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Often on HN's you'll get someone asking why a company has to continually grow revenues/profits. And the person is usually convinced once someone else comes alo

Often on HN's you'll get someone asking why a company has to continually grow revenues/profits. And the person is usually convinced once someone else comes along and lays out an argument that goes along the lines of.... 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".

swiley 10y ago
The decisions leading up to this by the Venezuelan government where known to cause things like this. They where made either out of ignorance or political pandering.
- fspear 10y ago
  Or just plain malice. Do not be mistaken, the final objective of the "socialist" agenda of the Venezuelan regime has always been to enslave an entire nation in order to lock themselves into power forever.
  - edblarney 10y ago
    As much as I loathe the socialists, let's not be too conspiratorial. 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.
    - fspear 10y ago
      >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. 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.
      - edblarney 10y ago
        Chavez enjoyed popular support and had no problem maintaining power, because the economy was doing great due to Oil. 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.
        aclsid 10y ago
        To be honest, Venezuela was doing great during Chavez because the guy as much as he was Trump like in his rethoric, was no fool. As soon as Maduro took power, he created massive chaos in the foreign currency exchange system, and he kept tampering with the economy with one failed policy after another, until we have arrived here. 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.
        scast 10y ago
- aclsid 10y ago
  I worked for the government years ago and can totally tell you these idiots are convinced they are doing a good thing. Main reasons for these problems are currency exchange controls and price controls, especially for a country with a lot of imports because we have tons of oil and the countryside morphed from agrarian to industrial overnight for a single product and its derivatives. 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.
imh 10y ago
You seem knowledgeable. Why can external currency changes (USD to bolivar) cause such strong inflation internally? I would think that at some point no one in the country can buy an iPhone, but how does that turn into no one being able to buy milk (or other essentials)? Do countries really rely so strongly on the international market for essentials? 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.
- Spooky23 10y ago
  It doesn't cause it, it is an artifact of the imploding value of the currency and future outloook. 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.
- stevoski 10y ago
  It's not just iPhones that get imported. Raw materials for plenty of goods need to be imported in modern economies. In Venezuela's case, an example might be cotton for making clothing. Or rubber for maintaining cars and other vehicles, (think brakes and tires). There are thousands of such examples.
  - dwightgunning 10y ago
    I recently read a HN comment that used their once booming oil industry to illustrate this fact. 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.
    - Symbiote 10y ago
      The less reliable your country, the less likely foreign businesses are to extend credit. If European and American companies, who probably manufacture the machinery, see the risk is too high, they will demand full payment upfront. Venezuela can't pay for its banknotes: http://www.bloomberg.com/news/articles/2016-04-27/venezuela-faces-its-strangest-shortage-yet-as-inflation-explodes http://www.bloomberg.com/news/articles/2016-04-27/venezuela-...
nickik 10y ago
I disagree with your assertion about 'depressed' countries having to inflate. The only reason that they got so depressed is because of bad government and way to much printing. You can't then turn around and say 'we already fucked it up' so destroying the monetary system now is good. 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.
- ptaipale 10y ago
  I suppose you mean deregulation. Regulation (in particular, price regulation) is what got them into this mess.
  - nickik 10y ago
    Yes I did, sorry.
    - ptaipale 10y ago
      Thought so :)
slv77 10y ago
Venezuela is a country that is simply being looted and there isn't a lot of economic theory needed to explain simple theft. 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.
- matt_wulfeck 10y ago
  It's almost like it's easier to loot and entire country when the government controls a significant amount of it.
- hourislate 10y ago
  You only have to look at any socialist country in the last 80 years to understand what is going on. This is how Eastern Europe survived for decades. The diaspora kept everyone back home alive while those in Government became rich. 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...
  - 10y ago
WalterBright 10y ago
Currency values are subject to supply and demand just like everything else in an economy.
cynicalkane 10y ago
This post really comes off like you're excusing Venezuela of their economic mismanagement, and I hope that's not what you meant. 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.
BurningFrog 10y ago
> 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 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.

swiley 10y ago

The decisions leading up to this by the Venezuelan government where known to cause things like this. They where made either out of ignorance or political pandering.

fspear 10y ago
Or just plain malice. Do not be mistaken, the final objective of the "socialist" agenda of the Venezuelan regime has always been to enslave an entire nation in order to lock themselves into power forever.
- edblarney 10y ago
  As much as I loathe the socialists, let's not be too conspiratorial. 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.
  - fspear 10y ago
    >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. 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.
    - edblarney 10y ago
      Chavez enjoyed popular support and had no problem maintaining power, because the economy was doing great due to Oil. 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.
      - aclsid 10y ago
        To be honest, Venezuela was doing great during Chavez because the guy as much as he was Trump like in his rethoric, was no fool. As soon as Maduro took power, he created massive chaos in the foreign currency exchange system, and he kept tampering with the economy with one failed policy after another, until we have arrived here. 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.
        scast 10y ago
aclsid 10y ago
I worked for the government years ago and can totally tell you these idiots are convinced they are doing a good thing. Main reasons for these problems are currency exchange controls and price controls, especially for a country with a lot of imports because we have tons of oil and the countryside morphed from agrarian to industrial overnight for a single product and its derivatives. 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.

imh 10y ago

You seem knowledgeable. Why can external currency changes (USD to bolivar) cause such strong inflation internally? I would think that at some point no one in the country can buy an iPhone, but how does that turn into no one being able to buy milk (or other essentials)? Do countries really rely so strongly on the international market for essentials? 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.

Spooky23 10y ago
It doesn't cause it, it is an artifact of the imploding value of the currency and future outloook. 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.
stevoski 10y ago
It's not just iPhones that get imported. Raw materials for plenty of goods need to be imported in modern economies. In Venezuela's case, an example might be cotton for making clothing. Or rubber for maintaining cars and other vehicles, (think brakes and tires). There are thousands of such examples.
- dwightgunning 10y ago
  I recently read a HN comment that used their once booming oil industry to illustrate this fact. 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.
  - Symbiote 10y ago
    The less reliable your country, the less likely foreign businesses are to extend credit. If European and American companies, who probably manufacture the machinery, see the risk is too high, they will demand full payment upfront. Venezuela can't pay for its banknotes: http://www.bloomberg.com/news/articles/2016-04-27/venezuela-faces-its-strangest-shortage-yet-as-inflation-explodes http://www.bloomberg.com/news/articles/2016-04-27/venezuela-...

nickik 10y ago

I disagree with your assertion about 'depressed' countries having to inflate. The only reason that they got so depressed is because of bad government and way to much printing. You can't then turn around and say 'we already fucked it up' so destroying the monetary system now is good. 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.

ptaipale 10y ago
I suppose you mean deregulation. Regulation (in particular, price regulation) is what got them into this mess.
- nickik 10y ago
  Yes I did, sorry.
  - ptaipale 10y ago
    Thought so :)

slv77 10y ago

Venezuela is a country that is simply being looted and there isn't a lot of economic theory needed to explain simple theft. 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.

matt_wulfeck 10y ago
It's almost like it's easier to loot and entire country when the government controls a significant amount of it.
hourislate 10y ago
You only have to look at any socialist country in the last 80 years to understand what is going on. This is how Eastern Europe survived for decades. The diaspora kept everyone back home alive while those in Government became rich. 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...
- 10y ago

WalterBright 10y ago

Currency values are subject to supply and demand just like everything else in an economy.

cynicalkane 10y ago

This post really comes off like you're excusing Venezuela of their economic mismanagement, and I hope that's not what you meant. 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.

BurningFrog 10y ago

> 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 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.