Venezuela’s Currency Has Had its Biggest Monthly Collapse
bloomberg.com
bloomberg.com
If you consider a market with two companies.
Company A that doesn't grow revenues or profits and company B that continually grows revenues and profits, which one would you invest in?
The answer is obviously once you realize that each company doesn't exist in a vacuum but is instead competing with other companies for the same investment dollars.
Currencies markets work in a similar manner in that you are never talking about a currency but rather you are explicitly talking about what a currency is worth with respect to another currency, or often implicitly with respect to the US dollar.
It's actually pretty amazing to think about the currency markets and how they are constantly reweighing each currency with respect to every other currency such that each currency has the correct valuation with respect to all others such that there is no available arbitrage opportunity.
So its not that the markets or wall street is being "mean" to Venezuela or punishing it, but rather they are trying to find the right balance of how many Boliviars one should get for each USD.
Unfortunately, there is a giant feedback loop that often means once a countries currency gets depressed enough they almost have no choice but to print money just to buy/import the essentials required for life. And this printing of money just has an feedback that increases inflation even more until its impossible to get out from without a bankruptcy, just google "Zimbabwe trillion dollar bill".
Maduro is facing assault on all sides due to this crises. Trust me he's rather be in the heady days of Chavez, when things were all kosher and happy.
He's a few inches away from losing power.
As someone who lived in Venezuela during Chavez's regime things were anything but "Kosher" and "Happy".
These are EVIL individuals who only want to make themselves rich at the expense of an entire nation.
Maduro is barely holding on to power. Maduro would desperately want the Chavez era.
Point being: Maduro is not creating this crises opportunistically, he's and idiot, and doesn't know how to manage things after the oil crash.
The problem with socialism the way I see it is that at some point there will always be a guy who wants to concentrate all the power to himself, like Chavez, Fidel, Mao, Stalin, etc. and then leave a big mess behind after they leave or after they have been in power for several years.
I am absolutely sure that Maduro, while incompetent, is in the same kind of problems Chavez would be, and is pushing the same agenda Chavez would have. Let's not get confused by personality cult here.
If you lived in Venezuela right around the time when Chavez died, you would remember vividly how you were able to access those Cadivi dollars, no matter how bad and annoying the system was with the three/four stupid folders they made you fill. Importers could buy stuff with their black market dollars and then replenish their stash when Cadivi finally payed them. As soon as Maduro took power he dismantled Cadivi and it has been next to impossible to get dollars at the official exchange rate. In my opinion that is the root of all problems, and yes, I do believe that under Chavez that would not have happened even if he was foolish enough to establish that exchange control for so long in the first place.
Hell, think about it, if tomorrow they really start offering dollars at whatever conversion rate, let's say 2000 but coming from the Central Bank, I can bet you everything I have this whole problem goes away immediately. There is an inherent quality at just being able to go to your bank to exchange currency instead of exchanging on a pool of people you know.
The thing with free rides is that, no matter how high or 'great' they sound on paper, they eventually end, and you see the real problems.
> "Importers could buy stuff with their black market dollars and then replenish their stash when Cadivi finally payed them."
Sounds just great. A 'great' working economy, working around arbitrage and fantasies. I don't need to have 'political biases' to see that Chavez, whose agenda crippled the entire private sector and killed every other possibility of economic growth that didn't depend on oil, would be in exactly the same position as Maduro.
But yes, we both agree that the person that started this whole craziness was Chavez. But I still disagree with you regarding what Chavez, or any other politician for that matter would have done in his shoes. I believe Maduro's main flaw is this attitude of not doing anything while the whole structure is crumbling. In my life, I have never seen any other politician like him unless we are talking about some of these government secretaries that end up being governors or mayors when the actual elected person starts slacking for whatever reason.
95% of the issue is oil prices.
Chavez would be strung up just as bad as Maduro right now if he were not already dead.
The 'free money' stopped flowing, and the system fell apart.
At the current prices, countries like Saudi Arabia and Venezuela can still turn a profit on their production, as opposed to the UK with their deposits on the North Sea or the US/Canada with shale oil.
But of course, there is always the question of who created Maduro, and Chavez is fully responsible for that disaster.
Chavez was able to paper over his incompetence.
Maduro can't.
So the plebes revolt.
Maduro and all his friends could be really incompetent running the country, but they are experts in controlling all the structure of power there.
I have Venezuelan engineer friends that were ousted of PDVSA, the national oil company, because they were great technical people but not politically sided with Chavez. They went to work for companies like BP, Repsol or Shell outside Venzuela but the people that replaced them were total Chavez supporters.
All those supporters could not expect to get anywhere near their current status if Maduro falls in disgrace. They would do anything to remain in power including taking weapons and killing people.
Venezuela has become one of the most dangerous place on earth.
PS: The people that aspire to replace Maduro are also socialist.
I can bet you even those new engineers at PDVSA will be voting to oust Maduro as well when the time comes. People are fed up with the lines for everything, and low wages caused by the massive inflation. What is needed right now is a proper vehicle to channel all that, which will need to be different from the opposition since they are closely resembling eunuchs of old times.
But what really bothers me is that whenever anybody points out the real reasons, the govt internally says that if they take out the exchange control they will face a coup d'etat, that it is supposed to control capital flight (right...). As for price controls, it is the child of always having these paternal govt since the 70s, that was always thinking what was best for the population instead of letting the market decide.
edit: I could see a terrible scenario playing out where domestic goods are now so damned cheap for anyone not in the country that the producers are incentivised to ship their stuff overseas to rich foreigners. It could be the domenstic buyers that are the only people who get screwed. This is all terribly complicated.
If I'm a guy with a cow and a gallon of milk is worth 1 boliviar today, but $0.80 tomorrow, I don't want your boliviar. I want a dollar, silver, 10 boliviars, or some bacon.
They have vast amounts of accessible light crude oil but due to their currency they're struggling to purchase/maintain the machinery in order to efficiently extract/refine and monetise it.
Talk about a vicious cycle.
Venezuela can't pay for its banknotes: http://www.bloomberg.com/news/articles/2016-04-27/venezuela-...
Simply because 'most things' that are sold in Venezuela are either imported - or depend on imports.
The Bolivar is crashing against all currencies, not just the USD - so anything: parts, fuel, TV's, entertainment - it all has to be imported, and it all got expensive.
'Internal inflation' can happen when there are more Bolivars floating around than before - even without outside currency markets to validate the price.
Ex: if there are 1 Trillion Bolivars in existence, and the government simply prints '1 Trillion' more and dumps them on the market. Guess what happens to prices? They will basically double every where.
So your shoes that cost 100 Bolivars, now cost 200.
It's becoming clearer, but I'm still confused.
Never mind that by paying their bills with freshly printed money they make all existing money cheaper.
Average Venezuelan can now buy less for their wage, but at least they've got some wage and it is stable or even grows number-wise. That's what makes this trap so dangerous.
What you pointed out - i.e. 'those holding property' - they don't 'benefit' - so much as their assets are in something that can't depreciate so quickly as currency.
If government prints massive bolivars - well - their houses go up by that amount proportionally. So they are somewhat 'insulated' from the inflation problems.
Now - because 'money printing' is a 100% signal of economic collapse, no 'asset' is going to save you at the end of the day, because as everything falls apart ... nobody has any money for anything, or rather, they have wads of worthless paper that nobody else wants ...
The govt is definitely destroying the economy, but just like in war economies, some people would benefit while a lot more will suffer. In here, the people suffering are people that depend on a wage.
I have stopped complaining about it because there is no real political leadership anywhere willing to do what is necessary to fix it, so the party will keep going on until they cannot pay their international obligations and the whole thing will start falling under its own weight.
What is slowly happening here is that this is morphing into another Cuba, where you will see the vast majority of the population earning these miserable wages, but they survive because of government subsidized food and services.
The worst part is that here the supply of such food is highly irregular so you see massive lines when people find out corn flour or whatever other product arrives at a store. But of course, if you have the means, you just buy whatever you want at market prices in certain stores and just avoid the whole thing. Prices that people living with a wage cannot afford.
So the real tragedy is this boiling frog effect. In 1989, there were massive riots because fuel prices increased, but now people are losing the will to fight for their rights, helped by lack of clear planning and leadership on the opposition. So I would say most people are just thinking of migrating somewhere else, Argentina and Chile especially, and frankly, I cannot blame them.
Many of the early backers of the Nazi regime were people who were able to get control of valuable industrial property and manufacturing equipment during the Weimar hyperinflation. Iirc, it's detailed in Albert Speer's book.
Inflation reduces the value of things priced in the currency, so the 'mortgage' is a financial product and so is worthless.
But try this: who is going to lend money to anyone to buy a home when the mortgage will be worthless in a few months?
Nobody!
The financial/credit system collapses so there are no real long term gains really.
You become 'more wealthy than your peers'. But in reality, it's crap for everyone. You become 'much less wealthy relative to everyone outside the country'.
Depends on what one values :)
Not true, the price will go up to track currency devaluation unless the price was pegged via contract or legislation. Even bread will see its price go up many times in day
They can print money to fulfil those obligations, effectively giving public sector staff a pay cut, pensioners a reduction in the value of their pension, etc.
Not really.
By 'printing money' they are simply 'taking value away from those already holding Bolivars'.
Printing money is just devaluing the Bolivars already in circulation - so you can think of it as a 'tax on cash'.
You can print paper, but you can't 'print' economic value and production.
Printing money to pay gov. employees is basically a 100% sign to everyone in the world that 'this economy is destroyed' - and that they should shut down all operations, cut their loses, get all their money out and exit in every way.
So it's a pretty bad signal.
You can run a tightly managed economy successfully but it's hard. Very hard. Completely free markets are cruel but corrupt tightly managed economies are moreso. It also becomes difficult to determine the difference between a completely free economy and a corrupt managed economy because without regulation the former tends to concentrate power until it becomes effectively or actually the latter.
Sometimes the only thing for a collapsing economy to do _is_ print money. It's what a failing state will do to prevent itself from becoming a failed state. It's not sustainable but it's like falling off a mountain, you have to do _something_ and devaluing your currency to keep your economy somewhat functional can be the "right" thing to do for a while.
No, this is upside down.
Printing money to pay debts, salaries - is what a 'failing state' will do to absolutely guarantee they will fail.
Central banks don't print money - they trade bonds or other assets in exchange for currency, and they do so at a rate to allow monetary expansion as the economy grows.
Cynically, you could say 'government issues debt, which is bought by central bank in exchange for $' which is very much like printing money, but it's not quite.
And 'gold' ... the amount of gold is so small it doesn't really affect anything.
A 'failing state' needs to restore confidence in it's institutions in order to get out of the hole, the last thing it can do is print money willy nilly.
The anti-populist measure would be to cap/cut government salaries, 'de facto' default on bonds - this is obviously a bad signal, but not as bad as printing money. A 'quiet default' i.e. signalling that 'there is no way we can repay so you'd better negotiate with us' is the pragmatic thing to do.
So if you no longer have the paper trail of things being bought and sold, who keeps track/makes public the amount of currency in circulation in this case?
If simply printing more money is a bad signal, why not just keep it secret?
There's a paper trail. It's just that when the Fed buys something the money is pulled from thin air. When the debt is paid back the principal returns to thin air, the profit goes to the US Treasury.
Not all government debt is purchased by the treasury though – it only does that in special circumstances to moderate the financial system. Most of is is purchased domestically and much of that by other pieces of government.
And you can't keep it secret. It's like supply and demand. More money means prices naturally raise because more people have more money to spend and will be willing to pay a higher price.
Because government debt first has to be bought by someone on the open market, for some market-based price.
Only then can they go to the central bank.
The Central Bank does not buy from the Government.
But there's a systematic problem there I would admit.
It can be a useful technique to tax wealth and provide liquidity. (i.e. "Quantitative easing")
But in any event: the US Fed, even their QE policies - are managed fairly intelligently. They're done in a manner that keeps the faith in the USD.
The USD because it's such a broad currency, gives a lot of opportunity for the Fed to do some crazy things.
Venezuela has a lot less 'wiggle room' - that said - small countries that act responsibly will do fine.
Sweden, Denmark etc..
* You can print money, but you can't print value. *
The value of the goods in Venezueala are priced in Bolivars. Bolivars have a fixed quantity.
If you 2x the number of Bolivars by 'printing money', then all those goods go up 'as measured by Bolivars' by 2x.
This normalization happens very - very rapidly.
Why? Because everyone is watching what happens.
The moment the Government prints X Bolivars, banks, currency traders, exporters, businesses basically 'mark down' the value of the currency, or 'mark up' the value of their products by that amount.
Many small businesses won't have the sophistication to do this, but the effects of the 'big banks and companies' doing this will make it pretty fast.
The only time you can safely print money is if there is more economic activity - and the expansion of the economy requires more currency. If you 'print money' at the same rate the economy expands, you can actually hold prices roughly stable.
As for widgets:
Anything produced internally - services, some agriculture - Venezuelans do this by simply 'doing it' - like all other nations on planet earth. Organize themselves intelligently.
As far as 'needed imports' - yes - once a currency crashes this is really bad. It's like losing your drivers license when you need it to get to work. No driving = no income = everything else gets bad.
In the short run, it will be hard, they have to basically live at a lower standard of living and restructure.
Once they are stable, and outside entities 'trust them' then they can get good credit, they people will accept Bolivars as payment etc. etc..
Also - they have to produce something of value.
Think: what is a Bolivar worth to someone outside Venezueala? Absolutely nothing. Really - it's only worth something if ultimately they can buy something from Venezueal.
So - a currency held by someone outside the market is really like an IOU to that country. An American holding Bolivars basically has an IOU from the Venezuealan economy - that can be exchanged for 'something' later, but Venezuealans have to be able to produce something that the American would want. Like Oil, berries, coffee, or some service or manufactured good.
The problem in Venezueala is not economic - it's political. They have old-style populist 'crony socialism', in which the government takes over everything, they don't know how to run anything, everything is run into the ground, and to boot - it's super corrupt: government officials are looting the treasury by all sorts of means.
The underlying populism of South American brand of socialism is much different that Eastern Europe or Asia. The issue is that there is a small minority of 'white people' descended from Europeans who are educated, wordly, somewhat competent - who own and run everything - and then large numbers of indigenous people who are illiterate aboriginals - at least in Europe the peasants had skills and formed an economic base. In South America, they are barely out of the Amazon jungle in many cases.
Now this is a very, very crude generalization - there is a lot of 'in between' and obviously tons of aboriginals who are totally up to modern standards.
But by enlarge, it's kind of ethnic war. The metzo Aboriginals have the voting power - they put blow-hard army goons and bus drivers in charge, their elite peers are just as corrupt as the 'capitalist class' and this is what you get.
The only 'alternative' is basically the 'white ruling class crony capitalism' which really wasn't super good for social progress. They under-invested in education and services etc. and so they lose power.
It's a really, really difficult situation in so many ways.
Civilization takes a long time to build, and can be destroyed quickly.
In fact, one of the major leaders of the opposition is a mestizo who graduated from Harvard. Totally agree the current govt is a bunch of assholes, in fact, make Chavez look like a terrific ruler, but as far as the race stuff, no, this is not Africa.
Whiter = more power/status. Maybe not so much in Venezuela as in other places, but a better comparison would be Brazil or possibly Mexico.
Africa - it's black/white - not a lot of brown.
Mexico I think is 40% aboriginal 40% mixed to varying degrees and 10% white, and that's how the money/power is divided.
The solution to Venezuela's problem is to produce more goods, either for internal use or to trade/export those goods, so that other goods can be imported.
http://www.tradingeconomics.com/venezuela/money-supply-m0
And then the banking system multiplies it by f(reserve requirement) modulo any capital requirements:
http://www.tradingeconomics.com/venezuela/money-supply-m3
From the ratio of M0 to M3, most of the expansion is from M0, so the Basel capital controls are actually slowing down a runway hyperinflation - to some extent at least. Seems to start in 2012, so I would guess that they started money printing to cover civil service salaries when the oil price dropped, and haven't looked back.
So you have it backwards. This almost entirely due to poor economic policies by the Venezuela, not something "external".
While the fall in oil prices has exacerbated the problem the core issue is the policy of plugging a huge budget deficit by printing Bolivars. This almost directly causes the huge local inflation and rapidly falling exchange rate as measured in the black market (i.e. the "true exchange rate). Combine this with strict currency controls (i.e. "fake" government set exchange rates that are not available to most people) you get shortages since Venezuela must import many essentials. [EDIT: And, as pointed out below, price controls are a key cause of the shortages.)
This situation while somewhat complex is a textbook example of these issues.
There are also other countries with multiple currencies. Like Zimbabwe that uses the USD and SAR as well as some others.
"Imported inflation" listed as "2." under "Causes of Cost Push Inflation".
http://www.economicshelp.org/blog/2006/economics/cost-push-i...
However, it misses the other side-effect of imported inflation, namely the effect of substitution. If good or service A is imported but priced in a relatively appreciating currency, and service B is non-imported and priced in the local currency, the price of B drops, driving demand upwards. If B is also exported, the export markets seeing a relative drop in the value of the currency B is priced in will also buy more of B, further driving demand upwards.
Consequently, imports become more expensive even without a drop in demand. Exportable items (or even just substitutes for imports) become more expensive in response to increased demand.
A bit more here:
http://www.economicshelp.org/blog/1491/economics/imports-and...
> but how does that turn into no one being able to buy milk (or other essentials)?
The problem is that these countries come with price controls for basic food. The food can be available on black market. The problem, it's much more expensive to produce than the current price tag on the controlled government market.
So there are two possibilities:
1. The industry goes bankrupt because of the laws. And I witnessed this first hand. I saw people and farmer throw away milk on the street. It makes no economical sense to produce at all.
2. Sell it on the Black market, or smuggle it outside of the country. This will depend on how strong is the local government on controlling borders and commerce.
The currency stuff is just a symptom of genuine lack of supply of goods/wealth.
The topic of inflation seems to be particularly of interest to conspiracy theorists who all claim to know exactly why it happens, who is to blame and how to fix it (it often sounds like "Government blah blah blah gold standard"...). The truth is there are some strong, well-researched but ultimately incomplete explanations regarding inflation, but really nobody knows.
So here is my understanding of the best current guesses about the topic:
Ignoring the specific example of Venezuela for a second. At a basic theory level: Inflation in country A does not depend on external currencies nor does it matter how much country A imports or exports or if they trade at all.
Imagine a closed off country with no international currency exchange and no external trade. For some reason, it doesn't matter why really, citizens there expect prices for things to go up (maybe it's an island running out of space so landlords raise rents or maybe the government is increasing taxes or maybe everyone on the island is just really lazy wanting to sit on the island's beaches all day thus it is taking increasingly more $ to get anyone to get up and do anything one might need help with)...
The citizens expectation of future higher prices leads those in the economy who sell a product or service and who can charge more for it to do so immediately (as they prepare for future higher expenses they will soon face). Specifically, the producers of inelastic goods like farmers who grow food or oil companies will do better in this scenario than regular employees who suffer more as they can't get an increase in salary so easily. But really everyone starts to struggle.
Depending on how high prices are increasing, citizens may start soon switching to bartering and looking to store value in other ways other than their currency (like gold coins or magic the gathering card collecting, etc). Barter is not always possible and most landlords won't accept rent payment in the form of your magic card collection, not directly anyway. Where money is still used and accepted, people will try to get rid of any money they receive as soon as possible (as it's increasingly less valuable putting it in a savings account is bad). So people try to get their money into anything but a savings account and buy as quickly as possible something they need immediately or something that is a store of value. This is inflation and potentially hyperinflation without any international currency exchange or trade.
Now, where a country is able to engage in trade with other countries (for good and services or sell each other debt), this will influence the economy and inflation there. And depending too much on imports one can't be sure they can afford is very bad. But external currencies doesn't cause inflation, rather currency exchanges become a mirror to reflect a country's relative credit-worthiness and growth prospects, as well as any inconveniences connected to the fact people don't want or need another country's currency so where someone does accept foreign currency they must be compensated for the process, time and risk of getting payment in a form they do want.
The closed off simple economy thought experiment is quite useful and established, here is wiki link to the most basic version, one dude on island aka the Robinson Crusoe economy https://en.wikipedia.org/wiki/Robinson_Crusoe_economy
Sure. There are many fundamental economic problems. But it is fear that drives hyperinflation. And this is why it is hard to fix. Because even if you fix the fundamentals the fear will still create hyper-inflation.
Stabilizing the monetary system, reduce government spending and deregulation is the only solution.
Its never impossible to get out of Inflation, there are only bad greedy governments that can't get there shit together. Its never a economic problem, just a political one.
The Bolivar isn't freely convertible except on the black market so there isn't any market (from free or otherwise) to talk about.
How it works is pretty simple. A connected businessman applies to the government to import medicine at the official exchange rate. He then takes those USD and contracts with a shell company he controls in Panama to buy antibiotics and provides all the paperwork. A small amount of those funds are then used to buy antibiotics on the open market and ship it to Venezuela. The profits are distributed around to othe shell companies controlled by various government officials to keep access to the favorable exchange rates.
Once they arrive in Venezuela the local paper writes up a story about the shortages and mentions the connected businessmen and officials as heros for importing needed medicine. Pictures are taken showing them inspecting the cargo as its offloaded.
But it there is still money to be made! Prices on antibiotics are regulated so a lot of the shipment is diverted into the black market which siphons up bolivars at the black market price.
Those are then traded back at the official favorable rates and the process repeats.
It's a brilliant scheme because the masses don't understand enough to understand how they are being robbed. Pick their pockets and then blame it on the "market" or "imperialist." Doesn't really matter as long as its a convenient.
And it gets better! Eventually things get so bad that people start sending relief supplies and cash which creates new opportunities to loot.
How did it work out for Russia, 80 years of communism and everyone had to line up for a loaf of bread and bar of soap. Venezuela managed to do it in a few short years...
That is a platitude that doesn't mean anything. Abolishing a pricing mechanism doesn't put people ahead - it destroys resources. Capitalism has done more for the people in the last 300 years than any other system in the last 30,000.
But in absolute terms it was very, very poor compared to today.
Communications? Medicine? Nutrition? Science? Housing? Civil rights? Arts? Life span?
In fact, corporations are actually creations of government. Corporations would not exist were it not for laws defining certain times of companies with limited liability for owners.
Marx saw capitalism as better than feudalism, but it is progression to next step aka Communism.
But most "communist revolutions" have devolved to state owned capitalism instead of worker ownership.
Also I can give you a list of some countries dying with socialism and socialist society: - Norway - China (They are richer than the US) - Italy You see were am going... I think that you should try to be not so dramatic in your arguments. There are good and evil in both sides.
You are exposing your ignorance. Ex soviet republics are by definition second world.
> Also I can give you a list of some countries dying with socialism and socialist society: - Norway - China
China is communist, not socialist. Norway is a redistributive democracy. There has not been a case where government or collective ownership of the means of production has led to good results.
China tried, and has been rolling that back ever since.
I suggest you learn your terms better before volunteering your opinion.
There's no requirement that a failing economy print money to pay for things. Currency markets aren't stupid; they know it's being printed and price accordingly. And even if they didn't, money is just an instrument of trade anyway, and the market will find its balance.
Anyway, the change in price is at least equivalent to taking money out of the hands of money-holders and putting it in the pockets of the government. So in a sane economic theory, it's always better to tax. The advantage of money printing is that, in a system where the dictatorial elites subscribe to alternative theories of economics, money-printing allows you to blame other forces (in particular, imperialists) for what's happening.
I'm sorry, but this is nonsense. Nobody outside the country is fooled by the newly printed money, and it doesn't buy any more imports.
It does help those controlling the money printing to have more money than others, thus effectively stealing from the rest of the country.
> just google "Zimbabwe trillion dollar bill".
I have some of those on my wall.
If you do google it, you'll learn that the economy and life of Zimbabwe improved considerably when they finally gave up having a currency, and trade converted to Dollars and Rands.
According to legend, the government only gave up this form of plundering because they couldn't afford the ink to print new bills anymore.
Whoever is buying dollars (or dollar-denominated goods) at the "official" exchange rate is making a killing. And will do so for about 6-9 months, before the entire thing collapses.
It's been like that ever since the currency controls were implemented in 2003, it is fairly well known that most if not all of the high ranked government officials (who have unlimited access to preferencial exchange rates) are behind the currency "black" market. The same government officials have their fair share of cash stashed away in tax havens.
This is beyond hope, corruption is not only endemic anymore but a neccessity for survival, unfortunately this will only end with blood, I believe international interference is a must in this case.
I think international interference in this kind of issues end up causing more trouble than solutions. It ends up becoming a contest of whose side is supporting who. Just look at Syria.
Before getting dollars at the official rate for importing, your company needs to get approved and jump through all kinds of burocratic stuff that could take ages and never get approved. Here in my state there was a huge cartel of military officers involved in the sale of pre-approved companies for importing. It was like buying companies off the shelf.
A bunch of people bought these companies at a very high price, but the returns were huge. You bought one company for say $50k, but then you imported at the official rate. There are 20 year old kids that are now living in Miami with $15-20 million dollars in their accounts, money they made through these companies. They had a small office with 5 or 6 assistants, one for each company doing all the paperwork for the constant fake importing of goods.
This is just one of the ways the country has lost more than $50 billion dollars to corruption in just two years, according to one of Chavez's former ministers, Giordani.
It is so high that the government has stopped publishing statistics, and also so high that "authorities would assign judicial police to Caracas area morgues to speak with families. At that time, they would advise families not to speak to report the murder of their family member to the media in exchange to have the process of recovering the victims body in an expedited manner. It was also reported that police would intercept the families of the victims and take them to the library of the University Institute of the Scientific Police (IUPOLC) where authorities offered families ways to "streamline procedures and advise them not to give information to the press in return for their aid"*
https://en.wikipedia.org/wiki/Crime_in_Venezuela
The government also banned private handgun ownership in 2012. The number of murders has grown by about a third since that.
Vermont, New Hampshire, Iowa, Idaho, North Dakota, Wyoming (about 8 million people between them) all have murder rates lower than Canada, Belgium and Finland.
Maine, Minnesota, South Dakota, Hawaii, Utah, Oregon, Montana, Washington all have relatively low murder rates.
I'd love to hear your explanation for what causes the wide variance between some states on murder rate.
Louisiana for example has had a high murder rate for a long time (as has eg Chicago) and states like Idaho, New Hampshire, Maine, Washington etc have had low murder rates for as long as the US has had meaningful data on murder.
I'd argue the opposite, chance plays zero role when it comes to the wide variance in murder rates among states.
U.K. 0.9 U.S. 3.9 Venezuela 62.0
https://en.wikipedia.org/wiki/List_of_countries_by_intention...
https://www.japanimal.org/culture-crime-map.php
Unsurprisingly bigger cities have (slightly) higher crime rates, with each of greater Tokyo, Osaka/Kobe/Kyoto, Nagoya and Fukuoka clearly visible.
>three-dozen
That seems like a lot of areas to say "just". If it's that easy to bring it down, do it in actuality rather than coming up with hypothetical scenarios where the US doesn't have such a high murder rate.
http://www.deathpenaltyinfo.org/murder-rates-nationally-and-...
And if you're trying to argue urban areas are more dangerous, you're wrong.
http://science.time.com/2013/07/23/in-town-versus-country-it...
Remember, murder rates are per capita.
I'm not sure why you emphasize that murder rates are per capita, that proves the point you're trying to deny. The per capita murder rates in cities are far higher. The very high city per capita murder rates in the US are the reason the US murder rate is so high.
Similarly, by cutting out the urban parts of the US in your comparison, you're cutting out 70% of the US population.
Take out some areas of St. Louis, Detroit, Chicago and a few other places, and the numbers look very different.
Of course other countries also have their bad places, but I think the U.S. is much more split to good and bad areas than most developed nations.
http://www.deathpenaltyinfo.org/murder-rates-nationally-and-...
Every single state is above the UK's murder rate of 0.9.
Still, I understand the divide is more between urban core/suburban+rural that between different states.
(Yes, comparing rather marginal differences.)
However, Venezuela is on a completely different level. Moreover, murder rates in the US are heading downwards; they are half of 1980's numbers. Venezuela is radically up, almost ten times of 1980's numbers.
Face it, the US done fucked up.
(However, breaking up Belgium brings to mind some controversies: the motto of the country is "Einigkeit macht stark" or "Unity makes Strength"; after the 2010 election (June 13, 2010) it took 541 days of negotiations to come up with a functional government (sworn in on December 6, 2011).
Get into the cities perceived as high crime (chicago, philly, dc...) and you get 15s and up - nawlins was 40!
Until late 1980's the Venezuelan murder rate was below 10. It was actually lower than United States. Since then, the U.S. has improved a lot, and Venezuela has collapsed, particularly quickly during Maduro's time but that is merely a consequence of Chavez's "Bolivarian" policies.
(I personally think they are giving a bad name to Simon Bolivar.)
http://www.deathpenaltyinfo.org/murder-rates-nationally-and-...
Every single state is above the UK's murder rate of 0.9.
Yes, people did stand in 6 hour queues for basic things like _bread_ in Poland under Russian occupation. This is a "bread queue" image search if you are interested:
https://www.google.com/search?q=kolejka+po+chleb&source=lnms...
Soviet Block deal with it by providing paper coupons for food and necessities. Without them you can't buy a lot of stuff.
https://www.newyorker.com/magazine/2016/11/14/venezuela-a-fa...
An earlier HN post addressed the question of Venezuela's refusal to simply default on its loans, as another South American state, Argentina, did: https://news.ycombinator.com/item?id=12057616
In another earlier thread, I suggest strongly that the problems Venezuela is facing are far more characteristic of a failing end-stage oil state than of the inevitable failure of Communism, for which China and Vietnam offer possibly interesting counterexamples.
Also, the brilliance of China's ruling party calling itself "communist" is that it can effectively thwart any leftist uprising seeking better representation for workers by pretending that they're already in power. For example, unions are outlawed in China because the Party takes care of the working class.
Indeed how brilliant it is, how a government steps all over their citizens rights.
Not all oil is equal. The single-strike wells of the Persian Gulf which poured fourth 70,000 barrels of oil per day of light sweet crude, and are still producing nearly a century later (see the First Oil Well of Bahrain for example) are quite different from the lower-grade, hard-to-pump crude Venezuela has, or the production profile of a hydrofracked well.
Put simply, you want to consider the net costs of production, including the energy costs of production (EROEI -- energy returned on energy input) which are considerable for Venzuela. Also, incidentally, for the "largest ever" onshore US discovery of Texas shale oil announced a week or so back.
For Texas, the average per-well extraction is 20 barrels/day. These low-production wells are known as "stripper wells", and operators will literally turn on and off the pumps in response to the price of oil if it exceeds their ongoing production costs -- fuel or electricity for the pump jack, plus depreciation.
http://oilpro.com/q/1775/many-barrels-oil-does-well-produce-...
I don't have a per-well production statistic for Venezuela, though national production has held steady at about 2.5 mbpd since 2004.
http://www.indexmundi.com/energy/?country=ve&product=oil&gra...
There are a few end-run oil exporter scenarios. One, the "export land model" by Jeffrey Brown looks at the total domestic consumption of exporting countries, and sees a tipping point where domestic demand accounts for all production.
There's another scenario, in which the total financial accounts of an exporter are taken into account. Here, the problem is that when the global oil price falls below the costs of production in a country, it literally cannot afford to pump oil from the ground, and finds itself deprived of foreign cash flows. The classic case of this is the Soviet Union in the 1980s. Having based its national budget on the high price of oil in the 1970s, it was caught in the double bind of large flows of new fields (North Sea and Alaskan North Slope), as well as a plummeting global oil price with the 1980s supply glut. As much as anything, Saudi Arabia defeated the Soviet Union.
That story's been played out in several Arabian states, including Egypt and Syria (both minor oil producers), Yemen, Lybia, Tunisia, and, yes, Venezuela. Texas, North Dakota, and Alberta, Canada are all running into the problem of development predicated on $100/bbl oil in a world of $45/bbl WTI.
I don't care what your governmental or economic system is. If you're basing your economy on massive sales of extractive resources and the price falls out from under you, you're sunk.
Saudi Arabia has been making very interesting noises about its finances for the past few years. Keep in mind that KSA are essentially a family-run state / business. The House of Saud runs the country and owns the country's largest company, Saudi Aramco, accounting for over half the country's GDP. I'm not sure exactly what you'd call a state in which a single unitary power bloc controls the major economic unit, but it doesn't strike me as terribly democratic-market-capitalist.
I've also poked around the Heritage Foundation's Index of Economic Freedom and measures of per-capita wealth, to find some interesting bits. Dig around https://dredmorbius.reddit.com for more on that.
Again: the heated rhetoric tends to cloud more than clarify understanding of what's going on here. I say that without either defending or denegrating Venezuela. I'm simply interested in understanding it.
http://www.ibtimes.com/saudi-arabias-2016-budget-creates-new...
Check this link out, where they explain the concept in detail: http://www.bbc.com/news/business-29643612
If Venezuela were to adopt a model like Norway for instance, where all oil income goes to a sovereign fund and it is not to be touched for anything other than building infrastructure, I can bet that the economy would be in good shape. And the reason is simple, people and the govt included, would have to learn to live by their own means.
I would agree that Saudi Arabia is not democratic or all that capitalist. Socialist don't have a monopoly on bad government.
How well a country is set up you can see what happens when their main export tanks, Venezuela was clearly terrible and instead of reacting and adjusting, they started looting the big companies, enforce exchange controls, escalated inflation and did many other idiot things that hurt the country badly.
We don't know yet how the Saudis will deal with this if it ever comes to that.
The oil price cop-out is one of the go to excuses for Venezuela. Another common one is the death of Chavez. Both are debunked by the fact that the current problems are nothing more than a worsening of problems that began [1] before either Chavez's death or the oil price drop. Venezuela is nothing more than the natural progression of extreme leftist government.
[1] http://www.nytimes.com/2012/04/21/world/americas/venezuela-f...
(at the time of that story -- April 2012 -- oil was above $100/bbl)
But I don't doubt that if this inflation rate keeps rising, something like that will happen very soon.
My premise is that the majority of oil demand will be gone in 30 years or so, not all of it. Losing the automobile industry to electric (nothing can stop that over the coming 30 years) will cut oil demand in half globally without anything else changing. Venezuela is cursed with mediocre quality oil that isn't easily extracted, so they'll be the first losers as oil demand falls (Saudi Arabia, Iran, Iraq, Kuwait, Russia as low cost producers will be the last standing and will fill that last 50% of the market that more slowly erodes).
Venezuela still has a lot of light crude oil, and also the large heavy crude deposits, which is still cheaper to refine than shale oil for instance. The industry here still has not even touched all the offshore resources properly and it is mostly suffering from lack of investment, especially in exploration for new wells.
And in the end, when all that is consumed we will probably turn to the uranium and God knows other minerals in the Amazon, instead of properly developing and diversifying the economy.
"These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who's the banana republic now?" - http://www.sanders.senate.gov/newsroom/must-read/close-the-g...
Maduro may be a civilian, but when you take a look at the people that hold all the ministries and important positions in the government, you see they are all former military that were put there by Chavez. This was his plan all along, the problem is he died.
The military has every incentive not to let the government fall. They are the ones controlling everything and every single bit of corruption must pass through the military first. They control the currency, industry and even the drug trafficking.
You think they are gonna let the government fall and possibly be tried and be brought to justice in the future?
Unfortunately, the only way out I see for the country is an Ukraine or Egypt like situation where the military basically kills people in the streets for a month or two and then some kind of agreement is reached where they are granted immunity from justice. Or they take off their masks and just declare a formal military dictatorship.
This is one of the reasons you don't see people in the poorer areas protesting. They are scared of these groups.
Right, that's the problem.
I can't remember where I read that, so take it for idle speculation.