We are geniuses

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Well, that didn’t take long.

A mere day after the SUNDECOP began “controlling” the prices for all goods and services in the economy, we are hearing from the Bolivarian National Guard that there is hoarding going on, that articles have “disappeared” from the shelves, and that they simply will not tolerate this. Coffee, cooking oil, and milk are already hard to find.

Perhaps they should look for the missing articles here. Oops, too late.

There you have it, folks. If, like me, you predicted scarcity and chaos thanks to this law, pat yourselves in the back. We are geniuses.

[HT: Noticias24]

1 COMMENT

  1. Are people in the government really this naive? Isn’t Giordani an economist from UCV? I refuse to believe that people like Giordani is the outcome of the Venezuelan universities. And more importantly, when will the people understand that without economic freedom there is no way to prosperity?

      • Perhaps it’s about the time when a promising young man, Giordani, and others now in power, fell into a hole in Oriente and got exposed to the missing radioactive containers of the defunct nuclear project by IVIC, RV-1?
        And now we have the Bolivarian Turtles!

    • Giordani is not a trained economist. He was an engineer in pre-privatized CANTV. I believe he has a graduate degree in something or another vaguely related to economics from a UK university (Kent).

      Graduate degrees didn’t save him from being a practical moron.

  2. As far as I know, the scarcity has been there for quite a while. It’s not a consequence of the new law. This one will just make it worse than what it already has been.

  3. I doubt very much there’s ever been any intentional hoarding going on in Venezuela, but one of the many, many things the idiots in chavismo forgot about the new law is this: with the comically draconian laws and potential punishment for those who sell products “above the fair price”, who in his right mind would even try to sell anything until he’s verified he complies with the law? So even if a shop and/or company wants to sell their stuff, they cannot even think of doing so until they are certain they aren’t going to lose their busyness because some bureaucrat in Caracas thought their prices weren’t fair enough.

    So, with this law, until the government actually analyzes your company’s costs and sets the prices, you can’t sell anything.

  4. No, we are not geniuses. It’s just that these guys have got to run Venezuela, and God might forgive evil, but He positively hates fools. Indeed, a scene comes to mind:

    “Tuco: Hurrah! Hurrah for the Confederacy! HURRAH! Down with General Grant! Hurrah for General… What’s his name? Lee! LEE! Ha ha. God is with us because he hates the Yanks too. HURRAH!
    Blondie: [spits] God is not on our side because he hates idiots also. ”

    Substitute Venezuelan characters.

  5. Yeah, they ARE geniuses, just that not in economics. They are geniuses in political propaganda, and that’s the real goal behind this mockery of a law. The economists inside the government probably knew that this was going to happen, but that didn’t matter. It’s all about make-believe fight against inflation and “speculation” while they advance their stupid communist agenda.

    Don’t waste your time trying to make any sense of this in terms of economics: it only makes sense in the context of their political agenda, and that’s what matters the most to them: political power, even if they have to turn Venezuela into Cuba or serve our behinds to China in a silver platter. The consequences are irrelevant for these morons.

    The question is: Can someone in the opposition explain this clearly to Juan Bimba without sounding like
    Scrooge McDuck’s lawyer?

    • A. Barreda, kinda… Juan Bimba quickly understands two things: 1) price to pay 2) amount in pocket.

      chavez has opted to win JB’s mind by saying something very simple: “I’ll cap prices of certain things.” You say it’s our problem trying to explain to JB the economics behind capping prices.

      I suggest we instead say: “we’ll put money in your pocket”. Then it’ll be chavez’s problem trying to explaining to JB the economics of why not.

      The key difference is that putting money in JB’s pocket is a good thing, whereas capping prices is a bad thing. Oh, also, money in pocket trumps capped prices.

      • In 2006 Rosales offered La Negra during his campaign, and it didn’t fly. Some people were skeptical about how the gov could pull that without going broke and saw this as a big fat lie; others just saw La Negra as populism.
        I have read some of the links you have posted about CCT and UCT and now I understand why they do make sense. However, not everybody will bother reading them. UCT/CCT are a great idea, but you need to sell the idea using clear and persuasive arguments.
        Recently I read these article, which indirectly supports the idea:
        http://www.nytimes.com/2011/10/26/opinion/its-consumer-spending-stupid.html
        Whether that may work in a petro-state or not is still left to be seen, but it’s worth a thought…

        • A.Barreda, Mi Negra did fly. At least, it was beginning to take off, but it took off too late. Also, during take off, the support was half-hearted and they kept changing the details, making it more and more complicated. But the numbers indicated that more and more people were registering for it at an increased rate, just too late.

          The key to note about Mi Negra is that it was not the poor seeing it as a big fat lie, nor as populist; the poor were signing up the same way they sign up for the chavismo populist big fat lies…

          As to the article, why wouldn’t it apply to a petrostate? Petrostate or no petrostate, people with money in their pockets spend it. The providers of goods and services receive it and spend it themselves. The more they receive, the more they consider expanding to receive even more, which creates jobs exactly where they are needed, which puts more money in people’s pockets to spend more. And the more efficient they are at providing goods and services the more they can compete against foreign providers of the same goods and services.

          And the more they make, the more the government makes. So, finally, the government and the market share the same incentive: maximize market income. The market through efficiency, the government through market policy, social development, market protection, and infrastructure.

          But to answering your question regarding the petrostate directly, remember that UCT would kill the petrostate, so the point is moot.

          Eliminating poverty is crucial, not just out of humanity, but in rescuing consumer market spending on which rests the solution to rescuing the nation. UCT is that solution, CCT a good step in its direction.

          • extorres,

            I’ve been on board your UCT since you first brought it up way back when. Have you been able to get anyone in the oppo camp to even have a look at it?

            I think you should have your own blog/website on this topic. If you’ve been saving all your discussions/arguments with various folks in various fora (like this one) you’d be able to put up a full-blown blog in short order, albeit in English (for now).

            In fact you could password protect entry into your webspace so that only the people you want to allow access to it can enter. Don’t need the chavistas, cubans and PSF’s nosing about.

            As you say, UCT is something everyone can understand, especially those folks in dire straits. They say the devil is in the details but I think you’ve handily explained and re-explained the benefits over the years and it doesn’t take a genius to know that the promise of a UCT “handout” would be a real vote getter (and vote protector), which at this point in time is the name of the game.

          • Mike Nelson,

            Glad to know you’ve been on board with UCT, and, most importantly, still are. If by oppo camp you mean people that have access to candidates ears, I can only hope so, but I’m not sure. I have spent quite a bit of time talking to chavistas. They, actually, are easier to convince than many oppo folks who have their minds much more set on what they think is the best solution. The poor folk take no convincing at all, nor the military folk. That leaves the Caracas Chronicle readership as the toughest sell of all. After all, if someone with Quico’s writing ability and economic knowledge can’t even get people on board with CCT, I know it’ll be an even longer road for someone like me to get anyone even farther than CCT to accept UCT. And you only know the half of it; Quico convinced me to keep quiet about the other half… 🙂

          • chavez backpedalling: http://www.globovision.com/news.php?nid=209697

            Now the mission is 430 bs for mothers in extreme poverty, but the handicapped aren’t getting double, just 600. But also the 430 is just “a part” in cash for the immediate needs, the rest in bank credit so that the mothers can get themselves out of poverty. Perfect opportunity for oppo to pounce with UCT.

          • I have to agree with MN: you should consider going public with this stuff. A blog is a good starting point, and probably a book later. If Baduel published his “solution” or whatever, why can’t you give it a try with this idea? I think it can be a more compeling idea than his…

          • Truth be told, I still can wrap my head around the “dutch disease” stuff, so I do not know whether UCT/CCT will make things worse. That’s the reason I am not sure about this theory working in a petrostate. I guess I have to think a bit longer about it.
            On the other hand, I support the idea of CT, although I am not sure if there are like different POV about it besides the CCT vs. UCT thing. For example, should/will the state give 100% of its revenues to the people as CT, or only a fraction? In the second case, how large should the fraction be? Should the state take care of something besides defense and security? Should PDVSA stay under control of the state or should it be owned directly by the citizens? What about health and education?

          • A. Barreda,

            I won’t go into much detail regarding the first part, just keep in mind that comparable CCT programs that have been tried are having results, better than expected *and* better than alternatives.

            There is a whole spectrum of POV around CCT and UCT. My position is at an extreme of the UCT spectrum, while Quico’s seems to be a cautious position on the CCT spectrum. I’ll answer your questions from my POV.

            I see the government as having two different categories of sources of income: A) sale and rent of natural resources, B) taxation. I think of A money as inheritance money. Even if the bank is concerned that a spoiled 21 yearold is going to misspend his inheritance, the bank still gets no say in whether to hand it over or not. Similarly, I don’t think the government, nor you, nor I, has any say in whether to give Venezuelans their share of natural resource income. So, from my POV, 100% of natural resource revenue has to be distributed, unconditionally to all Venezuelans, whether we like how they will spend it or not.

            Then there’s B money, taxation. It is obtained in a progressive manner, whereby the rich supply most of it and the poor hardly any. This money is to be used by the government to deal with all the nations problems, maintenance, and developments. If the government is in charge of health and education and infrastructure, taxation money is used to provide them and maintain them and improve them. If there is dutch disease, taxation money has to be used to address it.

            What I find very difficult to convey is that the decisions regarding how much money should be spent on education and health and all other government services has *nothing* to do with the discussion regarding oil money, because it’s simply not taxation money. The *only* money the government gets to spend, in my book, is taxation money; any use of A money is not only regressive, it is graft, as if the bank would spend your inheritance money for you. But A money should in no way define or limit or determine the spending of B money, except for the fact that A money will invariably increase the amount of B money. But, in the end, only B money should limit, define, and determine government spending.

          • Regarding PDVSA, by the way, I think the government has not business in being in the oil industry, but that’s a personal opinion independent of whether the money from selling of oil *to* PDVSA should be distributed as A money to all citizens.

          • A. Barreda, I forgot to address one point: “That’s the reason I am not sure about this theory working in a petrostate.” What defines a petrostate is not merely a nation that has oil, but a *state* that uses the oil at will. If we implement UCT, the state no longer has the oil money. Such a state ceases to be a petrostate, even if the nation has oil. UCT of 100% natural resources kills the petrostate model. So, you shouldn’t have to worry about whether such a UCT works in petrostate because they don’t coexist.

    • The opposition should point out how many times this worked in the past (particularly in the past 12 years). Not one time. At the times it seemed to work, it was because of massive importation and sale at below market prices.

      I would rather direct Juan Bimba to do something he almost never does, (however often he buys from them): Talk to Joao on the counter of the panaderia, to Wilmer who is a buhonero or to Cheng at the abasto. Not about “que tan buena esta Dayra Lambis”. But about the way they are constrained to run their businesses, by the government and by the economy. To get the dirt on them, ground-level, directly from them. This would also function as an eye opener and as a first practical lesson in economy, Venezuelan style.

      • I meant, to get the dirt on “them” (the economy and government policy), directly from them (Joao, Wilmer, Cheng, etc.), who have to deal with the environment and with the not-too-happy customers.

  6. Pero esta gente… yo tengo 2 meses sin ver café en el Mercado. Por la Gracia de Dios fui al mercado hace 2 semanas y estaban vendiendo leche en polvo (compre 4 bolsas, 2 para la casa, 1 para mi vecina y 1 para mi manicurista). Aceite si hay, pero puro aceite de soya (uno de los más perjudiciales para la salud), el Mazeite desaparecio, y el de Canola importado esta en 50 Bs. Tenemos meses cargando un serio desabastecimiento y estos wewones (disculpen mi vocabulario, pero me molesta) ahora dicen que es por acaparamiento? Si yo tengo que volver a patear Caracas buscando unas pichaches Toallas Sanitarias me voy a ir a acampar frente a la Asamblea Nacional a lanzar bombitas de pintura roja contra los asambleistas que apoyaron esta ley. Y para todos aquellos que crean que es muy extremo, entonces ustedes no han tenido la menstruación en Caracas cuando NO se encontraban las toallas sanitarias por ningún sitio. (rant over)

    • I crossed this comment in another forum, I think it complements your story. Forgive the inherent crassness of Spanish, in its Venezuelan version, but I’d rather not edit the guy’s text.
      “Les echo un cuento:
      Hace varias semanas está escaseando la leche. Tengo dos niños pequeños. La más pequeña no tolera la lactosa, así que tomar leche con lactosa le produce cólicos y diarrea. La única leche en polvo que tolera es Canprolac Prebio 1, así que esa era la que tomaba. Un día, esa leche desapareció. Comenzamos a darle leche pasteurizada deslactosada y la tolera bastante bien. Sin embargo la leche deslactosada también comenzó a escasear. Esta semana dimos varias vueltas, sin éxito, por Caracas tratando de encontrar algunos envases. Ya no hay leche deslactosada tampoco.

      Y bueno, resulta que a los niños pequeños hay que darles su tetero ¿verdad? Con eso no se juega.

      Anoche nos avisaron que había Prebio 1 en algún supermercado de Caracas, de cuyo nombre no quiero acordarme, y tuvimos que salir corriendo a buscar la leche. Obviamente, lo ideal hubiera sido comprar una caja de leche para garantizar que nuestra bebé tuviera su tetero durante algunas semanas. Sin embargo en el supermercado no estaban dejando comprar sino 2 potes de leche por persona. Racionamiento a la cubana, pero sin tarjeta.

      Cosssa má grande, asere.

      Ahora lo que me caga (sí, dicho así simple, llanamente, con palabras crudas y sinceras) es que ayer entró en vigencia la ley esta de costos. Comenzaron regulando los precios de un montón de rubros vitales para la higiene y el aseo personal.

      Adivinen qué.

      Sí, la pegaron. Esos productos van a desaparecer del mercado en el corto plazo. Vamos de cabeza al medioevo, cuando la gente se cepillaba los dientes con arena, si acaso, y se limpiaba el culo con hojas quién sabe qué, si es que acaso se lo limpiaban.

      Habrá que limpiarse con tusas, será, o con hojas de plátano.

      Pero lo más grave no es eso.

      Lo más grave es que si yo, perencejo pérez, presto un servicio o vendo algún tipo de bien tengo que registrarme en no-sé-qué oficina, para que los burócratas de dicha oficina estudien la estructura de costos y determinen el precio que yo, perencejo pérez, puedo cobrar por la mercancía que vendo o por los servicios que presto.

      Un burócrata decidirá cuánto debe cobrar un taxista, un carpintero, un plomero, un caficultor… y pare de contar. Un burócrata, señores. Los burócratas son los seres más inútiles de la tierra, porque lo único que producen son molestias.

      Esa vaina se llama comunismo. No son alharacas ni disociaciones. La esencia del comunismo es la economía dirigida centralmente. Lean a J. Kornai pa que vean.

      Es decir: que esa maldita ley le puso precio al culo de cada venezolano. Y la gente ni se enteró. Nos cogieron durísimo, hasta las ñángaras, sin vaselina.

      Y la gente no dijo ni esta boca es mía”.

  7. Long, wonkish, and mostly historical. Excerpt from “The Commanding Heights” on the US experience with wage and price controls in the early 70s: http://to.pbs.org/sVmxx3

    Choice quote:

    This time, however, it was apparent that the control system was not working. Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets.

    e.g. scarcity.

  8. El Ejecutivo solo reconocerá costos calculados al dólar Cadivi
    http://www.eluniversal.com/economia/111125/el-ejecutivo-solo-reconocera-costos-calculados-al-dolar-cadivi

    This is so obviously a political weapon. Let’s see Cadivi won’t give me any dollars so I have to get them from somewhere else & pay well above BsF.4,3. The government will only allow me to sell my products based on BsF.4,3 & with a very small margin. Well f… it! I can’t do business like this so all the products that I have to import or need imported components will cease to exist.

    Just incredible. It’s like a vendetta against all business owners in Venezuela.

      • loroferoz:

        If I understand your comment correctly you seem to be saying that many companies are using the Cadivi dollars to make gains in the exchange market. (sorry if this is a misunderstanding).

        The problem with that idea is that Cadivi has not been giving out dollars to most business for about the 2 years that the article that you refer to was written (Jan, 2010).
        I personally know a number of business that have to import 90% of the goods they sell. Cadivi has ignored their requests & they have received nothing. The only option they have is the black market. The Sitme solution is only a partial help as they can only get a small monthly portion of their needs. The rest is at 8++. Any suggestion of exchange gains is mute.

        The problem is that many businesses have been forced into the position of being criminals because of government policies. Dealing in the black market is still a criminal offence in Venezuela.

        Now with this new law all the market balances are being removed by threat of prison & other penalties. It will be impossible to make a profit. Businesses will be forced to close & unemployment will rise.

        • My interpretation of the information provided in the post is not the same as that done by somebody with a “revolutionary” and “socialist” mindset. It’s quite the opposite.

          I perfectly understand what it is to be made into an instant criminal while trying to do perfectly normal, productive things.

          Or that a bad system produces perverse incentives instead of incentives to do productive, normal things.

          Or that a system can be crooked enough that the greatest profit comes from “working” and “milking” it instead of doing perfectly normal things.

          Of course, it only adds insult to injury, to try to (laughs here) enforce a rule against the crooked system they created.

  9. Chavistas probably alocated one of the billions from the Chinese loan to import Ku-lo Lin Piu, toilet paper from a Chinese startup…at least until October of next year. The toilet paper will be distributed within the programme of Buen VIvir. And millions of Chavistas will praise the government for providing toilet paper almost for free…por ahora

  10. On the bright side,,,, the more these Chavista Retarded Imbeciles mess up, the better on the long run. If they continue to be this STUPID, messing with the most basic principles of any economy, hopefully even our uneducated pueblo will finally realize that these corrupt morons running the country have absolutely no clue as to what their doing, beyond robbery and fake illusions of power.

    • Yes of course. Because, naturally, those who vote for Chavez and support him are not doing so because their lives have improved in every measurable way, and continue to do so. They are not supporting him because poverty has been cut in half, extreme poverty reduced to less than 7%, etc and Venezuela has made historic progress in achieving the Millenium Development Goals. And of course that is the reason Chavez still enjoys support from over 60% of Venezuelans and the opposition is a joke who cannot actually present any coherent policies, economic or otherwise. Hmm…or the reason for his support might be that you want to return Venezuela to the corrupt economic disaster area it was before Chavez won democratic elections and actually did what he promised and improved the lives of all Venezuelans rather than the decades of corrupt, US dominated neo liberal leaders that preceded him. When someone like you makes such transparently absurd statements, it only exposes your own total refusal to accept reality and your own ignorance, rather than the reverse.

      • IronyAlert, you would be convincing if it weren’t for an analysis of efficiency. In other words, if chavez is receiving 5 times the income, then it would only be natural to expect 5 times the improvement over previous governments. If, on top of that, we accept your claim that the corruption was a greater disaster before chavez, then the 5 times amount of income should go an even longer way than just 5 times. But the cherry on top is that if we assume that costs were covered by the incomes of previous governments, then chavez having 5 times the income is really more than 20 times the money for development alone. So we really should be seeing at least 20 times improvement in all areas.

        Ironic: “When someone like you makes such transparently absurd statements, it only exposes your own total refusal to accept reality and your own ignorance, rather than the reverse.”

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