As we start to recover, más o menos, from Nicolás Maduro’s move —reversed last night— to pull the country’s largest bank note out of circulation, one fact stands out: nobody understands why he made this enormously reckless decision. Not really. We have a proliferation of theories and hypotheses on what he may have been hoping to gain, yes, but none of them are especially coherent. Which means even the wackier ones are plausible.

It could have been Maduro trying to emulate Narendra Modi’s move in fighting corruption in India, or a desperate attempt to curb a sharp rise of the dollar’s value in the black market, or even as they claim, a last ditch move to dump what is ultimately toxic money out of the economy.

Or it could have been nothing other than sheer stupidity by a guy who has raised the bar of stupid on a daily basis since he took office.

It wasn’t a matter of ifs or even whens, but of what would be the breaking point.

Remember, this is a man whose signature election campaign moment featured a conversation with a bird. It shouldn’t come as a shock that his understanding of macroeconomics exactly MIT-level.

The violent reaction in Ciudad Bolívar this weekend couldn’t have surprised anyone. Venezuela’s chronic food and medicine scarcity, rampant crime, low living standards, collapsed health and education system, and beaten down economy were bound to end in riots sooner rather than later. It wasn’t a matter of ifs or even whens, but of what would be the breaking point.

The punchline is that this was only the amuse-bouche, a sneak peek into the future.

In Ciudad Bolívar, the police sided with the rioters and the National Guard wasn’t willing to pull the trigger. Not even uniformed mercenaries can ignore how unhinged removing the 100 Bolivar bill was.

It showed how vulnerable and unprepared to stay in power they are. Even amid a militarized country effectively under martial law.

Maduro’s solution was a famous U-Turn to make the now infamous bank note legal tender again. But there aren’t enough bills in the world to hide how ugly their downfall will be.

Amor con hambre no dura. El que a hierro vive, a hierro muere.

25 COMMENTS

    • In the bigger cities, more people have bank accounts with debit cards. The people living in rural areas tend to live on cash more than the people in the cities. Thus, it was the rural and poor population who live day to day, who were the hardest impacted by this blunder.

      That is what makes Maduro’s actions so perplexing. in one stroke, he managed to piss off the few remaining sectors of the population that continued to support him.

  1. The chavista supporters are getting fed through CLAP and they don’t really care about the rest of the country, in fact, they seem to be laughing about it. They will be the ones getting attacked eventually, if for nothing else than to steal their food. The government seems oblivious to the monster it has created with ideological stupidity.

  2. On this episode of “Fantasy Island” (really a country, but island-like in its isolation from from all external/internal logic/opprobrium), NM (Nico Montalban), on the shores of Naiguata, draped in a white liqui-liqui, topped by a red beret, is accompanied by faithful sidekick Totono Merentes, who is pointing to the sky, exclaiming, “The plane, the plane, she is going some place else”, as a light 2-engine craft flies overhead, laden with precious cargo (new currency? white powder?). Tune in to the next episode, to see if the plane was headed to Caribbean Islands, Central America, Mexico, Florida swamps, or, maybe, even those dreaded warehouses in Poland/Czechoslovakia/Germany/Switzerland, even Cucuta, to be blamed for the next surge in the BM rate to 10m.

  3. Ciertamente es del todo incomprensible lo que ha ocurrido pero supongo que también lo que ocurrirá. Ni tan siquiera la estupidez sirve para explicar su intento de eliminar los billetes sin tener listos ni dar los nuevos a cambio, dejando al país virtualmente sin efectivo… Ver para creer.

  4. “In Ciudad Bolívar, the police sided with the rioters and the National Guard wasn’t willing to pull the trigger.”

    More like Ciudad Bolivar as ‘open city’, then…

    Anyway, Maduro and his army seem to be currently a paper tiger, he can’t even feed his soldiers properly.
    Put a real leader there and everything will crumble apart. Let Maria Corina lead the whole thing, total civil disobedience until Maduro falls!

    “Oh, we don’t want to become Syria.”

    Exactly, that’s precisely to avoid a Syria-like scenario. That fear of “it will get even worse if we don’t cooperate” is irrational and short-term thinking!

  5. That was what marked the tipping point in Eastern Europe for the whole edifice of Soviet style regimes to start falling , when a few armed police and army troops refused to shoot the protesters and instead joined them in their protests …….!! The rot happens in the mind as people who are supposed to defend the regime come to unthinkingly identify with the rioters and protesters , thats why this kind of regime goof ups are so important , because they make EVERYONE aware of the futility of defending such regime ……..

    Thats why on TV last night the faces of the ministers listening to Maduro speak looked so CONSTIPATED…!! They know what it means when these goof ups draw the masses unbriddled rage..!!

    • Most riots i saw were to either private banking or abastos, small stores or warehouses.

      The Goverment gives two fucks about those stores, they almost publicly encourage them, thinking this is some sort of pueblo uprising is almos wishfull thinking, I want to be wrong, but it’s like saying the Caracazo was on a political basis, it was and still is just chaos and looting, the political aspect came in the oportunity it presented after those events, and that certainly led us trough a yellow brick road.

      • As usual you are misinformed as to the scale and scope of the protests, there were 146 lootings in Ciudad Bolivar alone…….many of the assaulted and destroyed banks were govt banks including Bicentenario and the BCV, roads and highways were blocked, in many cases leading the protests were local crime gangs , in quite a few cases the police and GNB joined in the looting ……, what worries the govt is that the protests were so ferocious that they totally lost control of public order ….and the possibility that they might spread to other places and to the capital itself ……igniting the country to a mass revolt they cannot control. !! It could happen in the future as things become worse ( and there is no doubt they will become worse) …..!!

        They know that most of the country is tinder ready to go aflame , that this time it was contained but that next time some odd military commander might use it to start an uprising or the flames spread to where they burn the whole house down….!!

        Chaos allows things to happen , governments to fall , there is true rage against the regime on the part not only of the traditional opposition but of people who formerly were unconditionally loyal to Chavez, , and dont think for a moment that these measures are machiavellically planned to ensure a more stringent control of the population ……these mass movilization cannot ultimately be controlled , they are fragile , all it takes is some one with cojones in a regiment or battallion to raise the flag of rebellion and then they are history……!!

        The MUD is a factor in this process , but whatver it does or doesnt do there many other factors entering the fray which can bring about a toppling of the regime ….!!

        • I really hope for the armed forces to turn on the Goverment, however their true colors are so hidden it’s hard to tell, that’s one tightly closed group at least for what we can tell, you can only hope for middle rank officials with maybe some high ranking, problem comes with the paramilitary groups, and also the body as a whole being corrupt, it must be very scary being in the armed forces when one has dignity and respect for their fellow citizens. I can not picture the military doing such a thing and afterwards handing the Goverment over for democratic elections.
          Living here really makes you have a twisted way of looking at positions of power with extreme distrust and fear.

          • Remember that they are in on the game: the gasoline smuggling, the drug smuggling to US and Europe and access to the preferential dollars. It would probably need to be a conspiracy of mid-level officers, which would be nearly impossible to pull off.

  6. Someone posted this in Facebook; which makes some sense, For a measure that brought so much pain to he people there should have been more oof a nation wide reaction from the people and opposition.leaders

    Maduro no se equivocó al retirar el billete ni “está asustado” y por eso “reculó”. Está promoviendo el caos organizadamente. Comunismo.
    Que conste: no hubo NI UNA PROTESTA contra la medida monetaria encabezada por dirigencia de ese cadáver insepulto llamado MUD.
    Tiran una medida “loca”, luego la recogen cuando han logrado lo que querían y antes de romper la tensa cuerda. No es un error, es un método.
    La organización del caos es praxis comunista. No fue que “improvisaron” ni que “les salió el tiro por la culata”. Están caotizando al país.
    El comunismo necesita el caos para imponerse. Nada fue un error. No están acorralados. No recularon. Están avanzando al caos que necesitan.

  7. I am aware the following comment might seem a bit surrealistic within the context of Venezuela… but friends, not all is hunky dory in the world either, so bear with me:

    To top it up the “understanding of macroeconomics at MIT-level” is not exactly what it used to be either.

    Apparently MIT economists have not understood that allowing banks to leverage equity differently, based on ex ante perceived risk, would cause serious distortions to the allocation of credit to the real economy… and specifically provide Sovereign borrowings great regulatory subsidies, finally paid by smaller or more expensive bank credit for the “risky”, like SMEs and entrepreneurs.

    http://subprimeregulations.blogspot.com/2016/11/olivier-blanchard-agrees-there-is-need.html

  8. Perhaps this can explain why Nicolás Maduro wants to impose a ‘cashless’ society – to maintain control

    What Every Man Needs To Know About Capitalism And Economics
    First, understand that capitalism is NOT an option. It’s not an “opinion.” It’s not a “belief.” It’s not a “theory.”

    It’s a law.
    You have no choice but to abide by it just as you have no choice to abide by gravity.

    You may not “like” that statement. You may not agree with it, but none of that changes the fact that the economic phenomenon known as “capitalism” or “free markets” has naturally formed within humanity throughout it’s entire history.
    [..]
    Government as a means of protection rather than production

    All economic success derives from the protection and enforcement or private property. Understand that governments do not produce anything of economic value. The only thing that can produce something of economic value is people. Without a people, there is no point or purpose to have a government. But how do you incentivize the people to produce?

    Well, in the olden days you captured them and made them slaves, threatening them with torture, beatings, starvation, and death. Today, obviously, we need a new incentive. Enter private property.

    If I’m not a slave, I’m allowed to keep the majority of the fruits of my labor. This income will go to pay for necessary things like food, clothing, and shelter, but any excess earnings can be saved up and used to buy assets. These assets are also called “wealth,” and if I build up enough “wealth” then I can become “rich” and never labor again.

    This is a huge and VITAL cornerstone of capitalism because it provides not just one person, but all people with the key to their own freedom. They are allowed to work as much and as hard as they want, become as rich as they can, all of which invigorates and mobilizes billions of people to produce (resulting in the economic powerhouses of yesteryear western civilization). However, it was all contingent on the legal guarantee that their property would be their own and not confiscated for political purposes.
    http://www.returnofkings.com/48788/what-every-man-needs-to-know-about-capitalism-and-economics

  9. “any excess earnings can be saved up and used to buy assets. These assets are also called “wealth,” and if I build up enough “wealth” then I can become “rich” and never labor again”

    That is only if when you need to convert your assets into purchasing power, you find some buyers for these. How many Venezuelan have not seen their conserved asset wealth eroded?

  10. In 1733 British parliament imposed a tax on molasses imported from non british colonies to the 13 colonies , they did this to please british sugar growing plantation owners in jamaica who couldnt compete in price with the molasses produced in the French and Dutch Caribbbean colonies . Molasses was an important product because it allowed the 13 colonies to develop a highly luchrative rum making industry ….., of course the tax caused an uproar in the 13 colonies and gave rise to the cry of ‘no taxation without representation’ for the 1st time …..a cry which would some decades later galvanize the colonials to rise against the British authorities and seek independence….when new taxes on tea and stamps were later imposed .

    The cry itself had its origins in the english commoners opposition to a ship tax created by king Charles I without parliamentary approval , after the King was beheaded on losing the war to Cromwell and his iron army and parliaments authority had been restored its principle was incorporated into the 1689 English Bill of Rights , Because the colonists saw themselves as Englishmen the imposition of a tax which their colonial assemblies had not approved was viewed by them as a violation of their rights as ENGLISHMEN.

    Curiously enough the cry served later to rally the colonists to an armed rebellion against their British authorities….. and ultimately to independence !!

    The lesson from the above historical events is clear and one which all governments should heed if they want to keep themselves in power ……dont meddle with peoples money …..or things can turn ugly very quickly …..

    Evidently this lesson is not one which Maduro has ever heard of……..

  11. That was just an excerpt – read the entire article.

    The point is that Socialism will always fail because it is counter-intuitive to human nature.

    But with a cashless economy government control can more easily force this on the people.

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