Bajadita Chronicles

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Slide1Tell us more about how Venezuela can’t possibly face an economic apocalypse, Mark…

BTW, fun isn’t it how inflation numbers have to be leaked by BCV flunkies these days, since the bank sits on them for no good reason after they’re ready.

But let’s not gloss over lo más lindo del último analisis del cabeza’e’ñame este:

A este Gobierno no se le van a agotar los dólares. Actualmente, el Banco Central cuenta con $23 billones en reservas, y los propios economistas de la oposición estiman que existen otros $15 billones en manos de otras instancias del Gobierno, sumando así un total de $36,4 billones. Normalmente, las reservas que puedan cubrir tres meses de importaciones son consideradas suficientes;Venezuela cuenta con las reservas necesarias para cubrir por lo menos ocho meses, y posiblemente más.

Let me just translate:

The government won’t even tell me, their favorite economist, how much money they hold in unconstitutional off-budget funds that spend without A.N. appropriations. I’m too damn lazy to do the back-of-the-envelope work myself, but luckily there’re guys on Wall St. who get paid to do that kind of estimate, and they figure it must around $15 billion, so I’m just going to go with that. Of course they don’t really know because, did I mention, even though these are public funds, they are reported to nobody, audited by nobody, nobody’s responsibility, and could very well already have been stolen without anyone knowing because, just so we’re clear, they’re SECRET. Oh, and, by the way, I’m telling you all this to bolster your confidence in the Venezuelan economy…

Que jodedera tan divertida, chico…

1 COMMENT

  1. Here’s Weisbrot, obfuscating the truth again today. Notice how the first three months of 2012 become the most important datum in making hyperinflation a “very remote” possibility. What about all the other months?

    “La hiperinflación también es una posibilidad muy remota. Durante los primeros dos años de la recuperación económica, que comenzó en junio de 2012, la inflación venía cayendo aun cuando el crecimiento económico se aceleró a 5,7 por ciento para el año 2012. En el primer trimestre de 2012 alcanzó un punto bajo de apenas 2,9 por ciento, equivalente a una tasa anual de 12,1 por ciento.”

  2. the country is falling apart, whatever merits Chavismo had in its early days, and there were several, there’s no ignoring the country is falling apart. what a schmuck you are Weisbrot

    • There were several? Please! There was nothing but a barrel of oil at 24, 27, 28.1,
      36, 50, 61, 69, 94, 61, 77.5, 107.5, 109.5, 105.6 dollars after it was at $12…and that didn’t have to do with Chávez (in spite of what some say)

      • yes Kep, there WERE several 😀 fact remains, while Chavismo and leftists don’t understand how to run an economy, you guys don’t understand how to run a nation-two intricately tied albeit separate concepts. there is after all, a reason why Chavez was elected and we can get as elitist as we want rationalizing with the “ignorant savage” argument, but he did get elected. anyway, I’m AGREEING with you!! Weisbrot today es un imbecil, o un hombre muy rico

      • Almost any government does some good things. One could compile a good-sized book of the good things done by Nazi Germany. (And a 20-volume encyclopedia of the bad things.) No government ever got into power by promising that everyone will be whacked in the forehead with the corner of a brick twice a day. No government ever held power without doing some good for a substantial bloc of people.

        The chavernment has squandered 100s of $billions. But I recall a comment from a largely hostile review of the file Apocalypse Now. The reviewer noted some gorgeously shot elaborate scenes, and the film’s huge production budget. He concluded that one can’t spend that much money and not get something for it.

        Thus with the chavernment. Especially in the early days, when corruption was not so widespread and the “idealistic” element of chavismo had more power – and before chavista incompetence had wrecked so much of the nation’s functionality, and it was still possible to do useful things.

      • Very likely posted via iPad, from the comfort of his D.C. home, complete with constant running water, unwavering electric power and a full refrigerator, compliments of the very capitalist megamarket a few blocks down the street that has never seen a day of food shortages in it’s life, and to which you can incidentally go at midnight on foot, if you so damn please, because no one will mug you silly.
        Weisbrot sí que puede hablar con propiedad sobre los progresos de la revolución y del sufrimiento del pueblo, verdad, campeón?

      • At this rate many commenters will need to live past the normal human life expectancy to see the progress of the bolivarian revolution.

  3. How much does cherry-picker Weisbrot get for pimping here, during the dog and pony show on Why-You-Should-Buy-Vennie-Bonds? (Hat tip: Roy on Octavio’s TDE)

  4. So Weisbrot severely underestimates the risk of hyperinflation, that is clear. For example, he poo-poos the idea that increasing the money supply causes inflation, though obviously, it does.

    But what is the weak point in the rest of his analysis?

    http://www.theguardian.com/commentisfree/2013/nov/07/venezuela-not-greece-latin-america-oil-poverty

    He asserts that it is impossible for Venezuela to have a balance-of-payments crisis, because of oil revenues. And he claims that oil revenues more than make up the cost of all imports, with money to spare to pay off foreign debt.

    This all seems very macro to me; I doubt that the oil revenues do go right into purchases of imports. But is the failure of the government to provide dollars to make import-purchases for the health system, the transportation system, toilet paper, and all the rest just mismanagement?

    Or is there a structural shortfall that makes it impossible to pay for Venezuela’s purchases abroad, because nothing is produced domestically, thus raising the overall cost of imports?

    Weisbrot’s claims about what “Venezuela-haters” argue does not cite anyone making precisely the claims he rebuts, so I wonder what you all think.

    • It is very likely that Venezuel would enter into a balance of payments crisis, Weisbrot ignores the possibility that 20%+ of Venezuelan foreign earnings are being siphoned off to phantom imports or embezlement.

      • Exactly. I have talked to people who worked at companies where more than half the revenue was in overcharges. Of course that’s not the case with all of the Venezuela import stream but I’d guess that 20% is quite a conservative figure. And importantly, it’s the classic sort of strong constituency you want to avoid creating. You get a small number of people with a powerful interest in the status quo vs. a huge number of people who are each only mildly harmed by each instance of corruption (a sort of corruption-industrial complex). That’s a recipe for the situation to get keep getting worse.

        • By chance saw an experts report presented to a US tribunal ( and admitted as evidence) where the point was made that on average ‘trading commissions’ paid by importers of bulk goods to Venezuela averaged between 20 and 30% . One might assumme that those ‘comissions’ paid to ‘trade agents’ abroad where actually surcharges on the invoiced amount of the goods being imported to Venezuela
          part of the USD given those importers by CADIVI.

  5. Well guys, there’s nothing to worry about, the government is of course ready to implement something to fix the inflation issue, all while guaranteeing the right to supreme happiness: http://www.elchiguirebipolar.net/07-11-2013/bcv-anuncia-que-cambiara-ceros-del-bolivar-por-caritas-felices/

    Pero en serio, I’m pretty sure there’sa guy that makes a living out of proposing ridiculous things to the government and then selling the article to el Chigüire. And that sometimes he/she actually mixes them up and submits the satirical proposal to the government.

  6. The following is excerpted from a letter written by Steve Hanke, a professor of applied economics at Johns Hopkins University, published in the Financial Times earlier this year (Prof Steve Hanke, ‘Venezuela a long way from the hyperinflation hall of shame’, Financial Times, June 12):

    ‘[T]here actually is a recognised scientific definition of hyperinflation. This convention, articulated in Professor Phillip Cagan’s seminal 1956 paper, “The Monetary Dynamics of Hyperinflation”, holds that hyperinflation begins when the monthly inflation rate exceeds 50 per cent. This is the definition that Nicholas Krus and I utilised in documenting all 56 hyperinflations in world history (“World Hyperinflations” in: The Routledge Handbook of Major Events in Economic History, 2013). Indeed, Cagan’s 50 per cent-per-month threshold is the standard definition of hyperinflation used in economic research.’

    ‘Official statistics put Venezuela’s monthly inflation rate for May at 6.1 per cent. But, official statistics never tell the real story in a place such as Venezuela. Using changes in the bolivar’s black market US dollar exchange rate, I estimate that the true monthly inflation rate for May was 11.4 per cent. That’s almost twice the official rate, but it is not even close to the hyperinflation threshold of 50 per cent per month.’

    ‘Venezuela has a serious inflation problem, but the situation will have to deteriorate significantly before Venezuela can join the other 56 cases in the hyperinflation hall of shame.’

    In other words, the talk of hyperinflation in this comment section is not serious.

    • Hanke’s estimated monthly inflation rate of 11.4 percent translates into an annual inflation rate of 265%. Sounds serious enough to me if it isn’t brought under control. [A 6% monthly inflation rate = 101% annual] Granted, a country can live with 100% + annual inflation rates for years- Argentina did for about 15 years- but as the saying goes, that’s no way to run a railroad. [For Argentina, ending inflation was fairly painless- selling off the deficit producing government enterprises- such as the railroads.]

  7. If you do a least squares fit between May and October the line has a negative slope, which means inflation is moving down…unless November goes up, or December. The scarcity index was cool, a 12 month high at 22.4%, but Merentes said they will control things. Maybe Weisbrot will move down here and be forced to understand what scarcity means.

      • Reads like something from KCNA, “Korean women enjoy making Kimchee”

        “Ri Sun Hui, 65, in Ryonhwa-dong No. 1 of Central District, Pyongyang said KCNA that she would make very tasty Kimchi this time with 20 odd condiments.
        Making winter Kimchi, she added, shows the cookery of each housewife.”

        What progress, North Korea has brought the people back to Korea of 1860, before any modernization or mass production!

        What glories await Venezuelans, soon they can learn to grind their own Arepa flour, grow their own corn, raise their own chickens, sew their own clothes and midwife – all overseen from heavan by the eternal comendante. North Korea povides the model for socialist personal self sufficiency.

      • what a little sh*t is this pinhead Tamara Pearson, who I gather is a twenty-something on a teaching adventure in Vzla. From her diatribe, we know that she’s delighted with the freebies and low prices of most things in her “community”, and that she manages very well, thank you very much, even without milk. (Beyond its need for growing children, milk is not even good for you, she tells us, before she later expresses that she wished there was cottage cheese.) So now we know that she has reported shopkeeper(s) “outside her community” to Indepabis for the pricing anomalies she came across, when it was easier to do so.

        Love her use of “they”, as in “The scarcity mafia – They plan this scarcity though, and they organise the black market prices they’ll charge. …” Fuzzy wuzzy was a bear…. I could go on, but I’ve read enough.

        • OTOH, I’d like to have a full report from any one of these boneheads on using water instead of toilet paper — with diagrams, please.

          • Moisten sponge (water componeny). Place on stick. Wipe.

            I think that’s how they used to do it, anyway. I’m predicting an imminent shortage of sponges.

            I’m pretty positive another VA author, Chris Carlson, was a regular poster in the comments section here. Can you think of a strident gringo poster always going on about agricultural reforms and the improvements under chavismo?

            Wonder what ever happened to GAC. I haven’t seen anything from him since August.

          • Honestly I think he couldn’t take it anymore, the regime was just getting so off the rails and things are so bad he couldn’t keep it up anymore.

        • “Love her use of “they”, as in “The scarcity mafia”
          What Tamara Pearson will never acknowledge is that there are Chavistas profiting from the black market, many of whom don’t even pay the subsidized Mercal price but pilfer the food from the warehouses.
          I wonder what she thinks of the policy of 15 cents US [whatever] per gallon, and the black market sellers to Colombia. Will always happen when governments set an artificially low price.
          I hope she is living in a relatively low crime area.

          • Tejano,

            That woman, as far as I could find out around 2006, is an Australian communist who has been living since around that time in Mérida. Carlson was living there as well.
            I think that’s a rather popular town for musiuos wanting to learn Spanish or teach English and it became a centre for the PSFs living in our country. It’s relatively safe – in the grand scheme of Venezuela’s disaster-
            and it has milder temperatures than in Caracas or Valencia, so you caras-palidas don’t get a caquicardia if you live there.

          • Taquicardia, I meant.
            I think the only well-known gringa mercenary living in Caracas is the Revolution’s Harlot.

          • There is a woman who writes in the Venezuelan Politics and Human Rights blog that lives either in Catia or 23 de enero. I can’t recall her name.

          • As a tourist experience? Sounds like some heavy form of masochism. De gustibus non est disputandum, sed interdum: verga!

          • OK, I have to say that post sounds sensible and she is in large part right, at least with the perception in Greater Caracas. The reasons for Chavismo’s relatively popularity in rural areas is another topic, though.

          • the Revolution’s Harlot is no longer living in Ccs. She left so as not to deliver her baby in Vzla. And she bought apartments in a gentrified area of Brooklyn, NY (Park Slope), where her mom helps out with the babysitting, as well as in Miami. The Chávez Revolution was good to her.

          • Agree, Kepler. Rebecca Hanson’s article is well thought out and well written. It gives a much more credible interpretation of life in the barrios (in Catia).

        • “Meanwhile, photos are posted regularly to Facebook taken in Colombia, and even the US or of online shopping sites of our cornmeal being sold there at crazy prices, while its scarce here.”

          The harina pan (made by polar) you buy abroad comes from Colombia, that’s why it’s not scarce. Why should business in Colombia sell to Venezuela at controlled prices? Because the great leader said so!? morons…

        • Pearson is one of those people that believes she has everything figured out because she follows suit with every traditional or conservative way of life and thought that Chavism opposes. In the article, she’s a new age nutritionist, psychologist, economist, sociologist, and possibly many more things, only I couldn’t bear to finish her steaming pile.
          This belief is heightened on her righteous ideology platform, and who knows, it might give her the impression that she’s an intellectual. The awakening will be a rude one.

      • Wow, one could have a field day with what this person writes:

        For wiping your bottom, in the past “they were just using leaves or old newspapers or whatever.”

        Yep, you don’t need electricity or cars, or anything, either, we could go to bed earlier and walk, or, “whatever”. Damn the increased comfort brought about by the industrial revolution….

        Well, we might be headed back to the stone age anyway, might as well get used to it….

        • Communism can do no evil in the eyes of a true supporter. She’d rather look at the pros of living like a savage than allow herself to criticize this regime.
          Just look at how many arguments she made in favor of not finding toilet paper:
          – You have water, man! It’s much more effective! You don’t clean your body with paper, you take a shower, don’t you?!
          – People living in extreme poverty around the world don’t have access to TP anyway, and they seem to fare just fine.
          -TP is a capitalist scam. People used to stick anything in there back in the good ol’ days.
          -We’ve only been using TP for one century. Considering the earth is billions of years old, that’s not very much.
          – And of course, of course, she says “save the trees”.at the end.
          I wonder if she would act the same way in her homeland, and how many of her fellow Australians would laugh in her face if she tried.

          • I’m sure that in Australia, like in most countries, there’s a place for confused and non-aspirational romantics. These, unable to function, as per the norm, and compete for available resources, associate themselves with the marginalized, so as to gain some psychological advantage.
            I wonder what this knucklehead writes in her letters home. “Dear Mom and Dad, this week I came to realize that somethings in life are way overrated. Take for instance toilet paper and milk…. My partner is now lecturing on how to use water instead of toilet paper. There has been considerable interest from the community. The only thing he hasn’t been able to figure out is how to deal with a water shortage. But I’m sure that reasoning will come in time. Yesterday, I denounced a shopkeeper… it felt good to do something for the revolution…I may have to revise my ‘milk’s not important’; I just found out that the skeletal system needs calcium, and that milk is the most efficient way to gain that. You learn something new every day in the barrio…”
            Given her fuzzy logic and psychological issues, I also wonder if she might not be yoyo who periodically trolls on these boards.

            Truly, this article is made for parody. You could even write an entire theatrical piece on it.

      • With all the B.S that’s contained in that article I guess that the bit that the toilet paper cleans does not really make a difference.

      • I can’t read that. my blood is boiling. good god. the utter idiocy and mental gymnastics on display is truly remarkable. and she knows better than all of us!

    • Her article attributes magical power to “dolartoday” website:

      “Websites like dolartoday.com and tucadivi.com set the black market rate at whatever they feel like, it’s got nothing to do with the real state of the economy or the real value of the bolivar.”

      So, “dolartoday” sets the price for dollars way, way high, and then thousands of Venezuelans decide that they will pay this price for dollars, and then they expend their hard-earned Bolivars on this fool’s errand, and then they sell those dollars to others who they have convinced. Dolartoday has immense power!

      The solution is to have Maduro buy the website and set the black market rate right at the same point as the official rate. Problem solved!

      • That’s good Chavista reasoning 🙂
        It would be nice if a popular figure in Venezuela had the courage to ask Maduro to set up a site, bolivarhoy, where Venezuelans were told the real value for the dollars based on the real state of the economy and the real value of the bolivar.
        Venezuelans should have their Saulus-to-Paulus moment and immediately there will fall from their eyes something like scales and then they will only buy dollars at the official rate.

  8. Hola, si no me equivoco, este cálculo es exactamente a la inversa en la realidad, alguien debería decírselo a Marc también:

    But how can a government with more than $90bn in oil revenue end up with a balance-of-payments crisis? Well, the answer is: it can’t, and won’t. In 2012 Venezuela had $93.6bn in oil revenues, and total imports in the economy were $59.3bn. The current account was in surplus to the tune of $11bn, or 2.9% of GDP. Interest payments on the public foreign debt, the most important measure of public indebtedness, were just $3.7bn. This government is not going to run out of dollars. The Bank of America’s analysis of Venezuela last month recognised this, and decided as a result that Venezuelan government bonds were a good buy.

    • $93.6bn works assuming they sell every drop of 2 1/2 million barrels a day at a hundred bucks a pop. Uhhh, no dude, sorry. Not buying it.

  9. Weisbrot’s arguments are usually very limited and “convenient”. HOWEVER, I think that he’s just picking the low-hanging-fruit of the discussion.

    Low Hanging Fruit #1: Hyperinflation.

    Suppose that you’re overweight and you’re clinically 1 pound below the obese category. Suppose further that one day you ate a whole cake and you cross that threshold, however, by doing nothing your body returns to your original weight 2 days after that event. Are you obese? Where you obese? The problem becomes more semantic than interesting.
    Reference –> http://www.imf.org/external/pubs/ft/fandd/2003/06/pdf/reinhard.pdf

    Low Hanging fruit #2: Impresión inorgánica de dinero (closely related to LWF #1)

    Could someone please explain for me that concept? Specially when money is fiduciary?

    From the BCV website –> Dinero Fiduciario. Monedas y billetes de curso legal que carecen de valor intrínseco. Su aceptación y uso descansa en la confianza que tiene el público en que otros a su vez lo aceptarán a cambio de bienes y servicios.

    Low Hanging fruit #3: Balance-of-Payment Crisis

    It’s very vague to talk about a “slow-motion-balance of payments crisis”…. So defending yourself from a vague attack is usually very easy.

    Let me quote here a paragraph written by Krugman on a very influential paper written by Calvo

    “The paper starts by extending the standard speculative attack model to show that it is possible to have a balance-of-payments crisis even if there is no current account deficit prior to the attack. Calvo’s motive is to show that this possibility exists at least theoretically. The main implication of this finding is that the current account by itself is an imperfect measure of the true fundamentals. This casts doubts on the usefulness of the current account sustainability literature. I tend to agree with this general conclusion. I do not, however, share Calvo’s assumptions that drive the result.”

    Reference –> http://www.nber.org/chapters/c8690.pdf?new_window=1

    • Yeah, I guess what bothers me is Weisbrot’s utter lack of curiosity as to how a country that runs such a big current account surplus could find itself facing so many of the symptoms and dislocations normally associated with an impending BoP crisis.

      That’s where his real hackistry shines through. Because he’s right: IT’S CRAZY that a major oil exporter running a big Current Account surplus should be facing 50%+ inflation, major and deepening shortages, a price-wage spiral, huge capital flight pressures, etc. THAT’S precisely what needs explaining, como coño se las arreglaron para escoñetar a un megaexportador de petróleo hasta el punto que la gente se entra a trancazos por un pernil dentro de una base militar!

      He turns around and says, “nope, nothing to see here…the current account is in surplus, ergo all that stuff must be some kind of hallucination…”

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