
Venezuela’s currency is dying - davidklemke
https://www.washingtonpost.com/news/wonk/wp/2016/11/04/venezuelas-currency-is-dying/
======
firekvz
Venezuelan 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.

~~~
woodandsteel
> made again the rich unhappy and they decided to attack with all they have
> and this includes the media.

From what I understand, the government has pretty much eliminated the
independent media.

More generally, are you saying that the government has done a good job of
managing the oil industry, and also developing the rest of the economy so it
is not so dependent on oil?

~~~
eyko
> From what I understand, the government has pretty much eliminated the
> independent media.

There's no shortage of independent media in Venezuela, both press and TV.

------
heartbreak
There was a solid Planet Money story about the collapse two weeks ago.

[http://www.npr.org/sections/money/2016/10/21/498867764/episo...](http://www.npr.org/sections/money/2016/10/21/498867764/episode-731-how-
venezuela-imploded)

------
M_Grey
That 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.

------
umanwizard
> 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?

~~~
VodkaHaze
There 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.

~~~
dnautics
Is there evidence that Venezuela collapsed due to infighting? Is there
evidence that the us (which is resource rich) is going to collapse due to
infighting over resources?

~~~
zorked
There are plenty of exceptions to the "resource curse": Canada, Norway,
Brunei. There is, however, a lot of infighting in Venezuela.

~~~
dnautics
The existence of general infighting and there being a collapse does not mean
that infighting (much less, infighting _over resources_ ) precipitated the
collapse. I think if you examine the history of the collapse, it has almost
nothing to do with political infighting.

------
Laforet
For 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.

~~~
Pxtl
That didn't sound too impartial to me. Seemed to have a firmly anti-left
opinion.

~~~
pessimizer
As 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.

~~~
Pxtl
It seem to pretty clearly level its accusations at _every_ left-wing
government in South America, not just Venezuela.

------
edblarney
It'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
Is that not what people mean when they say a currency is dying? Or is there
some other meaning of a dying currency?

~~~
edblarney
A 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.

------
digi_owl
The 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
There 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.

------
eudox
>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
That 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
Well, it's sensible to take some debt (2% interest rate FTW); but the question
is how much?

~~~
charlesdm
Yes, 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
Greece 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.

------
known
Adopt US$ as your national currency [http://qz.com/260980/meet-the-countries-
that-dont-use-their-...](http://qz.com/260980/meet-the-countries-that-dont-
use-their-own-currency/)

------
JohnyBolivar
Don'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...

------
piotrjurkiewicz
All 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
Your 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.

------
paulcole
Seems like the ideal situation to implement a blockchain-based currency.

~~~
endgame
Trouble 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
I'm actually working on an on-demand hardware store that sells only nails and
accepts only bitcoin

~~~
Laforet
I'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
The 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.

~~~
zanny
You might be conflating currency with value. Nobody in the world trades in
gold. Precious metals did have its hay day for hundreds of years, where coins
were the most popular currency, but today nobody will accept gold or silver
coins for anything, they want fiat.

Gold remains a tremendous store of value as a deflationary scarce resource.
Bitcoin behaves exactly the same - the limited amount of gold, where demand
grows as population grows but supply grows slower because it is a fairly
limited resource barring occasional literal "gold mines" mimics bitcoin, where
assuming network growth the supply curve is not changing to meet increased
demand and thus the currency deflates against the dollar.

That isn't a viable or usable currency, though. Societies moved away from gold
primarily because just hoarding gold in a vault was too viable a monetary
strategy. Forcing transactions in an inflating money means just hoarding the
money is losing wealth rather than growing it through deflationary scarcity,
and when nations transitioned they saw significant economic growth as all the
dead weight precious metals money started moving faster as paper (even under
gold standard, every country was devaluating its currency against gold to
print more, thus inflating it).

Bitcoin is a great store of value, for the most part. The Blockstream
hijacking of bitcoin core, and the lack of any community movement to dealing
with it, significantly tarnishes the long term potential. But having a
deflationary cryptocurrency is not inherently bad - it just makes it
inherently bad for day to day transactions, because the whole point of modern
currencies is to inflate to pressure holders into spending it (either on
consumption or investment) rather than hoard it to keep it moving in
circulation.

I don't believe we actually have a good currency replacement cryptocurrency
yet, because that money will take the form of something you _don 't_ want to
accumulate because its monetary base expands, rather than contracts, over time
to cause inflation and thus devalue the currency driving holders to actually
spend it (outside volatile adoption demand that controls all the
cryptocurrency prices today).

~~~
knocte
> I don't believe we actually have a good currency replacement cryptocurrency
> yet

Yeah, cryptocurrencies are not perfect. But they are at least better than
fiat/gold. Humanity progresses with baby steps.

> over time to cause inflation and thus devalue the currency driving holders
> to actually spend it

Here you're bringing up the old belief that a currency needs to have inflation
built-in to not incentivize hoarding it, and to foster money circulation. This
is a fair requirement, however, it also fosters a consumerism outlook in
society. I'm still in two minds of what's better.

Anyway, if you're on the anti-hoarding side, you could like something called
Freicoin. It has the good parts of cryptocurrency (vs fiat), and it also has a
demurrage fee that disincentivize hoarding.

------
X86BSD
It'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
This 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
Usually 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."

~~~
colanderman
…except people don't keep fiat currency underneath mattresses. They invest it,
and better their economy for doing so.

So your old coin isn't competing against some ratty old dollar bill, it's
competing against the real value of my index fund shares.

Which, by the way, are winning: [http://ritholtz.com/wp-
content/uploads/2013/04/fda.jpg](http://ritholtz.com/wp-
content/uploads/2013/04/fda.jpg)

~~~
chillwaves
Just wait until he pulls that silver dollar out of his pocket. Then you will
see.

