Venezuela devaluates its currency

SLUSK

Venezuela devaluates its currency and that will send the already high inflation even higher. Venezuela is yet another proof that socialism is mucho el sucko but those idiots voted for Chavez so they get what they deserve.
http://abcnews.go.com/Business/wireStory?id=9521775

Rebelheart

SLUSK wrote: »

Venezuela is yet another proof that socialism is mucho el sucko but those idiots voted for Chavez so they get what they deserve.

Well, socialism seems to be working very well indeed for the capitalists and their enormous losses in this little country of ours. Who ever would have thought that the greatest socialists in modern Ireland would be capitalists.

Capitalism, what a successful ideology - not.

SLUSK

Ireland is capitalism for the masses and socialism for the rich, it is obviously not anything that I am advocating.

chevy

Venezuela seems more like dictatorship than a socialist country. Chavez seems to do what he likes there.

SLUSK

chevy wrote: »

Venezuela seems more like dictatorship than a socialist country. Chavez seems to do what he likes there.

Well they voted for him that's democracy.

chevy

I know they did.

It reminds me of ancient rome. Throw money and entertainment at the poor and they'll love you for it.

Byron85

chevy wrote: »

I know they did.

It reminds me of Ireland. Throw money and entertainment at everyone and they'll love you for it.

FYP.

johnathan woss

What do "socialism" and "capitalism" even mean anymore ?

When the USSR collapsed the elites stopped pretending to be communists and started pretending to be capitalists instead.

Loads of great "capitalists" have accepted state bailouts in the bastion of capitalism, the USA. Most of them have been living off the military-industrial complex since WW2 anyway.

IMO the terms don't add to our understanding of world events anymore, but actually detract from it.

nesf

chevy wrote: »

I know they did.

It reminds me of ancient rome. Throw money and entertainment at the poor and they'll love you for it.

Nah, it's the standard resource rich but otherwise poor country problem. Populist Government gets into power based on spending oil export revenues on large public projects. Which only works so long as you've got a good oil price, i.e. during global booms. It also centralises a lot of cash into State hands and literally this translates into buying off the necessary majority for re-election in a lot of countries.

It seems to be better for a poor country not to be resource rich because it forces the country to develop its economy and doesn't result in the kind of dependence on unwarranted public subsidies that you see in the likes of Venezuela which draws people away from more productive economic areas that could lay the foundation for independent prosperity. There's also the problem that so much easily centralised money in a country seems to make dictatorship more likely and encourages very high levels of corruption at high level. This is one of the lines of argument from Paul Collier by the way whose "The Bottom Billion" and "Wars, Guns and Votes: Democracy in dangerous places" books I'd strongly recommend to anyone interested in the area of developing countries and what the numbers say.

nesf

SLUSK wrote: »

Venezuela devaluates its currency and that will send the already high inflation even higher. Venezuela is yet another proof that socialism is mucho el sucko but those idiots voted for Chavez so they get what they deserve.
http://abcnews.go.com/Business/wireStory?id=9521775

It's worse than that, he's trying to enforce a two tier exchange regime. So you'll get 2 bolivar to the dollar for all food and presumably medical products and 4 bolivar to the dollar for all other imports. This is going to be extremely hard to enforce and will literally ruin the lives of farmers in his country who'll see the price for everything except what they're selling double.

The urban poor will benefit though, which is what I imagine his plan is (i.e. get reelected on the backs of people who've seen their food bill fall).

MikeC101

nesf wrote: »

It's worse than that, he's trying to enforce a two tier exchange regime. So you'll get 4 bolivar to the dollar for all non-food, non-medical products and 4 bolivar to the dollar for all other imports.

I get the feeling one of those figures isn't meant to be 4? Or am I missing something (it's late!)?

nesf wrote: »

This is going to be extremely hard to enforce and will literally ruin the lives of farmers in his country who'll see the price for everything except what they're selling double.

Extremely hard sounds like an understatement - I can't get my head around how they'll manage to enforce this to any manageable degree - I can see how it might be workable for imports, but how do they enforce it with regards to products produced in Venezuela? I confess to being simultaneously fascinated and somewhat appalled by this strategy.

nesf wrote: »

The urban poor will benefit though, which is what I imagine his plan is (i.e. get reelected on the backs of people who've seen their food bill fall).

So he's making a play for the support of the urban poor at the expense of the rural poor?

nesf

MikeC101 wrote: »

I get the feeling one of those figures isn't meant to be 4? Or am I missing something (it's late!)?

You're right, editted it there. Should be 2 bolivar to the dollar for food and similar.

MikeC101 wrote: »

Extremely hard sounds like an understatement - I can't get my head around how they'll manage to enforce this to any manageable degree - I can see how it might be workable for imports, but how do they enforce it with regards to products produced in Venezuela? I confess to being simultaneously fascinated and somewhat appalled by this strategy.

Bear in mind that they have very strict credit controls in place which prevent Venezuelans from converting their money out of the local currency officially (there's a rampant black market in dollars going on from all accounts because of this). Price controls are very likely going to be the tool used to achieve this. Forcing people to sell at a loss in other words.

In reality you can't have sustain such a system for long as because of the difference in prices people will leave the food production industry for every other industry and so on.

MikeC101 wrote: »

So he's making a play for the support of the urban poor at the expense of the rural poor?

That would be my guess since anything that increases inflation while holding down prices paid for food will screw over rural communities royally, especially in poor countries where in rural areas there'll be little other industry other than food production and related businesses. So in order to compete with cheap corn imports Venezuelan farmers will be forced to keep prices down or will need to be subsidised by the State or a combination of both.

jimmycrackcorm

Rebelheart wrote: »

Well, socialism seems to be working very well indeed for the capitalists and their enormous losses in this little country of ours. Who ever would have thought that the greatest socialists in modern Ireland would be capitalists.

Capitalism, what a successful ideology - not.

Ironically it is the socialism of our exhorbitent social welfare benefits and the equivalent in the working social welfare (i.e. unaffordable public services) that are crippling our country.

Joey the lips

"The president — a self-described Marxist and former paratroop commander — said the adjusted currency rates aim to boost the economy by encouraging local manufacturing of items such as clothing and shoes, which Venezuela mostly imports."

It self explains itself. His aim is to export more than he imports long term. By having weaker currency this becomes easy to achieve. The chinese are doing it years. Looks at the amout of american dollars in china.

When you look at chervez's long terem strategy a commonwelth of south america kinda. It all adds up.

"Last year we imported 90 million pairs of shoes, for the love of God," Chavez said. "We can make all of that ourselves — shoes, clothes, almost everything is imported."

I admire him if he achieves what he sets out to do, He is realising that the country cannot depend on oil forever and is trying to change his country to a manufacturing base.


What everyone fails to remember my hero David Mc Williams has actually suggested that Ireland should withdraw from the single european currancy and adapt the same strategy.


Well done Hugo. Your a socialist at heart.

Manic Moran

So he's making a play for the support of the urban poor at the expense of the rural poor?

This is a perfect exampl of the reason I am a firm backer of the 'disproportionate' parts of the American governmental system (Senate, Electoral College). It's the safety net for Americans who live in the sparsely populated breadbaskets of the country such as Kansas or Wyoming who do jobs that the US needs to survive to prevent their needs being run roughshod by the desires of the urban centres which greatly outnumber them.

I admire him if he achieves what he sets out to do, He is realising that the country cannot depend on oil forever and is trying to change his country to a manufacturing base.

There are ways of achieving a change in basic economic structure without affecting the entire currency. Ireland managed it about 20 years ago, moving to a high-tech/services base with the issuance of incentives targetted specifically to that high-tech market. It brought the industry to the country without affecting too greatly how much a farmer could expect to get paid in real terms for the beef from one of his cows.

NTM

southsiderosie

Sigh. I thought the days of ISI were over in Latin America...

I think this will be a disaster. There is no way for the government to control the currency in the way described without further sliding towards autocracy and massive state intervention in the economy. Sure there will be an "official" rate, but in reality the average Venezuelan will have to deal with a "street" rate for goods backed in dollars - which most people would prefer to use anyway. And it doesn't make sense to destroy the income of rural farmers in the Andes unless Chavez wants a proliferation of coca production. Finally, it's not clear to me what Venezuela even produces anymore besides oil. What domestic industries does he actually think will benefit from this?

Joey the lips

Joey the lips wrote: »

"The president — a self-described Marxist and former paratroop commander — said the adjusted currency rates aim to boost the economy by encouraging local manufacturing of items such as clothing and shoes, which Venezuela mostly imports."

It self explains itself. His aim is to export more than he imports long term. By having weaker currency this becomes easy to achieve. The chinese are doing it years. Looks at the amout of american dollars in china.

When you look at chervez's long terem strategy a commonwelth of south america kinda. It all adds up.

"Last year we imported 90 million pairs of shoes, for the love of God," Chavez said. "We can make all of that ourselves — shoes, clothes, almost everything is imported."

I admire him if he achieves what he sets out to do, He is realising that the country cannot depend on oil forever and is trying to change his country to a manufacturing base.


What everyone fails to remember my hero David Mc Williams has actually suggested that Ireland should withdraw from the single european currancy and adapt the same strategy.


Well done Hugo. Your a socialist at heart.

southsiderosie wrote: »

Sigh. I thought the days of ISI were over in Latin America...

I think this will be a disaster. There is no way for the government to control the currency in the way described without further sliding towards autocracy and massive state intervention in the economy. Sure there will be an "official" rate, but in reality the average Venezuelan will have to deal with a "street" rate for goods backed in dollars - which most people would prefer to use anyway. And it doesn't make sense to destroy the income of rural farmers in the Andes unless Chavez wants a proliferation of coca production. Finally, it's not clear to me what Venezuela even produces anymore besides oil. What domestic industries does he actually think will benefit from this?

Shoes it might be. He has noticed that he needs to produce rater than export. He is gearing towards the end of oil...

southsiderosie

Joey the lips wrote: »

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Shoes it might be. He has noticed that he needs to produce rater than export. He is gearing towards the end of oil...

The investment climate in Venezuela is horrible. I can't imagine why anyone would want to establish businesses that require physical capital investments - like manufacturing - in this system. It is doubtful that even with currency controls that Venezuelans could manufacture goods that could compete on price with goods from Asia or even Central America. And if you were to try, and the government didn't like what you were doing or your prices, then what is to stop them from telling you "you can only sell you shoes for $20" - even if they cost $25 to make. That kind of price and production meddling is a real possibility with this government. So why even bother in the first place?

States can gear towards the end of oil by making investments in education and infrastructure - both of which would have a positive impact on poor communities. Chavez has done neither.

Finally, although I generally agree with the "resource curse" comment from another poster, some countries (Chile, for example), have been wise about using their natural resource revenues as a buffer against economic downturns, rather than a limitless source for political payoffs at home and abroad.

ei.sdraob

SLUSK wrote: »

Ireland is capitalism for the masses and socialism for the rich, it is obviously not anything that I am advocating.

Ireland is not capitalist

if anything we are as socialist as we get

do they pay the equivalent of 200 euro a week in Venezuela to people for doing nothing? yep taught so

do they get free 3rd level education?

do the banks socialize their risks when they go bankrupt onto the taxpayer?

Joey the lips wrote: »

"The president — a self-described Marxist and former paratroop commander — said the adjusted currency rates aim to boost the economy by encouraging local manufacturing of items such as clothing and shoes, which Venezuela mostly imports."

It self explains itself. His aim is to export more than he imports long term. By having weaker currency this becomes easy to achieve. The chinese are doing it years. Looks at the amout of american dollars in china.

uhm why dont you bother looking up wikipedia, main export that earns hard currency is oil

Joey the lips wrote: »

ou look at chervez's long terem strategy a commonwelth of south america kinda. It all adds up.

his long term strategy? is making himself rich and holding onto power while everyone else gets poorer (and devaluation is a great way of making everyone poorer), "socialism" worked out great for his "respected" neighbor > http://www.guardian.co.uk/commentisfree/2010/jan/07/cuba-fidel-raul-castro

Joey the lips wrote: »

What everyone fails to remember my hero David Mc Williams has actually suggested that Ireland should withdraw from the single european currancy and adapt the same strategy.

:rolleyes: why doesnt David Mc Williams transfer his savings into Venezuela, and put his money where his mouth is, no? taught so! why dont you??

David Mc Williams is good at coming up with populist crap without thinking thru the repercussions of his daft suggestions, its all about getting more gullible people like yourself reading and buying his trash, im sorry to have to spell it out

if anything this highlights that people would switch to using a hard currency on black market further destibilising the economy rather than knowingly becoming poorer

ei.sdraob

Joey the lips wrote: »

Shoes it might be. He has noticed that he needs to produce rater than export. He is gearing towards the end of oil...

manufacturing and agriculture is 20% of their economy, petroleum is rest...

and dont forget petroleum and government debt of his is traded in dollars

so this devaluation all it accomplishes is makes larger sections of his country poorer in order to help a few, wow how very socialistic

Joey the lips wrote:

The chinese are doing it years. Looks at the amout of american dollars in china.

yes the Chinese are keeping their people extremely poor (if it was an proper market your average Chinese would be 3-5 times better of in living standards)
and sending the fruit of their labour to Americans
in exchange for what? yeh thats right little pieces of paper how much you think this paper would be worth if americans say enough and (ahem looks at thread title) devalues

lets not forget that in China you wouldnt be able to have a conversation like this thread as the website would be blocked and owner in prison, but lets ignore human rights abuses by these dictators, in the other socialist paradise of Cuba until recently it was illegal to own a computer as well

Rebelheart

ei.sdraob wrote: »

uhm why dont you bother looking up wikipedia, main export that earns hard currency is oil

In fairness to Joey, he is clearly well aware of this fact:

Joey the lips wrote: »

I admire him if he achieves what he sets out to do, He is realising that the country cannot depend on oil forever and is trying to change his country to a manufacturing base.

Joey the lips

ei.sdraob wrote: »

Ireland is not capitalist

if anything we are as socialist as we get

do they pay the equivalent of 200 euro a week in Venezuela to people for doing nothing? yep taught so

do they get free 3rd level education?

do the banks socialize their risks when they go bankrupt onto the taxpayer?



uhm why dont you bother looking up wikipedia, main export that earns hard currency is oil


his long term strategy? is making himself rich and holding onto power while everyone else gets poorer (and devaluation is a great way of making everyone poorer), "socialism" worked out great for his "respected" neighbor > http://www.guardian.co.uk/commentisfree/2010/jan/07/cuba-fidel-raul-castro




:rolleyes: why doesnt David Mc Williams transfer his savings into Venezuela, and put his money where his mouth is, no? taught so! why dont you??

David Mc Williams is good at coming up with populist crap without thinking thru the repercussions of his daft suggestions, its all about getting more gullible people like yourself reading and buying his trash, im sorry to have to spell it out

if anything this highlights that people would switch to using a hard currency on black market further destibilising the economy rather than knowingly becoming poorer

ei.sdraob wrote: »

manufacturing and agriculture is 20% of their economy, petroleum is rest...

and dont forget petroleum and government debt of his is traded in dollars

so this devaluation all it accomplishes is makes larger sections of his country poorer in order to help a few, wow how very socialistic



yes the Chinese are keeping their people extremely poor (if it was an proper market your average Chinese would be 3-5 times better of in living standards)
and sending the fruit of their labour to Americans
in exchange for what? yeh thats right little pieces of paper how much you think this paper would be worth if americans say enough and (ahem looks at thread title) devalues

lets not forget that in China you wouldnt be able to have a conversation like this thread as the website would be blocked and owner in prison, but lets ignore human rights abuses by these dictators, in the other socialist paradise of Cuba until recently it was illegal to own a computer as well

Folks I know his main export is oil. I was pondering at the possible reason for trying to establish a manufactring base nothing else.

ei.sdraob

Joey the lips wrote: »

Folks I know his main export is oil. I was pondering at the possible reason for trying to establish a manufactring base nothing else.

his reason has nothing to do with establishing a manufacturing base

and everything to do with carrying out policies to hold onto power (hes dictator remember) and lining his and his buddies pockets

The Venezuelan president is elected by a vote with direct and universal suffrage, and functions as both head of state and head of government. The term of office is six years, and (as of 15 February 2009) a president may be re-elected an unlimited number of times. The president appoints the vice-president and decides the size and composition of the Cabinet and makes appointments to it with the involvement of the legislature. The president can ask the legislature to reconsider portions of laws he finds objectionable, but a simple parliamentary majority can override these objections.

what a very democratic system :rolleyes:


@Joey the lips there is a simple test to see whether this was a right economic move

lets say you are a manager of hedge fund/investment company, and you have 1 billion euro burning your pockets, would you invest any of the money in Venezuela or move onto any other market in world?

an honest answer now?

Rebelheart

ei.sdraob wrote: »

@Joey the lips there is a simple test to see whether this was a right economic move
lets say you are a manager of hedge fund/investment company, and you have 1 billion euro burning your pockets, would you invest any of the money in Venezuela or move onto any other market in world?

an honest answer now?

Yes, hedge fund managers. Such a reliable group of people upon which to build your economy. The last thing anybody who is serious about long-term economic development should be doing is chopping and changing their economic programme in order to attract the very group which could bring the entire economy crashing down in a single night. That sort of thinking is so retro it isn't funny.

ei.sdraob

Rebelheart wrote: »

Yes, hedge fund managers. Such a reliable group of people upon which to build your economy. The last thing anybody who is serious about long-term economic development should be doing is chopping and changing their economic programme in order to attract the very group which could bring the entire economy crashing down in a single night. That sort of thinking is so retro it isn't funny.

avoiding a simple question are we? lets put it in simpler terms

if you personally had a billion (or any other amount) to invest

would you invest it there?

Joey the lips

I have not avoided any question the answer is obvious. But the problem with chevez is he does not particularly like hedge fund managers does he.

Your tone suggests your annoyed with my attitude towards him

I admire the man. Truly. So unless someone can actually show me on a socialist sense why trying to encourage homeland manufacturing is wrong I am not going to condem him

Rebelheart

ei.sdraob wrote: »

avoiding a simple question are we? lets put it in simpler terms

if you personally had a billion (or any other amount) to invest

would you invest it there?

Well, it really depends upon what sort of investment portfolio I wanted to build, my relationship with the powers-that-be and what I was investing in. Just as it would in any other economy.

As a very general rule, I'd imagine you'd fare better with that investment now, after devaluation, than you would have if you had invested in Irish bank shares in 2007, to take one instance of many in the supposedly "reliable" western economies which you are implicitly contrasting with Venezuela.

ei.sdraob

Joey the lips wrote: »

I have not avoided any question the answer is obvious. But the problem with chevez is he does not particularly like hedge fund managers does he.

if no one is willing to invest hard money in starting up business, then who will?

Joey the lips wrote: »

Your tone suggests your annoyed with my attitude towards him

I admire the man. Truly. So unless someone can actually show me on a socialist sense why trying to encourage homeland manufacturing is wrong I am not going to condem him

you admire a dictator? well enough said so

Rebelheart wrote: »

Well, it really depends upon what sort of investment portfolio I wanted to build, my relationship with the powers-that-be and what I was investing in. Just as it would in any other economy.

As a very general rule, I'd imagine you'd fare better with that investment now, after devaluation, than you would have if you had invested in Irish bank shares in 2007, to take one instance of many in the supposedly "reliable" western economies which you are implicitly contrasting with Venezuela.

facepalms oneself...

perhaps you should visit and live in one of these socialists dictatorships for a while, comeback and tell us how you got on

southsiderosie

I think the focus on hedge fund managers is misplaced. Most developing economies are sick of "hot money", and are more interested in long-term investment. The issue for Venezuela is, under the current regime, they are not going to attract a lot of long-term investors because they would be afraid that the state would seize or otherwise compromise their assets. And potential domestic investors who are not political allies of the regime would be rightly wary of setting up shop. So unless Chavez plans on spending oil money on some kind of state-owned enterprise, I don't see how any of this could work.

Another issue is that it's unclear to me if Venezuela's domestic market is big enough to support large-scale manufacturing for domestic comsumption; the country only has around 28 million people. A large country like Brazil (195 million) or the US (300 million) could perhaps make this argument. But Venezuela? Perhaps Chavez's thought on this is that if he can successfully build some kind of economic bloc with Ecuador, Bolivia and a few others that there would be both a domestic and "captive" foreign market for Venezuelan goods. But most of Chavez's political allies are either extremely poor countries or are economic basketcases, so I don't know how much this would help their manufacturing base either.

Rebelheart

ei.sdraob wrote: »

perhaps you should visit and live in one of these socialists dictatorships for a while, comeback and tell us how you got on

Ah, "dictatorship" is it? What a neat little manichaeistic worldview you have, evidently shaped by the good people in Fox News. Funny how even a democratically elected leader such as Hugo Chávez becomes a "dictator" when he happens to not share the dogma or financial interests of the market economy zealots. But what can we expect when even the New York Times penned an article praising the overthrow of the democratically elected Chávez in April 2002. Oh how tenuous is this love affair between capitalists and democracy when democracy rejects them.

At any rate, on this "dictatorship" malarkey, I don't remember being consulted when my income and that of generations to come was socialised by the current government of Ireland in order to bail out your supposed heroes of world civilisation, capitalists.

No, what happened in this little "democracy" of Ireland was a unilateral transfer of wealth, and the assurance of more such transfers, from ordinary people in Ireland to capitalist financial institutions. So much for the simplicity of this dictatorship/the bad guys vs democracy/the good guys argument.

ei.sdraob

southsiderosie wrote: »

I think the focus on hedge fund managers is misplaced. Most developing economies are sick of "hot money", and are more interested in long-term investment. The issue for Venezuela is, under the current regime, they are not going to attract a lot of long-term investors because they would be afraid that the state would seize or otherwise compromise their assets. And potential domestic investors who are not political allies of the regime would be rightly wary of setting up shop. So unless Chavez plans on spending oil money on some kind of state-owned enterprise, I don't see how any of this could work.

Another issue is that it's unclear to me if Venezuela's domestic market is big enough to support large-scale manufacturing for domestic comsumption; the country only has around 28 million people. A large country like Brazil (195 million) or the US (300 million) could perhaps make this argument. But Venezuela? Perhaps Chavez's thought on this is that if he can successfully build some kind of economic bloc with Ecuador, Bolivia and a few others that there would be both a domestic and "captive" foreign market for Venezuelan goods. But most of Chavez's political allies are either extremely poor countries or are economic basketcases, so I don't know how much this would help their manufacturing base either.

spot on

if external parties dont want to invest since it can easily endup in same situation as Cuba

and internal business switched to using dollars on the black market

then what hope is there of setting up manufacturing or anything else for that matter

Rebelheart wrote: »

Ah, "dictatorship" is it? What a neat little manichaeistic worldview you have, evidently shaped by the good people in Fox News. Funny how even a democratically elected leader such as Hugo Chávez becomes a "dictator" when he happens to not share the dogma or financial interests of the market economy zealots. But what can we expect when even the New York Times penned an article praising the overthrow of the democratically elected Chávez in April 2002. Oh how tenuous is this love affair between capitalists and democracy when democracy rejects them.

At any rate, on this "dictatorship" malarkey, I don't remember being consulted when my income and that of generations to come was socialised by the current government of Ireland in order to bail out your supposed heroes of world civilisation, capitalists.

No, what happened in this little "democracy" of Ireland was a unilateral transfer of wealth, and the assurance of more such transfers, from ordinary people in Ireland to capitalist financial institutions. So much for the simplicity of this dictatorship/the bad guys vs democracy/the good guys argument.

:rolleyes: sigh

as i said earlier in thread (if you bothered to read) Ireland is also a corrupt and perverse form of Socialism

yet you continue to blame Capitalism and free markets for what here and in Venezuela are problems caused by Socialistic line of thinking and acting

well done you just nicely made a point for me with your post

whether its Chavez making everyone poorer so few get richer or Cowen making everyone here poorer in order to keep few rich, its all the same problem
Socialism, populism and belief that the state has the right to rape everyone for the sake of few

the fact that you fail to see that both countries have issues caused by same line of thinking, and then turn around and support that line, makes me feel sorry for you

/