The Genius of Devaluation

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So did you see all the insanity in Cyprus over the last few days? Man! For reasons too complicated to go into here – but which will surely feature in Macroeconomics books for a generation to come – the Cypriot government found itself forced to just grab a chunk of all depositors’ savings. Just like that!

The “one-time contribution” – which will range from 6.75% for small depositors to almost 10% for those with over 100,000 euros in the bank – has caused an enormous stink, destabilizing financial markets all over the world, rattling the European Union, creating a diplomatic crisis with Russia and generally sending Cypriots into pitchfork-wielding-mob mode.

I mean: of course! Economic policy-making doesn’t get any closer to armed robbery than this, does it? They just decided to out-and-out grab a bunch of cash indiscriminately from everyone with a bank account, from multinational firms to little-old-ladies with their retirement savings in the bank. Wouldn’t you be superfly-TNT, too?

Actually, you wouldn’t be…because, as it turns out, just over a month ago the Venezuelan government grabbed a much bigger chunk of your savings right out of your bank account – hell, right out of your back-pocket, if you happened to be carrying cash and…nothing much happened!

Why? Because Merentes & Co. were much sneakier than the Cypriots. Rather than calling it a “one-time contribution” and letting you see exactly how much of your money was being swindled from right under your nose, they called it a “devaluation”, which means you keep the same number of bolivars, but buy less with each of those bolivars.

Exploiting our irrational – but very human – aversion to losses, they managed to screw us three times more than the Cypriots got screwed and got nary a peep in protest.

If anything,  devaluing is way more regressive than a Cypriot style move. At least in Cyprus they get to retain some level of progressivity by taxing big depositors at a steeper rate than small depositors. You can’t do that when you devalue – it’s just a straight out flat-rate hit on everyone. And yet, though nobody likes it, nobody really freaks out. The reason, I think, is that the day after devaluation, the number of bolivars you see in your bank statement is the same, and that somehow makes us feel better.

And that…that is the genius of devaluation.

1 COMMENT

  1. ¿Intervenir una soberanía de ahorradores pequeños y medios es mejor porque a cambio pierden ahorros oligarcas rusos? ¿Qué clase de argumento es ese?

    Las devaluaciones, estudie las del ministro español Solchaga en los ochenta, no son malas ni buenas de por sí por eso “macroeconomía” está empleado de un modo desconcertante aquí, despistando por tal de criticar al gobierno electo (cosa que no señalo en otro término más que descriptivo).

    Yo mismo he sido muy crítico con la devaluación de Venezuela, la del bolívar al 30%, porque afecta a los más pobres y me parece una maniobra errónea y muy equivocada sobre todo para la clase media y la baja, la digamos asalariada.

    Pero seamos rigurosos: el problema estaría en la carencia de un mercado interno competente y con más PyMes (pequeñas y medianas empresas) no en la guerra de monedas que no la empezó Venezuela sino Nixon, arrebatando el patrón oro y sometiendo al dinero a una unidad de cambio ficticia en la que Draghi, Bernanke y el gobierno chino juegan a su más puro antojo.

    El patrón oro tiene problemas, por supuesto, pero esto es una ficcionalización del dinero. Así que, señor Toro, me gusta que sea usted crítico, por eso le leo desde España, pero no que confunda al personal. El problema monetario está en un juego capitalista corporativo y cruel que manejan gobiernos y bancos centrales a su antojo y que no terminará nada bien.

    • Sobre España hace 30 años o EEUU hace 40 no puedo comentar. Sobre Venezuela hoy, sí – en una economía dónde la enorme mayoría de los bienes transables son importados, devaluar tiene un efecto directo sobre el poder adquisitivo de la gente que es PERFECTAMENTE asimilable al de una confiscación al estilo chipriota.

      En Venezuela, al cabo de un proceso de desindustrialización y enfermedad holandesa brutal de más de una década, el mercado interno de bienes transables está devastado, es una economía dónde todo lo que se puede importar se importa – hasta el Café!! – y esas importaciones se pagan con dólares. El efecto ciertamente no es 1-a-1 – porque hay rubros no transables que no se importan (servicios, cemento, etc.). Pero el efecto, en términos de transferirle poder adquisitivo del pueblo al estado, es perfectamente análogo a lo que están haciendo en Chipre.

      • Que cómico lo que dice Toro. Usa el café como ejemplo de la “devastación” de los bienes transables, cuando la producción del café ha aumentado en los últimos diez años.

        http://www.fedeagro.org/produccion/default.asp

        Luego habla de transferirle poder adquisitivo al estado, cuando todo el mundo sabe que los últimos años han visto el poder adquisitivo del pueblo aumentarse drasticamente.

        https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ne_con_prvt_pc_kd&scale_y=lin&ind_y=false&rdim=region&idim=country:VEN&ifdim=region&hl=en&dl=en&ind=false&q=venezuela+gdp

        Pero lo más irónico es que cita un artículo de Moises Naím para criticar la devaluación. Los que saben algo de la historia de Venezuela saben que Naím fue el arquitecto de una de las más infames devaluaciones de toda la historia.

          • Apparently JC has issues reading simple charts. But you’re right JC, such a good example of the “devastation” of tradable goods.

          • ¿Lo que dije es incorrecto? La producción de café ha caído de acuerdo a esa tabla.

            Una antipatía más y te borro todos los comentarios.

          • Yes, because demonstrating how the facts directly contradict what Toro says is obviously just “trolling”. Haha!

          • Everyone can have fun with base years. Here, coffee production has fallen 18% over the last decade!…

            Exactly as true…

            Listen, it would be interesting to have a debate about issues like this, actually, but for that you’d need with a counterparty who had minimally credible claim to arguing in good faith. You plainly don’t have that, which is why arguing with you = getting trolled.

          • I would agree that one needs a “counterparty” with a “minimally credible claim to arguing in good faith”, which is why arguing with someone who claims Chavistas are “abnormal persons” who belongs to a “cult” clearly demonstrates that you plainly don’t have that.

            By the way, you didn’t back up your claim of falling coffee production.

          • By the way, it doesn’t really matter what you say about coffee production. It is clear that using it as an example of the “devastation” of tradable goods is nonsense. It has clearly been higher on average under Chavez than during the 1990s, despite this government’s explicit efforts to shift agricultural production towards grains and away from traditional goods.

            One could have a serious discussion, if one were interested. But you are more interested in calling people “trolls” when they point out the flaws in your argument.

          • Fedeagro coffee production figures : 1998: 1.453.043 quintales , 2011: 785.000 quintales, indicating a 46% drop despite the favoured attention currently given agricultural sovereignty ..

          • The first year of Chávez is 1999. You wouldn’t know that because you’re not Venezuelan. Production in 1999 was higher than in 2011.

          • Yes, JC, Chavez’s first year was 1999, which means that year’s production would be under his administration. You don’t start counting from AFTER his first year in power.

            But regardless, none of you have addressed the point at hand. Coffee production clearly has NOT been “devastated” by this government, or by “dutch disease”, etc. etc. It has been higher during the 2000s than it was during the 1990s.

            I would recommend you read DiJohn’s treatment on the dutch disease interpretations. He shows how they fail to explain Venezuela’s key economic problems.

            (Funny, I guess you have to be Venezuelan to know when Chavez’s first year is, but being Venezuelan apparently doesn’t help you understand the flaws of the dutch disease interpretation… funny how that works huh?)

          • This is the second time in a week that I have seen JC threaten someone with deleting his/her posts for disagreeing with him or for saying something that he did not like. Way to go, JC! Freedom of expression is alive and well in Caracas Chronicles!

          • I sort of agree that threatening deletion is nasty but, in particular, ineffective. If you’re getting trolled the way you stop getting trolled is by not engaging, or by deleting, but never by threatening to delete.

          • Keep it up and I’ll delete you too. There are rules for commenting on CC, they´ve been around for years. Saying something stupid (like equating deleting comments with freedom of expression or something) is but one violation of the rules. Don’t like them? Go somewhere else.

        • Desde un punto de vista abiertamente crítico, las cifras que hablan de crecimiento son cifras oficiales del INN y del Ministerio de Agricultura y Tierras. Sabrá Dios si son ciertas…
          Pero dígamos que son ciertas. Entonces donde está el azúcar, el café y la harina pan? Por qué en los mercados no está! (http://www.el-nacional.com/caracas/barrios-acabo-fiao_0_154186718.html). Y cómo debes saber, nada se puede exportar sin permiso del gobierno o de las mafias militares que lo integran. Tampoco ha ocurrido un repunte masivo de confiscaciones de mercancía acaparada que ponga en evidencia una conspiración anti-gobierno! Y cuesta imaginar el tamaño de los depósitos necesarios para ocultar miles de toneladas de harina pan, azucar, cafe, harina y demas productos que no se consiguen…

          La realidad económica es dura y simple: no puedes gastar más de lo que ganas. Eso es cierto para cualquier persona, sin importar si es de izquierda, de derecha. Y lo mismo aplica a los gobiernos. Lamentablemente eso es algo que gente ignorante como tú y Giordani se niegan a entender. Y por eso repiten hoy los errores cometidos durante el gobierno de Lusinchi, que no hacen sino causar escasez, inflación y devaluación.

          Los principios de la economía no son muy distintos a la ley de gravedad: puedes creer que las puedes desafiar si te montas en un avión (aumentar deuda y gasto público), pero tarde o temprano te toca aterrizar (pagar la deuda y recortar gasto).

          • Sr Barreda!
            Como se atreve usted a mencionar al El Nacional como una fuente confiable de informacion sobre el desabastecimiento! Por Favor…
            Dejando a un lado las estadisticas, yo si les puedo hablar de produccion de cafe y cacao, por lo menos en el oriente del pais, y a mi no me van a venir con graficos ni nada. El cafe hace hace tiempo que desaparecio de las fincas por encima de los 500 msnm. No solamente no es rentable, sino que dos enfermedades lo han devastado, con mayor o menor medida dependiendo del sitio. EL poco cafe de Caripe no alcanza para abastecer ni el estado Monagas, y de paso es caro y la gente prefiere comprar el que importan de Centro America. Por que es caro el cafe venezolano? Pues porque un jornal ahora cuesta mas de cien bolivares y solo trabajan medio dia. Si usted tiene una finca de 6 hectareas, los costos de mano de obra son brutales. Por eso es que cuando alguien de afuera viene a Venezuela se da cuenta que no tenemos agricultores, sino recolectores. El cacao? el mismo cuento… En Carupano estan construyendo una chocolatera inmensa, cuya capacidad de procesamiento es del doble de nuestra produccion nacional de cacao. Que ojo! la produccion de cacao esta por debajo de las 17,000 toneladas, no 21,000 como el gobierno dice. Eso esta claramente certificado por las distintas asociaciones de productores. La diferencia es porque importan cacao
            colombiano. El tema es que todo el mundo se pregunta de donde van a sacar el cacao para la chocolatera? de Ecuador, gracias al ALBA. Aqui esperamos la estocada final para el cacao de la zona oriental.
            Aun asi GAC insiste aqui todo esta de pinga y subiendo…
            Give me a break…

          • “Pero dígamos que son ciertas. Entonces donde está el azúcar, el café y la harina pan? Por qué en los mercados no está!”

            Zzzzzzzzzz…. This isn’t that hard folks. Use your brain a little. Coffee production has not increased much since the 1990s, while consumption has exploded. It doesn’t take a rocket scientist to figure out what is happening here…

          • So.. the increase in demand is the new explanation to the utter failure of Chavonomics. First, chavismo put the blame on the low investment in agriculture, so BAM! Chavez invest a gazillion dollars. It didn’t work. Later, the culprit was latifundismo. BUM! They expropriated many farms and kicked the evil landowners out. It didn’t work either. After that, it was the industry. PUM! Fama de America and others Coffee companies were expropriated. Coffee was still missing. Oh wait! It’s obviously evil capitalists hoarding the coffee. But where are they? They are nowhere to be found. So… it’s obviously the INCREASE IN CONSUMPTION!

            Yeah, it doesn’t take a rocket scientist to realize what’s happening, it’s just a matter of common sende: Chavonomics is nothing but marxist fanfiction and it’s condemned to failure. Sadly, common sense is something that people like you and Giordani obviously don’t have…

          • did we not also see the diminished quality that fama de america is? I cant even drink that crap, and I live in the USA…. where crap coffee is everywhere…. god i miss my old fama de america coffee…

          • Hey Barreda, we’re talking specifically about coffee, not food production in general, which actually HAS increased much more than during the 1990s. Sorry you wasted so much effort writing that post which made no sense in the current conversation.

          • Yeah, sure. That´s why I cannot find harina pan, sugar, coffee, and many, many other things. Because the incredible success of the revolution. Coño, the european and american caviar gauche are surely green with envy because of our unprecedent success!
            Given your absolute ignorance on the subject of food shortages, I’ll assume that you do not live in Venezuela nor have relatives living there. Get a clue: the poster boy of the caviar gauche that lives in perennial denial…

          • Yes, the fact that you can’t find Harina PAN just PROVES that production is down. It could not possibly be for any other reason. Way to use your brain!

          • Get a clue, as per your suggestion, using my brain a little, if consumption has exploded, then exactly why hasn’t production increased since 1990’s, let alone gone down if we use a different reference date?

          • Production in food HAS increased, much more than it did during the 1990s. But we are talking about coffee specifically, which hasn’t seen much growth. Again, this isn’t that hard. Just look at the statistics which I’ve provided here a million times.

          • I was referring to coffe production, which is what your comment was about. Do you have an answer rather than a sidestep?

          • Because the government has moved away from traditional crops and has focused on spurring grain production. They’ve been fairly successful at it too. Grain production has increased by more than 100 percent.

          • Get a clue, so you’re stating that coffee production has not increased, even though consumption has exploded, because the government decided to focus on increasing grain production. So, you’re stating that it’s the government’s fault that production levels are not meeting demand? How exactly is that a good thing that you are touting?

          • Production levels have struggled to meet demand in Venezuela since the 1930s, and you’re going to tell me that its this government’s fault? Of course you are, not because you’ve given it careful thought…. but because you’re more interested in criticizing anything you can, even if you have zero understanding of it.

          • Please Rodrigo, study Venezuelan history. Since even before the 1930s governments have been searching for ways to increase domestic production because it hasn’t been able to meet urban consumption levels. This isn’t a new problem.

          • And you might want to remember that price controls allow poor people (the majority of Venezuelans) to afford basic food items.

            It is pretty easy to not have scarcity when the majority of the population can’t consume those items. That’s hardly something to be proud of thought is it Ricardo?

            In the 1990s many Venezuelan families ate meat less than once a week. But hey, there weren’t any shortages!

          • I am not arguing that production has always been domestic. I argue that the only times that you have not been able to find products in the shelves are those.

            There are better ways to provide the poor with access and that is by subsidizing the demand size and not the offer side (as an example).

          • Yes Rodrigo, and you’d be able to find the products on the shelves today too if the poor were eating like they did in the 1980s and 1990s.

          • Get a clue, as expected, your argument just fell apart, and you try to claim it’s me out of whack: It was you who stated that the coffee consumption had exploded but that the coffee production had not because the government had focused on grain production instead, thus, by your statement, making it the government’s fault. I merely asked you the questions, tú te hiciste un ocho solito. Don’t believe me? Go back and read my comments on this thread.

            … and then you went to insults… and then you claim that we don’t argue well with you. Go figure. I end here. Ciao.

          • I never said coffee production had exploded. I said consumption in general had exploded, which is clearly shown in the statistics. There are no statistics that I know of for coffee consumption. And I never insulted you.

            IN other words, your whole argument was based on something I didn’t say. Congratulations for wasting everyone’s time.

          • GAC: “Coffee production has not increased much since the 1990s, while consumption has exploded.”

            xt: “if [coffee] consumption has exploded, then exactly why hasn’t [coffee] production increased since 1990′s?”

            GAC: “Because the government has moved away from traditional crops and has focused on spurring grain production.”

            xt: “so you’re stating that coffee production has not increased, even though consumption has exploded, because the government decided to focus on increasing grain production. So, you’re stating that it’s the government’s fault that production levels are not meeting demand? How exactly is that a good thing that you are touting?”

            GAC: “Production levels have struggled to meet demand in Venezuela since the 1930s, and you’re going to tell me that its this government’s fault? Of course you are, not because you’ve given it careful thought…. but because you’re more interested in criticizing anything you can, even if you have zero understanding of it.”

            Note: At this point, I, xt, have only posed questions. Not a single statement. Not a single criticism. Yet, GAC states assumes incorrectly what I’ll state, and accuses me of not giving careful thought, and of criticizing anything I can, even with zero understanding of it — an insult, in my book.

            xt: “It was you who stated that the coffee consumption had exploded but that the coffee production had not because the government had focused on grain production instead, thus, by your statement, making it the government’s fault. I merely asked you the questions, tú te hiciste un ocho solito. Don’t believe me? Go back and read my comments on this thread. … and then you went to insults… and then you claim that we don’t argue well with you. Go figure. I end here. Ciao.”

            GAC: “I never said coffee production had exploded. I said consumption in general had exploded, which is clearly shown in the statistics. There are no statistics that I know of for coffee consumption. And I never insulted you. IN other words, your whole argument was based on something I didn’t say. Congratulations for wasting everyone’s time.”

            Get a clue, dude, you’re not making sense.

          • Wait, I get it. When you stated “Coffee production has not increased much since the 1990s, while consumption has exploded.” you were not referring to coffee consumption! LOL. Just consumption in general, even if you did say “But we are talking about coffee specifically”. Ok. I’ll let it go, then. LOL. Dude, to think all I was doing is asking questions. Then you wonder why people don’t engage with you. I’m out.

          • Rodrigo, like I told you before, the overvalued bolivar would only make my argument about increasing productivity that much MORE true.

          • I was talking about productivity. But in this case your argument is obviously false, because if the growth in household consumption was simply a product of inflation and the overvalued currency, then we would see a drop when the currency is devalued. Yet we don’t see that. In addition, you are assuming that the currency is so much more overvalued than it was in the past.

          • Claiming that you are correct over and over again isn’t an argument. If you want to debate whether or not consumption has dramatically increased under Chavez, we can look more places than one. Here are the statistics for food consumption, which also show a remarkable increase in per capita consumption:

            http://www.fedeagro.org/consumo/default.asp

          • Rodrigo,

            No one with half a brain would claim that household consumption has decreased. There isn’t a single economic indicator that would support such a claim. GDP per capita is greater, inequality is lower, food consumption is much higher, per capita electricity consumption is higher, imports have increased, etc. etc. Everything indicates consumption has increased significantly. Your claim to the opposite just doesn’t have a shred of evidence to support it.

          • HA! I actually went over all that data. ALL OF IT. Pasted it on excel. Did a per capita on each of the categories over the years. Guess what?

            Only pork, human consumption eggs, milk, onions and “other vegetable” have increased over the years. Everything else has either remained constant or dropped. Cane sugar, all other vegetables, cereals, grains, chicken, fish, you name it. ALL A HUGE FIASCO!

            I used all of Fedeagro’s data (which for the last 4 years has not released anything but ‘memoria y cuante del Ministro’). Population was grabbed from INE. I would be delighted to share it. I made tons of pretty plots.

            The only thing that has increased over the years is financing. I would love to know how was the money spent, and I bet I can show that for every bolivar we invested in agriculture, over the last ten years we got less, if I only had the data.

            So there you go. Production as a whole has decreased. I am so sorry to be the bearer of bad news. We would have to aggregate the imports to see what they add to.

          • A corrected chart (the one you linked above) would indicate otherwise.

            Also, lowest GINI coefficient in Venezuelan modern history was 1993. Today we are not seeing neither the lowest inequality nor the highest GDP per capita in our modern history.

          • Uh, the per capita information is already calculated there. And it shows that it is MUCH higher for most items of the Venezuelan diet.

            Did you actually look at the data I just pasted? Because it wouldn’t make any sense to paste it into excel when the per capita info is already calculated.

          • Yes Rodrigo, but I didn’t say it was the lowest in history. That is beside the point. What I said is that consumption has increased significantly over the last decade. There simply isn’t any way you can deny that, no matter how hard you try, no matter how much you try to make your own bogus calculations.

          • “So there you go. Production as a whole has decreased. ”

            That’s simply not supported by any of the statistics. Not even opposition sources like Fedeagro or Innoven make that claim. They say production has not grown enough (which is obviously true) but they aren’t dumb enough to claim it has decreased!!

          • What??? Not only is that false, but we aren’t even talking about that. From the very beginning we were talking about consumption. And you are clearly wrong in claiming that consumption has decreased, it has actually increased dramatically.

          • No, you brought consumption up.

            What I am trying to argue for is “la devastación” de los bienes transables” way up there. national per capita production has declined.

          • Even if that were true (which you haven’t given a shred of evidence to show), it wouldn’t support the claim that tradable goods have been “devastated”. Domestic production has increased in real terms, not decreased.

          • But you aren’t understanding the point. Even if it were true that production were down in per capita terms, it very far from down in real terms (population has grown close to 30%). In other words, it would make no sense to try to claim that it has been “devastated” by dutch disease. If anything, it has grown MORE under the high oil prices of the 2000s than it did under the low oil prices of the 1990s. Where’s the dutch disease?

          • OK, you may not like the superlative. Which is Toro’s writing style. But saying that the current administration is performing great is false. In fact saying that is performing better in per capita terms than the previous is also false.

          • I’ve never said it was performing great. I’ve simply tried to show how Toro’s comments do not line up with the facts.

            However, I do think this government is performing better than previous governments. And I’m pretty sure a majority of Venezuelans would also say so, as electoral results have consistently shown since 1998.

          • Oh, and its more than Toro’s “superlative” writing style. It is a basic misunderstanding of the core problems of Venezuela’s economy.

            Like I said up above, you should read DiJohn’s book on the dutch disease perspective. He gives it a pretty thorough trouncing. It simply has very little explanatory power for the problems of Venezuela’s economy.

          • Men, that friend of mine, the Scotsman, was totally right: Innumeracy is as dangerous as illiteracy.
            GAC, I don’t know who taught you math, but it was a waste of your time and money… Como dirían en los viejos tiempos: Acude, te estamos esperando…

          • Can’t help but notice that you don’t have an argument here. I’ll wait until you can come up with something that actually makes sense.

          • I don’t have arguments? Well, neither do you, but you’re still here. And what for? You did nothing to refute Toro’s argument:

            Chavista devaluation = Chipre’s “one-time-contribution”

            Sadly, given the innumeracy of most people – and blind fanatism of people like you – the common people still do not realize it.

            Get a clue? Much accurate would be Get a Calculator… 😉

          • “Chavista devaluation = Chipre’s “one-time-contribution””

            Right, and since the currency has become increasing overvalued over the last few years, I suppose we should also credit Chavez with putting money back into Venezuelans’ pockets, right? Oh, I forgot, the logic only works one way with you guys….

          • Indeed, but that will not last long, because the petrodollars are limited. The saddest part is that in the end most of the money ends up in the pockets of entrepreneurs in China, Brazil and Argentina. The overvalued currency is the equivalent of subsidies to chinese, brazilians and other foreigner producers to SELL US their food, appliances and many other things.
            Because, the chavista fight is not against capitalism. At least not capitalism in Argentina, Brazil, USA or China. It’s a fight against private entrepreneurship IN Venezuela.

            Because it’s not about capitalism. It’s about having control of Venezuela and their boliburgueoise privileges.

    • Quizás la forma más fácil de entenderlo es viendo que Chipre tiene que llegar a esto justamente porque como esta en la zona Euro no puede hacer “lo lógico” en una situación así, que es devaluar. Económicamente, son equivalentes. (Políticamente ¡no!)

    • We have all been misled–Venezula’s problems today, although still being caused by El Imperio, were really all caused by Nixon, when he took the greenback off the gold standard–Give Me/Us On This Blog A Break!!!

  2. Very interesting twist, looking at the devaluation through the lens of behavioral economics. Downright crafty of the chavernment. Add to that of course the classical timing to coincide with carnaval. I am surprised there hasn’t been more outrage over the devaluation. It’s equivalent to being put on a diet:
    http://www.tradingeconomics.com/venezuela/inflation-cpi
    How does that compare with the price increase of gas leading to the caracazo? (chavistas out there?? they should know the figure by heart)

  3. Ironic that you link to Moises Naim, who also devalued the Venezuelan currency. I guess you’re calling him a criminal who stole from the people too?

    • Nah, though I do think the Manuel Azpurua – Lusinchi’s finance minister – who caused all the macroeconomic imbalances that left Naím with basically no choice but to either devalue or default, has plenty to answer for.

      It just so happens that Giordani is his own Azpurua!

      • Right! It was that Naim didn’t have any choice… I mean, its not like he has any ideological attachment that would make him want to enact neoliberal policies!!

        • ” I mean, its not like he has any ideological attachment that would make him want to enact neoliberal policies!!”

          Well, at least now there’s agreement that Maduro and Giordani were ordered by Chavez to enact a neoliberal policy. Progress!

          • No vale, you have it all wrong. Naím and Co. were handed a perfectly functioning economy, with no imbalances, plenty of foreign reserves, a balanced budget, tons of room for maneuver and lenders beating down their doors to lend them more money but they CHOSE to impose a massively unpopular austerity drive because…well, because they are bad, evil people who enjoy being hated by everyone and get their willies out of pissing off their own congressional allies, labor supporters, political machines and social acquaintances. I mean, it makes PERFECT SENSE…

          • Not because they are evil people, but because they believe in free market policies. Have you read ANYTHING by Moises Naim?

          • Get a clue, how is Venirauto doing these days? We’ve given you years for it to start massive production. Come on, send us the report.

        • I seem to remember that at the time oil prices where falling causing a big drop in government revenues , Now oil prices are sky high and government revenues presumably booming and yet the currency was devalued, this time however ……”for the good of the people”. .

        • You are just bluffing.
          You dare to say most of the time “if one would have some history knowledge…” If you’d have such a thing you wouldn’t even dare to speak about CAP II, la tasa mas alta de crecimiento economico en este pais le pertenece a el, no al sapo hinchao, pa’ que te duela…

        • With you people it is everything about ideologies isn’t it? Can’t you see that the world has problems that require solutions. Some problems are better dealt with markets and some problems can be tackled with social programs? Everything doesn’t have to be black and white. I don’t understand, you hate market economies and capitalism, but show off the marvelous economic achievements of the revolution (with distorted plots) every chance you get measuring them in dollars. So, what is it? What is exactly what Naim et al should have done then? Do you agree with Giordani? Do you think this devaluation is righteous?

          What is your argument?

          Everyone in this forums thinks that the devaluation that Giordanni did was necessary. But if other monetary and fiscal decision were made before it could have been avoided. Since the people in charge of the economy has been the same, they should know this. Naim didn’t have the luxury of doing policy making with Lushinchi.

          • Who said I hate market economies and capitalism? I don’t. But free market policies aren’t the solution for Venezuela’s problems, as Naim himself did a good job of demonstrating in the 1990s. The reason is that Venezuela’s economy doesn’t function like a modern market economy.

            A very simple thought experiment should be enough to clearly demonstrate this. To Naim and his followers (like you), Venezuela’s problems are rooted in overbearing state interventions and politices that interfere with the functioning of the free market.

            This is obviously false, since Venezuela was a very poor country long before any of those state interventions even existed, or even before the modern state ITSELF existed. In fact, most of those state interventions that you all decry were created precisely because of the failure of the private economy to advance and increase productivity.

            Any theory that seeks to explain why Venezuela is poor obviously obviously has to go back beyond the formation of the state in the first half of the 20th century. Otherwise it isn’t a good theory.

          • And by the way. I don’t fully agree with Naim’s policies back then, and in he wrote a great book about the shortcomings of that period (paper tigers and minotaurs). But I disagree with most policies of today. That book has a lot of the ‘lessons learned’. I think enough has been discuss of that period. This blog is about discussing the current period.

          • The book is actually not that great. He is mostly trying to explain away the huge failure that the CAP II administration was, and he even tries to glorify CAP as this courageous pioneer.

            I would argue that the reason you disagree with most of the policies today is because you have based most of your political ideas on this bogus theory of “too much state intervention is bad”.

          • Not at all. I think a balance of state intervention is good. I just think milk production is not the place for it. Mass transit it the place for it. Environmental regulations is the place for it. Electricity distribution is the place for it.

            But that’s another discussion, but it is one that the country needs to have.

          • Depends on what the situation is with the milk sector. Certainly if it is controlled by a monopoly firm that refuses to increase productivity it might be a good candidate for state intervention.

          • Rodrigo,

            Anyone who says they don’t believe in ideologies apparently doesn’t know what an ideology is. Everyone has an ideology. You just expressed an ideology up above when you said where you agree with state intervention and where you don’t. Ideologies are simply sets of ideas.

          • But milk wasn’t a monopoly before. Nor it was many of the other industries where the state has intervene. And they are difficult to be mono. It is hard for such and industry to be one.

            And as my preference it is what I have seen as success from others experiences. That doesn’t mean to be biased.

          • You should read what Naim has to say about this. Even though the sector isn’t controlled by a single firm, if there are only a few firms in the sector they often make agreements to avoid competing and channel investment out of the sector. Essentially it is the same as a monopoly.

          • I read it. The chapter is called “the war of oligopolies”. It is really interesting stuff. That;s why I think he is a really smart guy and down to earth. His conclusions are precisely what you are saying. One can’t always implement such policies, or not in that way. I don’t think he is today what you claim he is. Naim also has some really good lessons learned on price controls, and the ability of the government to actually execute and regulate. All very real things. I do believe Naim et al, where and are today better prepared that loonies like Giordanni.

            I am very aware of the shortcomings of markets. Specially in places like Venezuela. But other places in LatAm have been able to find solutions to such shortcomings. The road that Venezuela has traveled over the last decade it has been taken before and it leads nowhere. We are pursuing the 1960’s CEPAL model.

          • And here, the real reason Quico doesn’t engage with you. If he did, this beautiful comment, at long last an idea (and a good one), might never have got writ.

  4. Por otra parte, si busca las crónicas de Rafael Poch para el diario español La Vanguardia comprenderá que lo que está en juego en Europa no tiene nada que ver con una comparativa en la que Venezuela es peor. La soberanía nacional está intervenida.

    Le recuerdo que en Italia hay un presidente que nadie escogió recortando feliz desde hace unos meses (y ahora parece que “hubo” elecciones: ya veremos en qué margen) y que en Chipre unos señores a los que nadie escogieron han decidido que un pueblo, el chipriota, va a pagar las deudas privadas de unos bancos que no son suyos.

    Y en España le recuerdo que la clase media y baja, con subidas de IVA e IRPF, van a rescatar a un banco privado, una medida que nadie escogió y que no venía en programa alguno. No sé qué clase de democracia cree ud. que hay en Europa pero socializar las pérdidas de intereses privados me parece la más mezquina y necia de las medidas. Al acumularse como deuda total los países prosiguen con su política abusiva de recortes públicos e impuestos y precariedad en los sueldos para reducir costos.

    • Ay no mijo, hablar con Toro de las contradicciones inherentes del capitalismo es tiempo perdido. En más de diez años escribiendo sobre los problemas económicos y políticos de Venezuela, el carajo no ha mencionado las contradicciones del capitalismo ni una vez! Tampoco ha dicho nada de los medios de comunicación capitalistas, ni de los sistemas políticos capitalistas. Para este filosofito la raíz de todos los problemas del mundo empieza con “Ch” y termina con “z”.

      • I have yet to read a post in this blog that talks about how great capitalism is, the only ones who seem obssesed with capitalism are you and your comrades, I mean, its like a fixation you guys have.

        • No one said anything about how great capitalism is. The point is Toro simply ignores capitalism and all its inherent contradictions as if they simply didn’t exist.

          • Exactly, no one is singing the greatness of capitalism, the only ones who care about capitalism are you guys, you seem to still live in 1930. Den el salto al presente, los estamos esperando.

          • Uh, okay, so we shouldn’t care about capitalism? Is that not the economic system that we are living under? I wasn’t aware the capitalism ended in the 1930s.

          • True capitalism exist only in the US and China, what we have in Europe is much more of a social-democracy, is you guys who have a 1930’s mentality of pitting everything in the capitalism vs communism arena that aren’t being taken seriously in here.

          • Who said anything about communism? I didn’t.

            Social democracy is a political ideology, not an economic system. And what’s most ironic about your comment is that the foundational idea of social democracy is to reform capitalism. In other words, the very political ideology that you claim to support admits that the current economic system is capitalism! Hee hee!

          • By the way, how’s Europe doing with the current capitalist crisis? Oh, I forgot, they don’t have capitalism over there.

          • When did I say that I supported Social Democracy? Or Capitalism for that matter? Again taking things out of context when you get cornered uh? The point was that you still see the world through your 1930 Soviet Russia glasses were everything is communism vs capitalism and how contradictory capitalism is, because of course, in your mind, capitalism is what brought us to this point.

          • Uh, okaaaay. I haven’t mentioned communism once. But, yes, capitalism has brought us to where we are today. I’m not sure there’s a serious analyst in the world that would disagree with that.

          • So of course because we are in a crisis we blame evil and unjust capitalism, you didn’t hear anything about capitalism in the early 2000’s when governments in Europe were borrowing left and right without thinking about the means to pay those loans, in the case of Greece, you could retire at the age of 45-50, and the retirement programs they had back then rival those of countries like Finland or The Netherlands, without having a productive economy to sustain them, because you know, they could just borrow!

            And I guess that PC, Mac, Iphone, Ipad, Android or whatever you use to post your nonsense here is the product of a planned socialist economy right? See, I can take things out of context to GAC.

          • Hal,

            I’m afraid you have some issues that I can’t help you with. Many people were indeed talking about capitalism in the early 2000s, especially since there was a recession in the early 2000s that many attributed to a capitalist cycle.

            The PC, Mac, Iphone and Ipad are all amazing innovations that have come out of the capitalist system. I’m not sure I’m getting your point.

          • I can try and show you my point as best as I can, but you’re simply going to ignore it because it disagrees with yours and by god we can’t have that! It wasn’t the brain-dead political decisions that precisely distanced themselves from capitalism that caused the crisis, no, of course, lets blame capitalism because its a meme now. Está en la moda pues.

          • The only people that care about the ‘inherent contradictions of capitalism’ are old Marxists that are too irrelevant to be anything in their daily lives and instead spend their days trolling a blog they disagree with. What a waste of life.

          • That’s history now, they are irrelevant simply because they didn’t gave a concrete proposal, just whining around because they didn’t had a Job.

          • GAC: discussing the flaws of capitalism in the abstract is as obsolete and futile as discussing the relative merits of republics vs monarchies , we live in a capitalist world , and that includes russia , china and all countries that now or in the past have claimed to be communist . also capitalism stands for may different things to different people , there are many versions of the original capitalist system which have proliferated and evolved and which will continue evolving with some ocassional improvements and mishaps as happens to any human institution . I see original capitalism as the natural product of history and human nature , it did not need Adam Smith to be born or conceived , it was a living reality before anyone started writing about it. Communism is different , except for some primitive and archaic communities it never made it to history except as a sectarian doctrinal invention. In this sense criticising capitalism in the abstract is like criticizing the human body because every so often it knows illness and disease , all bodies at one time or another will experience pathologies or malfunctions , thats natural and shouldnt inspire us to think that maybe human bodies should be substituted by a wholly articial cibernetic body.. Your insistence on blaming everything on your imagined version of capitalism is just a waste of time !!

          • “I see original capitalism as the natural product of history and human nature , it did not need Adam Smith to be born or conceived , it was a living reality before anyone started writing about it.”

            That’s great. Thanks for sharing. Unfortunately you don’t have a very good grasp of history.

            Humans have existed on this planet for hundreds of thousands of years. Capitalism didn’t appear until less than 300 years ago, and only in a few places.

            By the way, I never even mentioned communism, and in fact I didn’t criticize capitalism either. Its pretty funny how you all respond when someone simply mentions that capitalism has inherent contradictions. That’s not even controversial in academia, yet I know this is far from an academic environment.

          • the seeds of what you call capitalism have been present in human history and in human behaviour for ages , capitalism is a product of history because historical systems are of course not present from the beginning of history but need to develop from the confluence of difference circumsntaces throughout time , do read your marx , People who comment on the flaws of capitalism usually do so to praise the comparative virtues of communism , which of course has even worse flaws than most forms of capitalism , evidently you are as conscious of the latter as your are of the former , good for you!! glad that I could modestly broaden your curious notions of history. Next time spend some time illustrating us on the known contradictions of communism , they are well worth your attention!!

          • “the seeds of what you call capitalism have been present in human history and in human behaviour for ages”

            Yes, which is why the dominant economic system for thousands of years was not capitalism, but rather feudalism and other more primitive economic systems. You obviously don’t know what you are talking about.

            “People who comment on the flaws of capitalism usually do so to praise the comparative virtues of communism”

            Uh, or they do it because they want to analyze capitalism…. I wasn’t aware that anyone who criticizes anything about capitalism is automatically a communist.

      • GAC, go to the early blog and saty that again. If he doesn’t talk about those things these days, specially the capitalist media he’s written a lot about (Globo et all in their glory days were constant targets), it’s for the same reason Nietzsche didn’t like socialism (and I paraphrase): Socialism is what makes all moderate men get radical because, though it thinks it’s smart, it’s a kind of collage of past history with no soul of its own. Like telling a guy with fever to go and whack himself in the head, kill the virus cells by hand and read the 44th page of the dictionary becuase the virus hates all those things more than medicines.

        • I couldn’t find the exact quote I wanted, but dig this one: “Socialism may serve to teach, very brutally and impressively, the danger of all accumulations of State power, and may serve so far to inspire distrust of the State itself. When it’s rough voice strikes up the way cry “as much State as possible” the shout at first becomes louder than ever, but soon the opposition cry also breaks forth, with so much greater force: “as little State as possible”. “

  5. The freakonomics guys did this experiments with monkeys teaching them the value of money. The whole piece is well explained in the book. One of the things they did was test the effects of giving them a smaller allowance Vs raising the prices, and they would go insane with smaller allowance and be slightly pissed with higher prices, it’s pretty funny. Here is a video of the experiment where they brush on the subject and talk a little about the whole experiment in general http://www.youtube.com/watch?v=J8449HgS3FM

  6. They are already projecting a 30% inflation for this year and a 3,4% decrease in the GDP, can you guess who’s going to be affected by this the most? Not the chavista parlamentary who has his children studying in the US or Europe.

  7. Well, it is not like the Cypriots has any other option. They cannot devalue their currency because it is the Euro! Cyprus is unable to implement any monetary policy whatsoever.

    • Sure, but that’s sort of my point. In taking away Cyprus’s ability to do it by stealth via devaluation, you force them to grab people’s savings out in the open. Turns out when you make devaluation VISIBLE like that, people are very, very angry about it…

      • Or could it have anything to do with the surrounding economic context? I mean, it couldn’t be that Venezuelans are much more tolerant of a devaluation after a decade of gains in standard of living and falling unemployment, whereas unemployment in Cyprus has skyrocketed in recent years.

        • So we as Venezuelans have to be happy with having our adquisitve power slashed by 30% overnight just because people in Europe are going through a crisis?

        • Well, it could be. But how are all those “gains in standard of living” any more sustainable than anything el pueblo enjoyed pre-Viernes Negro? Nothing: the rojita “revolution” has simply gone back to the old puntofijista model of giving away a share of oil revenues so that a good share of the population is able to eat three meals a day and afford other basic necessities. But nothing has changed in terms of the people’s capacity or incentives to effectively flourish as autonomous human beings due to the fruits of their labor (or actually, to the extent that they’ve changed, they most probably have deteriorated). And if all of a sudden oil prices collapsed, the country would quickly fall into a similar crisis, or worse, than what led to el Caracazo.

        • Do you know that “informal economy” is considered employment, right? venezuelans are tolerant to devaluations because we have had them for the longest time with frequency. We seem not to learn how to avoid them.

          It must be all those evil nations who profit at the expense of our poor people and of course, we are so defenseless that we can’t seem to defend ourselves from them.

  8. Oh, Gac, please, will you bring in a Venezuelan, you know, one of el pueblo mesmo, and let them explain here exactly what devaluation means, and just how it will affect them? Y otra vez, te recomiendo que aprendas usar bit.ly

    • Funny, this is one of the people who claims I don’t know how to debate, yet this person can’t ever seem to even remotely respond to anything I have said. It is quite remarkable.

      • Yes, it IS quite remarkable. There’s nothing to which to respond. It’s as simple as that. You have nothing besides “point/counterpoint”. That’s not debate: that’s called “head-banging”.

  9. People are less reactive to price increases and devaluation because the number of dollars or strong bolivares they have does not change. Their acquisitive power goes down, but their bank account does not. On the other hand, when the government takes 7% of your bank account, you can see how people would think of that as a “steal”… Even though that and devaluation have pretty much the same effect. Human Phsycology is very interesting.

    • Its long been an accepted tenet of economic behaviour that people are impacted more by a loss than by a gain , Noble prize winner Kahneman just wrote an interesting book on the subject of economic behaviour which underscores this point.

  10. The problem with your position, Quico, is that you make it sound like devaluation in Venezuela is a bad thing. In fact, devaluation would be one of the few sane things these bozos could do, if they ever had the nerve to bite the bullet and stop subsidizing imports. Not until they devalue to BsF 20 and eliminate Cadivi will we begin getting our economy in good shape.

  11. I’d be in the shoes of Cyprians and I’d too be rioting!

    The difference is that the Bolivar is a bullshit, overvalued currency. Euro is the second most important currency in the world. So when the government devalues it doesn’t take no one by surprise.

  12. Why did OW’s comment get deleted here? Are you all really that afraid of people pointing out your contradictions that you immediately label them “trolls” and delete their comments? Why such insecurity?

    • “Why did OW’s comment get deleted here?”

      Porque la puso tan de bombita que a Quico y/o a JC les dió pena ajena?

  13. I like that you bring up the analogy of devaluation being like taking money right out of people’s pockets. I agree. This is precisely my reason for claiming that, if properly implemented, then small, daily devaluations would be a better form of taxation. The problem in Venezuela is that it is being used on top of many taxations, on top of grafting many natural resource revenues, on top of many policies that counter the free market, on top of many forms of over budget debt accumulations, and more.

  14. Venezuelan Coffee from , 1992 to 2011 (only from the organization linked above, in tons)

    69,340
    66,476
    68,404
    65,088
    73,026
    63,000
    66,840
    79,854
    78,440
    91,877
    84,470
    64,265
    71,503
    64,484
    74,332
    73,642
    72,000
    63,193
    73,687
    75,510

    The numbers aren’t in your favor here, get a clue. They peaked in 2001, Hugo’s third year of government, but I’m not sure I can attribute that to his policies. We could say that the subsequent drops were caused by the Globovision supported coup, the oil lockout, and then the ehem crisis of the world capitalist system in 2008.

    But still, 1992 to 2011, only 6,000 tons increase in production? Look around the region, is that a good track record for coffee production?

    Anyway, about the devaluation, I still don’t get what Capriles is offering as an alternative. He criticizes it, and says the missions are in danger. Ok, that’s good politics. But will he not be forced to devalue himself? What will he do differently? There should be room for some clear and concise policy proposals which are not demagogic and specific, that would be informative to possible Capriles voters evaluating whether or not he’s gonna screw them over with a huge devaluation.

    • Maisanta,

      No one said coffee production had greatly expanded under Chavez. The whole point was to show that Toro’s claim that it was “devastated” by dutch disease just simply isn’t true. Amazingly, no one seems to be able to acknowledge that simple fact. Instead they just call me a “troll” and respond with immature nonsense.

    • Whatever the stats, or numbers you pull from your hat, coffee production is in a mess. I teach in the UCV ag school and have the opportunity to talk with all sorts of people involved in many different aspects of the coffee trade. They all coinicide on this. As a consumer I can attest to the dismal quality of most nation-wide coffee brands now available. Last xmas holidays I spent some days in what was a coffee growing region on the slopes from La Colonia to Puerto Maya. Coffee is now marginal being replaced by bananas on wicked slopes with dire effects on the area´s streams. Local ornithologists point to the negative impact of shade coffee plantation elimination. My brother in law sells machinery to coffee producers and the only big clients left are those directly related to the government, boliburgueses. Also, check out the shipping manifests for Puerto Cabello. Booming coffee production in Venezuela? I´m sorry but it just isn´t making sense in the face of my experience.

        • I’m sorry but your claiming are just based on extreme partisan propaganda. You are so partisan that you don’t even bother to check if the numbers are right. Are those number corrects? Has anyone bothered to verify those figures? I can also make a website and publish any number that I like.

          That stats of Venezuelan Coffee Production, shows a trending that seems to be irregular, one year falls, the next year increases, and the next year falls again. One could easily realize that If there were an agricultural policy, the production would be showing the clear tendency to be rising up, but that’s not the case.

          If you’d dug a bit more you could have found that the only thing that have been increasing over the years is the import business.

          http://trade.nosis.com/es/Comex/Importacion-Exportacion/Venezuela/Cafe-te-yerba-mate-especias/VE/09?f=I&p=A&e=T

          Instead you selectively pick the stats that can help you enforce your arguments, while blatantly ignoring others that don’t.

        • @Get a clue, You got served! And tell me what do you think about tomorrow’s “neoliberal” new exchange market, sponsored by Maduro and co.?

          • The interesting thing here is that while Maduro announced some time ago the creation of a system for accessing foreign currency diferent from cavidi , Giordani dragged his feet and made public his discomfort with any such measure , in fact delaying its implementation for several weeks , this shows that Maduros authority over giordani andother ministers may be so weak that it can be challenged and sabotaged , never the case with Chavez, Yesterdays tv spectacle with a evidently fuming giordani present was a sign that Maduro wanted to show himself as the boss , the guy in charge . even then he had some soothing and laudatory words for Giordani . The other thing that it showed that Maduro could be more pragmatic than sectarian die hard dogmatic giordani .

        • @Get a clue, You got served! And tell me what do you think about tomorrow’s “neoliberal” new exchange market, sponsored by Maduro and co.?

  15. On an abstract aside: the accusation of being “ideologically driven” gets thrown around here by both sides. We shouldn’t lose sight of the distinction between ideological questions that address what we think society should look like (for instance distribution of wealth and political power) and policy questions that ask how to get there. Echoing the teachings of macroeconomists, we should also not forget that there are pretty solid rules regarding cause and effect as regards macroeconomic behavior, much of it very well understood. There is a lot of solid theoretical, modeling and historical evidence regarding the consequences of specific policy decisions. So the question is then, given what we know is the cost of a macroeconomic policy decision, are we willing to pay for the cost? One example is what Chavez did for 14 years. Apparently chavistas were willing to pay the cost for the predictable consequences of his decisions. An alternate current example is the difference in austerity policy and outcomes in Europe vs USA. People in general make the mistake of not understanding that there are pretty consistent rules that dictate the consequences (cost) of macroeconomic decisions.

    I imagine chavistas will disregard some of what I write here as imperialist tripe or propaganda. I don’t pretend that there is no room for debate on ideological questions. Entre gustos no hay (o deberian de haber) disgustos. But I will not budge on one issue: like physics providing rules that clearly explain the consequences of gravity’s pull, there are pretty consistent rules that describe macroeconomic behavior, and it is tomfoolery to ignore them. Please do not pretend that there is a parallel set of economic principles that govern the chavista universe. Like creationism, there is just no room for that nonsense given the evidence. Even 8 million irrational Chavistas, in aggregate, behave predictably from a macroeconomic standpoint.

    If you are willing to pay the high price to create some bizarre chavista society, like the price Cambodia and innumerable experiments in communism payed to create their earthly paradises, then behavioral economics may be a good place to start a discussion. You need to address how human beings should behave versus how you can expect them to behave. At this level one can argue that there are much better alternatives than the chavista doctrine to make as many people as possible as happy as possible, for as long as possible.

    Another point: education is expensive, not least in terms of time. It is an investment and sometimes a gamble, you forgo current income in the hope of enhancing future income. If you are not enrolled and have spare time I can recommend taking an online course. If you are a chavista and think this is nonsense, I still strongly recommend you take a course, what better way to debate your opponents than to understand precisely where they are coming from:
    http://bit.ly/15XLLOa

  16. Pretty interesting exchange! Nevertheless, I am surprised that no one has brought up the alternative of dollarization of the Venezuelan economy. Oh yes! How sinful to think of it. What about our soberania? Well, to tell the truth, it is in the hands of the Castro Brothers for the time being. So, if we lost that, why not be honest once and for all and also loose our financial “soberania.” Dollarization will do away with devaluations once and for all, no more Cadivis, no more Black Market, no more Sitmes. Hell, we could also do away with the whole Banco Central de Venezuela for the almost inexistant influence they have. Look at Ecuador, they belong to ALBA profess infinite love for Chavismo, but they no longer have inflation or devaluation. Don’t worry though, this will never happen, The influence of the Boliburgueses Cadiveros is too big to let this once-and-for-all solution occur.

    • Yes, this is the right post for it too: Cyprus proves beyond a shadow of a doubt how handing over control of your monetary policy to a larger, distant entity that won’t pay any attention to you when they set monetary policy NEVER BACKFIRES…

        • Yes… It’s really easy to get carried away with the trolls. They are just diverting us from the real discussion, which is probably their main goal.

          On the other hand, Toro made a clear and compelling case on the subject, so the iddle chatter and troll bantering are not that harmful…

          I wonder if there’s any correlation between the political impact of the post (how harmful it is to chavista PR image) and the intensity of trolling activity. Or is it just all meaningless, sterile trolling?

    • Toro gave you the main argument against dollarization. The second one is the implied elimination of seignorage, because the State will not own the currency in circulation.

      Given that a rough estimate of this “inflation tax” (inflation-adjusted M1 times the inflation rate) hovers on the 7% of GDP range nowadays, losing this source of fiscal income will lead to a dramatic austerity drive, severely damaging our economy.

    • Shows I was right! Done openly, in a way that everyone can SEE what is happening, devaluation is seen as extreme and politically toxic. Devaluation is just subtle enough to be politically palatable. I mean, Keynes had it right: “Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency… Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.”

      • That’s a great quote.

        The context is definitely recommended reading:
        http://bit.ly/16ITtNp

        and the part you skipped seems worth repeating:

        “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the existing distribution of wealth. Those
        to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers’, who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

        This will of course bring a smile to some of the “rojitos” in the audience who may have heard it all before, but should give pause to all but the most ideological extremists.

        “permanent relations between debtors and creditors […] form the ultimate foundation of capitalism”

        With an unstable (debauched) currency not to mention innumerable other obstacles to free commerce such relations cease to function. Everyone loses except those handling the purse-strings and their friends.

  17. A mi modo de ver el post quieren llevar al lector a inferir que lo que se hizo Chipre es mejor a lo que continuamente se hace en Venezuela: Devaluar. Sin embargo hay que decir:
    1) No es equivalente 1 x 1, ayer baje a Maiquetia y el autobus SITSSA sigue costando los mismos 10 Bs. el trayecto, al igual que los servicios básicos luz, agua y algunos alimentos de consumo básico.
    2) En el caso Chiprense, que aún falta por ver si se aprueba, va en contra del liberalismo ya que los fondos al día tomada la decisión no estaban a libre disposición como manda el “capital”.
    3) Algunos economistas, sobre todo los de corriente Keynnesiana recomiendan la devaluación entre otras cosas como vía para hacer los productos más competitivos al exterior.
    4) Socialmente la percepción no es la misma y se crea mayor jaleo político con medidas tipo corralito que vía devaluación.

    • No. La solución de Chipre no es mejor que la de Venezuela. Justamente, el punto de Toro es que en lo económico son equivalentes, pero políticamente tienen consecuencias distintas. Justamente en tu punto 1 que comentas es un buen ejemplo. Como los precios están congelados, pareciera que la devaluación no tiene mayor impacto en la economía, pero si lo tiene.

      El precio nominal del servicio es el mismo, pero el costo de producirlo ha aumentado. Uno no se da cuenta porque las tarifas están congeladas. Pero como los repuestos y los equipos usados para producir el agua, la luz y el transporte son todos importados, una devaluación hace que estos sean más caros ahora. La consecuencia? Luego aumentarán el precio del servicio o la calidad empeora. En el caso de la luz el gobierno ha optado por la segunda opción: dejar que el servicio empeore (apagones).

      Y justamente en tu punto 4 das en el clavo. Ese es precisamente el argumento de Toro. Como la mayor parte de la gente no es muy buena con los números, les cuesta entender que una devaluación es lo mismo que sacarte dinero del bolsillo. Si la gente comprendiera eso, ya estarían en la calle como los chipriotas.

      • Coincido con lo de lo repuestos y que en general todo lo importado va a aumentar = inflación, incluso lo producido nacionalmente. Sin embargo, en Venezuela ya parece que estamos acostumbrados (http://www.reuters.com/article/2011/02/25/us-venezuela-inflation-idUSTRE71O4NP20110225?feedType=RSS&feedName=everything&virtualBrandChannel=11563) , por lo que el sector que se puede endeudar lo hace hasta el punto que aguanta su ingreso. Luego con el mecanismo devaluación + inflación vienen aumentos salariales los asalariados y en las ventas el sector comercio (el margen de ganancia se mide en función del precio por lo que es mayor su ingreso, siempre y cuando se mantenga mas o menos el consumo) por lo que la “capacidad” de endeudamiento es mayor y la deuda que tenia es relativamente menor y así hemos ido en este circulo devaluativo….

        Por ejemplo, actualmente en España la gente se endeudó a tal punto que ya no da mas su capacidad de endeudamiento. Incluso los pisos aunque bajaron de precio, hay familias que quedaron con deudas por mas de 30 años al precio de compra. La “mano invisible del mercado” ajustó los precios de los pisos a la baja más no así la deuda familiar… Una devaluación + aumento salariar (aunque no sea al nivel de la devaluación) haría que el porcentaje de endeudamiento fuese menor y eso aliviaría un poco la situación.

        En resumen, al devaluar también el valor de las deudas que se tengan (en moneda local) bajan. Si aplicas corralito la deudas siguen siendo la misma. Yo no defiendo devaluación per se ya que favorece el consumo de cualquier cosa aunque no la necesitemos y evitar cualquier ahorro. Lo que quiero resaltar es que no puede compararse una medida con la otra.

        • Excelente reflexión, Miguel. Creo que el grano del asunto se podria plantear de la siguiente manera: es factible la austeridad en un contexto de democracia? Algo más o menos así fue lo que propuso Naim en su libro del 1993 (paper tigers and minotaurs) y luego en su artículo “High anxiety in the Andes” del 2003. Si la pugna por la mayoría del voto a corto y mediano plazo es lo que caracteriza el juego democrático, es prácticamente imposible esperar que político alguno se inmole en pro de un plan de austeridad de largo plazo y sin certeza de que va a dar cabida. De modo que tiene que mentir como lo hizo CAP en la campaña del 1998, o aceptar las consecuencias de un suicido político, como igual lo hizo CAP en el 89. Claro hay casos excepcionales – Menem en el 94 – pero de algúna manera precisamente lo que lo salvo fue la convertibilidad que por unos años aunque sea mantuvo baja la inflación respecto a la década anterior. Pero igual se vino abajo.

  18. GAC : I guess Im stubborn , this is in response to your comment on the origins of capitalism , before capitalism there was feudalism after which period capitalism naturally developed because different historical processes and circumstances made it happen , capitalism itself is still evolving and in 500 years we may see the birth of a new system , thats how history works , the fact that feudalism preceded modern capitalism doesnt prove that capitalism isnt a natural historical product which took centuries to develop , you been more logical dealing with other subjects in this blog but here logic totally fails you . Regarding your silence on the virtues or flaws of communism and exclusive criticism of capitalism , the context in which you have here stated your comments strongly suggest that you do so in attempting to praise and defend the policies and practices of the current regime which has declared itself to be inspired by communist ideals , this is indicative of communist sympathies any way you look at it . If you choose to deny your communist sympathies then maybe you do so because you want to pose as an objective analyst without being one . I suspect you know enough spanish to have heard the saying “el que calla otorga”, which seems particularly applicable to you in your denial of communist sympathies , which by the way , your are perfectly entitled to have!!

  19. Faust : Im not sure I understand your comment , My view is simply that market economies and the culture that sprung from it is no accident , no artifice born of few mens desire to get rich by exploiting all others as some primitive marxists might have it , that its rooted in deep historical processes that no men deliberately planned for , and indeed on certain aspects of human nature which flourished once conditions allowed it . Today the world economy is a market economy with many diverse forms and formats , there are today not one but many forms of ‘capitalism’ practiced in different ways and with different levels of success . In contrast I see doctrinaire communism as something artitificial, born of the imagination of a few men of thought , who on the whole made a criticism of a kind of capitalism that no longer exists and gave no thought of what has made capitalism so succesful and rooted and also no thought to how absent the capitalist market economy , a rational economy could be run on a practical , day to day level. Im no believer in perfect systems , its enough for me that they are functional and competent in doing certain essential things but recognizing that all sytems carry flaws and incongruities ( the inner contradictions of capitalism) that are inevitable and people must live with or adapt to or simply make bearable, that much of what happens in any system is governed by randomness , by ambiguity , by incongrous contrasts and yet be worthy of preservation !! sorry for the lecture, just got carried away !! .

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