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Venezuela’s currency is dying
- M_Grey 10y agoThat makes sense, Venezuela's economy, social structure, and political systems are also dying. It would be crazy if currency based on those things were not dying as well. If they were a collapsing star, they'd be rapidly approaching r=2M.
- eudox 10y ago>The problem was that the Chavista regime bungled the state-owned oil company so badly that it didn't have enough money even when crude prices were high, and really doesn't now that they're low. Naturally, the problem is but a mere implementation detail.
- charlesdm 10y agoThat sounds like most western economies of the world.. unable to function without running a deficit, and they'll be worried when interest rates go up and wonder where that massive budgetary hole came from.
- witty_username 10y agoWell, it's sensible to take some debt (2% interest rate FTW); but the question is how much?
- charlesdm 10y agoYes, it's sensible to take on some debt to invest in actual projects, such as infrastructure. Those have a positive ROI. But: low growth in western countries is here to stay, and it's not sensible to borrow billions every year without reducing structural expenses. You're borrowing from the future, with no money to pay it back. That's just pushing the bill to the next generation, e.g. look at what happened to Greece.
- nhaehnle 10y agoGreece is a bad example because they're not monetarily sovereign. The harsh fact is: As long as there are leaks in the circulation of money, you either have to plug the leaks or increase the in-flow. If you do neither of these things, the economy shrinks and people suffer. Western countries have leaks in the form of people saving (in part it's fair to blame the rich, but the whole emphasis on private pension funds is also a huge contributor to the problem reaching all the way into the middle class) and companies accumulating money. You either have to plug the leak (by taxing the rich and/or companies to drain all those savings, and returning to public pension schemes that are pay-as-you-go out of taxes) or increase the in-flow (this is what budget deficits are doing[1]). Reducing the in-flow is pretty counter-productive: it increases incomes of people without addressing the structural problems that cause the leaks (like pension systems, ridiculously wealthy companies and individuals, etc.). Also, the whole "pushing the bill to the next generation" rhetoric is pretty non-sensical, because government debt is never an inter-temporal problem, but always an intra-temporal one: If government debts are high, so what? It just means that assets are high elsewhere. You can be worried that assets slushing around are a problem (I am), but myopically focusing on the debt side of the equation without looking at the asset side is pretty dangerous. [1] This is also what central banks are trying to do by decreasing interest rates etc.; here, the in-flow would come from private debt. The problem is that it's not a very reliable tool.
- heartbreak 10y agoThere was a solid Planet Money story about the collapse two weeks ago. http://www.npr.org/sections/money/2016/10/21/498867764/episode-731-how-venezuela-imploded http://www.npr.org/sections/money/2016/10/21/498867764/episo...
- X86BSD 10y agoIt's interesting to me that everyone seems to think all world currencies are not dying. The problem is the "currency" the worlds been sold into. Case in point... it takes us all about an average of $2.00 dollars for a gallon of gas. On average right now. Probably more on the coasts. If I take one of my Morgan silver dollars, and melt it for the silver content I can get as of today roughly 8 gallons and a little more for that one silver dollar. 2 paper, fiat, federal reserve notes for 1 gallon OR 1 Morgan silver dollar for 8+ gallons. The problem is the currency is worthless. And is inflated away each year to lose more and more value. So IMO the problem is the currency. It's worthless and bankers are able to devalue it at will.
- R_haterade 10y agoThis is such a wildly unpopular notion, and yet I've never heard a reasonably articulated counterargument. It's like people who understand supply and demand short-circuit when they think that the same laws don't apply to money too.
- X86BSD 10y agoUsually people don't understand the dangers of private banks owning a fiat paper currency they can print at will. Until I pull out a silver quarter or silver dollar and prove to them how much the private federal reserve has devalued their money. Then it's like, "Oh. Wow. You're right."
- Laforet 10y agoA Morgan dollar is worth $15 for its material and possibly more for its collectible value, what is the problem here? Every dollar invested in 1900 would still have yielded a better return than $15, i.e. burying silver in the ground. The real issue with a currency based on precious metal is that the reverse grows at such a rate much slower (<1% annually for gold IIRC) than economic growth. In a deflationary market, rational actors would simply remove money from circulation because it will just increase in value on its own, whilst the economy collapses.
- 10y ago
- paulcole 10y agoSeems like the ideal situation to implement a blockchain-based currency.
- endgame 10y agoTrouble is, there's nothing in your response that lets me differentiate "there is a blockchain solution here and it would work, here's why" from "I'm a bitcoin fan with a blockchain hammer and this kinda looks like a nail".
- paulcole 10y agoI'm actually working on an on-demand hardware store that sells only nails and accepts only bitcoin
- Laforet 10y agoI'm generally amendable to the idea of cryptocurrency but I don't like the current way Bitcoin is designed. Block size has been discussed ad nauseum whereas nobody seems to be willing to admit that a deflationary currency is doomed to fail. It's an interesting experiment but I am still waiting for something with proper inflation targeting.
- Hondor 10y agoThe argument that a deflationary currency is doomed to fail has been made many times too. But it's not a very strong one since Bitcoin isn't forced on anyone like a national currency, so it doesn't behave in all the same ways as everything we've seen before. Gold is also deflationary, but it's the longest lived currency on Earth. That pretty much proves your claim wrong.
- Laforet 10y agoIf we did not abandoned the gold standard then maybe. So far the only ruling regime that made a serious argument for a return to gold standard is ISIS[0] [0]: http://www.ibtimes.co.in/isis-currency-new-video-shows-islamic-state-minting-gold-coins-save-muslims-satanic-us-banks-644766 http://www.ibtimes.co.in/isis-currency-new-video-shows-islam...
- umanwizard 10y ago> Now, there's never been a country that should have been so rich been so poor as Venezuela. Indeed, it has the world's largest oil reserves, but has still managed to have the world's worst-performing economy. Is there any actual evidence that natural resource wealth is strongly correlated with level of development?
- danharaj 10y agoIt is correlated with having your natural resource wealth extracted by developed nations. Everything else can vary widely.
- akytt 10y agoNope. Think Russia. The question is about the development stage of the society when the resources are discovered.
- VodkaHaze 10y agoThere is such a thing as the "resource curse". That is, if a country is rich with exploitable resources, the political economy will tend towards infighting over who controls the resources. This is akin to a zero sum game, instead of creating an inclusive system where innovators can profit from their creating. "Why Nations Fail" is a great book that goes over this.
- dpc59 10y agoIt's called dutch disease. https://en.wikipedia.org/wiki/Dutch_disease https://en.wikipedia.org/wiki/Dutch_disease
- unclenoriega 10y agoMore specifically, it's called a "resource curse". https://en.wikipedia.org/wiki/Resource_curse https://en.wikipedia.org/wiki/Resource_curse
- dnautics 10y ago
- DominikR 10y agoAnd so Venezuela goes down the predictable path that Socialism is always leading to. Do they already have forced labor camps in Venezuela? There's already cases of Cannibalism in Venezuelan prisons so they must be close to the final Socialist stage.
- karcass 10y agoJust like, say, Norway. Oh wait, Norway has the highest standard of living in the world.
- marcoperaza 10y agoVery small society with high social and ethnic cohesion and trust and guaranteed oil income is able to make welfarism work. I don't think you can derive many broader lessons from that.
- kingkawn 10y agoNot the lessons your worldview wants anyway
- selimthegrim 10y agoUh, who was it they brought in to manage their oil fund? Was it <drumroll> an Iraqi? Yes it was! https://news.ycombinator.com/item?id=9673157 https://news.ycombinator.com/item?id=9673157
- rokosbasilisk 10y agohmm. i dont see how that contradicts parent post. one iraqi doesnt change a nations demographics.
- eyko 10y agoSince the late 20th century, Norway has been quite multicultural.
- Laforet 10y agoFor those who want an impartial overview on Venezuela's economic woes, I high recommend the podcast below: https://www.youtube.com/watch?v=OrfM5UD-Azk https://www.youtube.com/watch?v=OrfM5UD-Azk Hint: It did not begin with Chavismo, but it has got worse since.
- jacobolus 10y agoVenezuela’s political problems also did not begin with Chavismo (indeed, Chavismo was a populist response to entrenched political corruption of the previous ruling elite). My take is that (a) development of political institutions and functioning civil society is really hard, (b) being a petrostate makes it much harder, and (c) when you’re a weak undiversified petrostate and oil prices collapse, heaven help you.
- Pxtl 10y agoThat didn't sound too impartial to me. Seemed to have a firmly anti-left opinion.
- Laforet 10y agoI was actually expecting criticism from the other direction since the presenter unequivocally blames the upper and middle class for their role in the ongoing crisis and see the Chavista government as enablers of continued plundering of Venezuela's national coffers by the same group of people.
- duncan_bayne 10y agoWould you expect an impartial analysis of other morally and logically flawed philosophies?
- pessimizer 10y agoAs a person on the left, I didn't recognize any anti-left sentiment in the video (which I thought was excellent.) If you're looking for a neutral analysis that won't blame policies instituted or continued by the group that has been in power for 20 years for its current situation, you're looking for something that is impossible. Saying that they have completely failed to prevent the predictable catastrophe that would be caused by the fall in oil prices is undeniable. Blaming it on the rich who are reaping massive profits by exploiting Venezuela's policies instituted to mitigate the harm to the populace is like blaming the wind. Rich are going to rich, it was up to Chavez to come up with a sustainable defense to that rather than simply pumping more petrodollars in. It was a boat with a big leak, and it's becoming more leak than boat.
- digi_owl 10y agoThe problem, afaik, is that the Venezuelan oil is nastier than most and thus few refineries will work with it unless it is worth it. And since the Saudis opened the valves and the price tanked, few refineries have found it thus.
- tim333 10y agoThere are a lot of problems beyond much of the oil being heavy. Mostly created by the government and it's not very good economic policy.
- dwills 10y agoSo the word socialism is mentioned twice in the 57 comments that currently exist here, and both of those comments are greyed out having been downvoted. Not a surprise given the socialists that inhabit this space. SOCIALISM: the cause of death and misery for hundreds of millions of humans in the 20th century.
- labster 10y agoBad management is not synonymous with socialism. While you can argue that good management of an economy is harder with a weakened invisible hand, that's a far cry from saying socialism causes death.
- duncan_bayne 10y agoThe idea that you can "manage" an economy is known as the (socialist) calculation problem, and was raised as an issue last century by (amongst others) the Austrian school. Simply put, it's impossible, and the harder you try, the more death and misery you create in the long term.
- duncan_bayne 10y agoCurious about the reason for the downvotes here - the calculation problem has been one of the strongest economic (as opposed to moral) arguments against socialism, for decades.
- golergka 10y agoIt is: managing other's people money that you can steal from always gets worse results than managing something of your own.
- yxhuvud 10y ago> that you can steal This is the bad management part, and does not automatically follow from socialism.
- firekvz 10y agoVenezuelan here, the current problems related to our currency losing 70% of its value in only 3-4 days are directly related to media manipulation. Black market was totally stable in the 1000:1 mark for months, until the actions from the gov to stop the presidential referendum made again the rich unhappy and they decided to attack with all they have and this includes the media. 95% of the imports in Venezuela are made using the official rates and thats a bit complicated to explain, there is 2 rates wich are 1usd:13bsf (a price fully subsided used mostly for food and items that are considered "basic") and 1usd:658 for everything else and then there was the black market dollar wich is now 1usd:1758bsf The thing is you can sit here and say the dolar is 1:2000 but it doesn't really mean thats the cost, thats where everyone fails, because neither the venezuelans have the money to pay for it or people want our currency, there is an special case of people doing this kind of trades and are the ones that are fleing the country, emigrating to other places and are desperated in need of USD In the other hand, is somehow totally fake that we are paying this prices, in fact, noone imports anymore since gov barely gives USD at subsided price thus this is why we are now under scarcity problems.... so there you go.. offer and demand sets the prices but theres actually not really demand, I mean there is an insane demand but not demand for the 2000:1 price, thats just a political fight.
- toomuchtodo 10y agoWhat can I, as a US citizen commoner, do to help?
- firekvz 10y agowell there are ways to help but are somehow complicated and they dont really affect directly to the normal citizen, like for example you could send medicines or food to someone or even money but it does not help at all, the problem persist. Your best bet is to donate to some NGO like https://transparencia.org.ve/ https://transparencia.org.ve/ that tries to implement a better transparency system in our country. Venezuela problem is not socialism or w.e method, we actually had everything. Our all time problem was corruption and we had it during our whole story, is not something that came with chavez or with socialism, we had this very same problems 30,40,50,60 years ago.
- edblarney 10y agoIt's not the currency that is dying, it's that nobody wants the currency, because the entity that backs it has no integrity. So, it's more like 'Venezuelan economy and governance is failing -> nobody wants Venezuelan Bolivars -> currency loses value rapidly
- btdiehr 10y agoIs that not what people mean when they say a currency is dying? Or is there some other meaning of a dying currency?
- edblarney 10y agoA lot of people surprisingly don't make the connection. Even among politicians and leaders. They see inflation, then blame outsiders etc. - and then try to fix prices / grab private businesses which only exasperates the problem.
- edblarney 10y agoA lot of people surprisingly don't make the connection. Even among politicians and leaders. They see inflation, then blame outsiders etc. - and then try to fix prices / grab private businesses which only exasperates the problem.
- repsilat 10y ago> the entity that backs it has no integrity. Funnily enough, one of the most perplexing thing about Venezuela's disintegration is that they haven't defaulted on any bonds, even though they're paying exorbitant interest rates. See https://www.bloomberg.com/news/articles/2016-07-04/venezuela-refuses-to-default-few-people-seem-to-understand-why https://www.bloomberg.com/news/articles/2016-07-04/venezuela... They're going to run out of money to pay bondholders soon, though.
- edblarney 10y agoIt's not the currency that is dying, it's that nobody wants the currency, because the entity that backs it has no integrity. So, it's more like 'Venezuelan economy and governance is failing -> nobody wants Venezuelan Bolivars -> currency loses value rapidly
- JohnyBolivar 10y agoDon't forget that some years ago the gov renamed the currency taking three ceros out and renaming it the Bolivar Fuerte (strong bolivar). So really we are talking about an exchange rate of Bs 2.000.000 = 1 usd at current black market prices...
- maverick_iceman 10y agoThis is what socialism looks like. Bernie fans take note.
- known 10y agoAdopt US$ as your national currency http://qz.com/260980/meet-the-countries-that-dont-use-their-own-currency/ http://qz.com/260980/meet-the-countries-that-dont-use-their-...
- piotrjurkiewicz 10y agoAll comments in which the word 'socialism' appeared, are now [flagged] and [dead], therefore invisible for most users. And you still dare to argue that there is no far left political bias and manipulation on HN? EDIT: I posted this comment and immediately refreshed the page. I took no more than 2 seconds, and this comment already had 0 points. No real user would be able to reload a discussion page, recognize a comment as a new, read it and downvote, all of this within 2 seconds after the comment was posted. I bet some bots do this, maybe this is even happening on the server side. Thank you for providing the best evidence for my words!
- dang 10y agoYour comment was (rightly, since it's false, off topic, and unsubstantive) downvoted by a user who happened to see it less than a minute after you posted it. This is hardly unusual on a high-traffic site. The comments you're referring to were rightly flagged by users as containing nothing more than empty political rhetoric. We don't need posts on HN like "This is what socialism looks like. Bernie fans take note." This would be just as true if you flipped all the ideological bits. I've given you many detailed explanations in response to these insinuating comments about HN, and already asked you once to stop. Every sinister claim you've made has had a simple factual explanation. If you are open to changing your mind, you now have lots of good information; if not, that's your prerogative; either way, it's high time you stopped posting these harmfully misleading comments here.