these facts and don't let propaganda get in the way. There are opportunities abound in South America.

And it's a much safer investment in any of the countries that DON'T have a narcissist dictator that, at the drop of the hat could start nationalizing businesses.

Venezuela will not implode because of this devaluation. It is just one of many that Venezuela has had to deal with in the past 30 years.

The money printing causes the devaluation, which reduces living standards and f*cks up the economy. The price controls will cause the implosion.

Remember what I'm telling you, goman. Your economic prescriptions are getting a full-on test. Print money for everything you need. Let's see how it works out for Venezuela.

MaverickDago wrote:
Real Capitalists know these facts and don't let propaganda get in the way. There are opportunities abound in South America.

And it's a much safer investment in any of the countries that DON'T have a narcissist dictator that, at the drop of the hat could start nationalizing businesses.

Real capitalists don't go for "safe" investments. They invest in new interesting things.

What exactly is a Real Capitalist?

Quintin_Stone wrote:

What exactly is a Real Capitalist?

I'll answer your question for five dollars.

We've got a Venezuelan on the boards, you know. Anyone want to get Feeank's take on all this? I know he's not pleased with the state of gaming in Venezuela.

Real capitalists don't go for "safe" investments. They invest in new interesting things.

Real capitalist don't like being told "here 5 dollars, that farm you used to own, its ours now". Their isn't any in Venezuela that's worth that hassle that isn't found in its neighboring nations.

Quintin_Stone wrote:

What exactly is a Real Capitalist?

Apparently someone who wants to print money, then blow it on risky ventures. And why not? He can always print more!!!

MaverickDago wrote:
Real capitalists don't go for "safe" investments. They invest in new interesting things.

Real capitalist don't like being told "here 5 dollars, that farm you used to own, its ours now". Their isn't any in Venezuela that's worth that hassle that isn't found in its neighboring nations.

Doesn't get more interesting than being nationalized.

Pages