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How to fix Venezuela

David_N

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Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela
There are two basic storylines for what went wrong. The first, which you hear in America, is that Venezuela's government is being run by socialists, and socialism is bad. The second, which you hear from the ruling Socialist Unity Party and President Nicolas Maduro — who took over from the late Hugo Chávez — is that Venezuela is being screwed by a hazy something-or-other called "external and foreign aggressions against our country."

But as Mark Weisbrot — the co-director of the Center for Economic Policy Research, who has written extensively on Venezuela and Latin America — explained to The Week, the main reason for Venezuela's troubles is likely a lot more technocratic, and a lot more banal: Namely, their currency exchange system is a mess.

The government does run the country's oil industry, and it gets a bit over half its revenue from international oil sales. But the rest of its revenue comes from taxes, just like in America. The government employs about 20 percent of Venezuela's workforce, which is actually a smaller portion than you see in many major European countries, and is roughly the same as you'd find in France. "It's not Cuba," as Weisbrot put it.

America has a floating exchange rate. The dollar isn't pegged to anything, like another currency or the value of gold. So how much of another currency you get in exchange for a dollar "floats" up and down all the time, reacting to countless forces in the market.

Venezuela's system, by contrast, is a dysfunctional mess. The country's official exchange rate is pegged to the dollar — specifically, it's 10 bolívares for $1. So no matter what happens, whenever the government does business with anyone, it gets or gives 10 bolívares for every $1.
But there's also an enormous black market currency exchange. This is where the hyperinflation is coming from: The number of bolívares you can get for $1 on the black market has rocketed up to well over 1,000, and may go considerably higher.
This causes no end of problems. The black market inflation raises the price of imports for basic goods, which drives the government to clamp down with rationing and price controls, which causes shortages, which drives more people into the black market, which drives the black market exchange rate ever higher and feeds further inflation. It leads to rampant theft and corruption, because if you can get your hands on U.S. dollars you can make a killing in bolívares. It causes people to engage in all sorts of economically irrational behavior, like stockpiling dollars for their own sake because they're the only stable store of value; or taking real goods and commodities out of Venezuela to sell them elsewhere for U.S. dollars, so they can return to Venezuela with those dollars and make a killing.
Fixing Venezuela's problems — or at least the crucial first step — is thus relatively straightforward, Weisbrot argues: Unify the exchange system into one floating rate that everyone, including the government, uses. This would allow the government to get its fiscal house in order, and give Venezuelans a stable place to go to trade in the country's own currency.

Because of the rampant dysfunction and currency speculation in the black market, it's hard to know the "real" market value of the bolívar. But Weisbrot figures Venezuela's currency would stabilize around a few hundred bolívares for every dollar.

Once that's done, Venezuela would need to put a system of cash aid in place so its citizens can afford to buy basic necessities like food. And it would need to eliminate the rationing and price control regulations, which really do play havoc with the market.

Finally, Venezuela's government should invest in new and different industries that would allow the country to diversify away from oil. There's no reason for Venezuela to rely so heavily on imports for food — it got 24 percent of its food from abroad in 2011, the last year for which data is available — and relying on imports for basic necessities has of course interacted horribly with the currency system's problems.

Unfortunately, moving to a unified floating exchange system is unpopular with the Venezuelan public, precisely because it would involve a one-time but very big drop in the official value of the bolívar against the dollar.
 
Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela

Yes, but to say that the exchange rate should be reformed and that other corrective steps should be taken is the same thing as saying that the socialist government and leadership should be removed, because they are the architects of the dysfunction and are unable to see their errors or correct them. It's part and parcel of having a bunch of leftists in power that the country should end up with hyperinflation, unable to afford imports, their industrial base in a shambles, and the country on the verge of abolishing democracy and the rule of law.
 
ROTFLMAO

Socialism failed again, big surprise there. And then the left comes along and attempts to convince people that "it just wasn't tried the right way, we have to try again." Expecting different results no doubt. lol
 
ROTFLMAO

Socialism failed again, big surprise there. And then the left comes along and attempts to convince people that "it just wasn't tried the right way, we have to try again." Expecting different results no doubt. lol

Who said this?
 
ROTFLMAO

Socialism failed again, big surprise there. And then the left comes along and attempts to convince people that "it just wasn't tried the right way, we have to try again." Expecting different results no doubt. lol

Socialism fails and so does trickle down Reaganomics.

Only the middle way will work.
 
Socialism fails and so does trickle down Reaganomics.

Only the middle way will work.

All political systems become corrupt and quit working eventually. Some last longer than others. Periodically the slate needs wiped clean.
 
All political systems become corrupt and quit working eventually. Some last longer than others. Periodically the slate needs wiped clean.

I don't see how this pertains to us right now, to wipe the slate clean. Reaganomics is a recent blip in the economic trajectory having nothing to do with America's long term survival. The Founding Architects gave us a Constitution to last the ages from inspiration and protection from very advanced sources. If we screw it up we will be in very much trouble.
 
I don't see how this pertains to us right now, to wipe the slate clean. Reaganomics is a recent blip in the economic trajectory having nothing to do with America's long term survival. The Founding Architects gave us a Constitution to last the ages from inspiration and protection from very advanced sources. If we screw it up we will be in very much trouble.

It's not if we will be in trouble, it's when. When it happens is when the slate will be wiped clean.
 
I don't see how this pertains to us right now, to wipe the slate clean. Reaganomics is a recent blip in the economic trajectory having nothing to do with America's long term survival. The Founding Architects gave us a Constitution to last the ages from inspiration and protection from very advanced sources. If we screw it up we will be in very much trouble.

You may want to research 1976 Nobel Prize Winner for Economics Milton Friedman and stop using the silly term Reaganomics. That is only if you wish your arguments to be taken seriously - your choice.
 
It's not if we will be in trouble, it's when. When it happens is when the slate will be wiped clean.

We can wipe the slate clean anytime we want to arrange a co-operative vote.

You may want to research 1976 Nobel Prize Winner for Economics Milton Friedman and stop using the silly term Reaganomics. That is only if you wish your arguments to be taken seriously - your choice.

Everybody knows this program; give big tax cut to the rich and instead of spending that money on jobs they put it into some bubble.

Not until Republicans recognize and admit this fallacy and repent of it will I allow them to prosper.
 
Yes, but to say that the exchange rate should be reformed and that other corrective steps should be taken is the same thing as saying that the socialist government and leadership should be removed, because they are the architects of the dysfunction and are unable to see their errors or correct them. It's part and parcel of having a bunch of leftists in power that the country should end up with hyperinflation, unable to afford imports, their industrial base in a shambles, and the country on the verge of abolishing democracy and the rule of law.

Socialism is not defined by every policy that socialist governments make. Tying the value of ones currency to that of another currency is not in any way socialist. Over regulation of markets is also not strictly socialist. Sure, most of the government in question could use replacing, but that's due to corruption not socialism. This casual ideological hackery is getting old.
 
Everybody knows this program; give big tax cut to the rich and instead of spending that money on jobs they put it into some bubble.

Not until Republicans recognize and admit this fallacy and repent of it will I allow them to prosper.

Milton Friedman, look him up.
 
Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela

Good article. I believe this article is referencing to the author who wrote this article: http://thehill.com/blogs/pundits-bl...licy-could-determine-the-political-results-in
I posted a thread on this article here: http://www.debatepolitics.com/latin...ld-determine-political-results-venezuela.html

Ill mainly mirror what I said earlier about it. This is a pretty damn fair and objective look at the Venezuelan economy and what needs to happen in the country.
Some key things Venezuela needs to do to get a grasp on their economy. 1.)Unify their two exchange rates for their currency into one floating exchange rate. This would allow the govenrment more control on direct subsidies on imports which can be used for social programs and will help curtail the black market exchange rate. 2.)Needs to sell or securitize off most of its $52 billion in foreign assets. 3.)Sell some of its oil reserves it has in oil. This oil does not have to be pumped out now. 4.)Invest in more sectors other than oil. Invest in agriculture, industrial production, etc.

But as usually instead of debating the actual substance and taking an objective look at the crisis Venezuela is going through now, debate around here mainly turn into what can be found in post #3 here, "SOCIALISM SUCKS!"..

But none the less a good article and I think its a fair, and objective look at the crisis and ways in which Venezuela can find a way out of it.
 
You mean the guy that backed fascist dictators around the world?

You mean Paul Krugman, or was that just socialist dictators around the world? Also, I didn't know that Pinochet was around the world - I thought he was just in Chile? Learn something new every day.
 
Milton Friedman, look him up.

I looked him up; nothing new.

Take into account all the factors.

Give people big tax cut and what do you have:

1) Government short on revenue and vulnerable to crisis.

2) People with extra money they can spend extravagantly, on things they don't need giving wrong signals to the economy and industry. Furthermore these people can give into greed and sensual misleading of their power (sin, evil) causing calamity.
 
You mean Paul Krugman, or was that just socialist dictators around the world?
Paul Krugman supported socialist dictators? :lamo Good one.

Also, I didn't know that Pinochet was around the world - I thought he was just in Chile? Learn something new every day.
Well I guess your admitting his support of fascism.


You mean dictators like Hugo Chavez?
Oh. Here we go again. Please explain how Hugo Chavez was a "dictator"...
 
Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela

It is not that the article is necessarily wrong, as they do have a realized problem with their currency exchange system controls. The problem is the solution still ends up being a band-aid on a leg being blown off.

A unified floating exchange rate that the government would have to honor suggests other governmental changes they still ill-prepared to make. Post a more market evaluation of the Bolivar (which I agree with the article means loss of value of their currency,) there is still a necessary series of changes they would have to make on trade. The bigger problem Venezuela has to deal with (irregardless of how they handle their currency problems) is how ripe with fraud their government has been.

We already know that wealth collection in that nation, which includes government fraud and abuse in their own right, tends to offshore their holdings and probably in US Dollar or Euro based investment vehicles and locations. The idea being that even if the general population is experiencing fallout from all this abuse, there is still a realized truth about the governmental ideology they lean towards. They still got aristocracy, they still got fraud, and they ended up on the hook for government's failed actions (and activity.)

The article also has a few flaws, which means they understate some impacts just to make their monetary policy point.

While it may be true that "the government... gets a bit over half its revenue from international oil sales" what they failed to mention is oil and refined oil products represent over 90% of their entire national export market. Roughly 75% in crude oil alone, with another 17% coming from refined oil products.

So the government's own model of income has taken a significant hit when oil was trading around $100 to $110 several years back and now looks to be seeing a new normalized price range for the next few years at least not breaking $50 without new international level events demanding it. Because of where their national controlled oil interests are they require some break even rates that have put projects and extract locations on hold as well. When the Saudi's went after North American shale oil and oil sands interests, they also (accident or otherwise) put the hurt on Venezuela. So basically the $25 to $30 billion in exports back in 2011 to 2012 reduced to probably no more than $6 or $7 billion for 2016 going outward for at least the medium term.

Venezuela may not have quite the totalitarian socialist model that right leaning DP'ers here accuse them of, but they do have significantly more of their internal economic model driven by government spending and that level of dependency.

That goes down, their economy ends up depressed. That did happen and will continue to be the case for years to come until they fix more than just some of their monetary policy faults. I would go so far as to say these governmental dependencies and economic structural faults are strong enough that just going to a unified floating exchange rate with no other changes is meaningless to their economic model faults.
 
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Not until Republicans recognize and admit this fallacy and repent of it will I allow them to prosper.

Why should we repent? Reagan's tax cuts gave us 25 years of prosperity. And during that time, yes, the income and overall prosperity of the lower class did increase.

We could really use more economics like that right now.
 
Socialism is not defined by every policy that socialist governments make. Tying the value of ones currency to that of another currency is not in any way socialist. Over regulation of markets is also not strictly socialist. Sure, most of the government in question could use replacing, but that's due to corruption not socialism. This casual ideological hackery is getting old.

Yes, well I knew we'd see at least one round of the "It wasn't really socialism, they didn't do it right" argument. If only, if only, if only someone somewhere would do socialism right then it would work great. But nobody ever does.

Screwing with the market is certainly socialist policy, centralized control of the economy is socialist. That would include controlling the exchange rate, of course. In practice this invariably leads to waste, mal-investment, erroneous valuation, all of the maladies that attempts to control the economy are heir to because nobody is smart enough to do it, but some people, socialists, are dumb enough to think they are.
 
Why should we repent? Reagan's tax cuts gave us 25 years of prosperity. And during that time, yes, the income and overall prosperity of the lower class did increase.

We could really use more economics like that right now.

The time may be right for cutting revenue and it may not. The time may be right for more $250 stimulus or increasing the minimum wage. I don't know. I do know that the Republicans threw a monkey wrench in the economy when they filibustered 69 times and their calculations proved correct when they won in 2010 with Obama's help for reaching out to them instead of fighting them while they were doing this.

Their calculations failed though in making him a one term President and they didn't calculate that I would take note of all this and do what I have done to them (Clinton, Trump, Sanders.)

The time for all this stimulus, highways bill and raising the minimum wage has past. With it we would have been able to afford the ACA.

I don't know what will balance the economy anymore but as long as the Republicans keep running as if they and a big tax cut are the only solution I will not support them.
 
The time may be right for cutting revenue and it may not. The time may be right for more $250 stimulus or increasing the minimum wage. I don't know. I do know that the Republicans threw a monkey wrench in the economy when they filibustered 69 times and their calculations proved correct when they won in 2010 with Obama's help for reaching out to them instead of fighting them while they were doing this.

Their calculations failed though in making him a one term President and they didn't calculate that I would take note of all this and do what I have done to them (Clinton, Trump, Sanders.)

The time for all this stimulus, highways bill and raising the minimum wage has past. With it we would have been able to afford the ACA.

I don't know what will balance the economy anymore but as long as the Republicans keep running as if they and a big tax cut are the only solution I will not support them.

The difference between Reagan and Obama was that Reagan cut taxes AND cut regulations while Obama funded the stimulus and greatly increased regulations and their financial burderns and brought in a raft of new taxes as well. The stimulus had no chance against everything else that Obama did.
 
Yes, well I knew we'd see at least one round of the "It wasn't really socialism, they didn't do it right" argument. If only, if only, if only someone somewhere would do socialism right then it would work great. But nobody ever does.

No offense, but the article describes what the author believes to be the root of Venezuela's crisis. And guess what, the problems are not entirely socialist in nature. But because Venezuela is a socialist country, you assume the problem must be socialism, and then go off on the typical hollow anti-socialism rant. Like I said, it's getting old. You make a huge leap in logic that is unsupported.

Screwing with the market is certainly socialist policy, centralized control of the economy is socialist. That would include controlling the exchange rate, of course. In practice this invariably leads to waste, mal-investment, erroneous valuation, all of the maladies that attempts to control the economy are heir to because nobody is smart enough to do it, but some people, socialists, are dumb enough to think they are.

"Screwing with the market" how do we define that? Regulating? Having a policy regarding one aspect of the economy or another? Or is "Screwing the market" defined simply as "What socialists do"? Controlling the exchange rate of currency is socialist? Just like basing ones entire economy on a single volatile commodity is also socialist right? You keep trying to blame a complex disaster on a single factor. It's intellectually dishonest to say the least.


Casual. Ideological. Hackery.
 
No offense, but the article describes what the author believes to be the root of Venezuela's crisis. And guess what, the problems are not entirely socialist in nature. But because Venezuela is a socialist country, you assume the problem must be socialism, and then go off on the typical hollow anti-socialism rant. Like I said, it's getting old. You make a huge leap in logic that is unsupported.



"Screwing with the market" how do we define that? Regulating? Having a policy regarding one aspect of the economy or another? Or is "Screwing the market" defined simply as "What socialists do"? Controlling the exchange rate of currency is socialist? Just like basing ones entire economy on a single volatile commodity is also socialist right? You keep trying to blame a complex disaster on a single factor. It's intellectually dishonest to say the least.


Casual. Ideological. Hackery.

Hackery indeed. Screwing with the market means central control of the economy and all that entails, everything, in short, that was done in Venezuela from currency exchange to price controls to wage controls to controlling dollars and imports. All of it falls under the rubric of government control of the economy, which is what socialism is all about.

The socialists own the debacle in Venezuela. Don't try to weasel out of it.
 
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