Author Topic: Venezuela's economic nightmare takes an ugly turn  (Read 2060 times)

loco

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Venezuela's economic nightmare takes an ugly turn
« on: March 18, 2014, 10:52:35 AM »
FORTUNE -- The protests in Venezuela are starting to get nasty. The death toll is now at 28 and rising as people take to the streets in opposition to the government's mishandling of the economy.

In response, the Venezuelan government this week announced a new "third" exchange rate mechanism (SICAD II) to increase the supply of U.S. dollars to private businesses and individuals. The government hopes this new scheme will help alleviate the crushing inflation and goods shortages at the heart of the month-long protests.

But while SICAD II might make things easier for small businesses in the short term, it is hard to see how further manipulation of Venezuela's worthless currency will do anything to stem the tide of mass protests. Under President Nicolas Maduro, successor to Hugo Chavez, Venezuela has continued to flounder in a cesspool of self-induced crime brought on by economic stagnation. If the middle class and students leading the protests are able to draw enough support from the poorer classes to join their struggle, Maduro won't stand a chance.

The recent month-long protest in Venezuela is the strongest civil-disobedience movement the country has seen since 2003, when then-President Hugo Chavez was almost ousted from power in a military-led coup. In the years that have followed, Venezuela's standard of living has fallen dramatically as the government took to manipulating the nation's currency as a way to maintain popular support from the poorer classes. By using the state-controlled energy company, PDVSA, as a piggy bank, the Venezuelan government has subsidized a dubious state-regulated exchange rate to keep the price of food stuffs and medicine cheap.

The system never worked well, but it has really fallen apart in the last two years. The market distortions have created major economic disincentives for investment and production inside the country. This has made Venezuela almost entirely dependent on imports for pretty much everything from electronics to food. As a result, inflation has skyrocketed (56% last year) as the central bank printed more and more bolivars, Venezuela's currency, to sustain the exchange rate.

Today, the government's official exchange rate remains locked at 6.3 bolivars to the dollar, but on the black market the rate is at 80 to 90 bolivars to the dollar, around 14 times the official rate. Such disparity means that foreign goods are now incredibly expensive, leading to shortages. It's become so bad that people are only allowed to go to the supermarket once a week, and when they get there, they find little on the shelves.

Last year, in a bid to stem the shortages, the government implemented a new foreign exchange system known as SICAD, which allowed state-owned enterprises to "bid" for dollars in state-run auctions. SICAD gave these key businesses access to scarce dollars so they could pay their foreign suppliers at a rate that was higher than the official rate but below the black market rate.

This is understandably very confusing. It is easier to think of SICAD as just another unsustainable state subsidy. It does nothing to foster investment or growth; it just continues the same old, broken economic policy that has turned Venezuela into a textbook example of how not to run an economy.

So where are all these U.S. dollars coming from? Venezuela can't print them so they have to earn it somehow. With 95% of Venezuela's dollars coming from oil sales, this means that it is pretty much all coming from PDVSA. Therefore, the state-owned enterprises received dollars from PDVSA, and PDVSA received a bunch of devalued currency in return. That's bad news for the oil company, which has seen production fall off a cliff in recent years due to a lack of capital.

The economic collapse has had many consequences, most notably, a huge increase in violent crime. People are fighting over scraps, and the police are checked out. The black market for goods and dollars has the country looking like a dystopian hell, with crime bosses and private armies looting and murdering to control finite resources. Roves of highway bandits ambush vehicles they think could be carrying dollars. In one such attack last December, robbers shot and killed popular soap-opera actress and former Miss Venezuela Monica Spear and her husband in a violent carjacking near Puerto Cabello, the country's main port. The incident inflamed the media and brought the dollar-fueled crime spree home for many Venezuelans.

Popular anger boiled over last month when the attempted rape of a student sparked mass anti-government protests at universities across the eastern part of the country. The harsh police response to the student-led protests spawned even larger protests across the country, including in Caracas, Venezuela's capital. The students have since been joined by the disillusioned middle class, who have seen their savings and wages obliterated by inflation.


In a desperate attempt to alleviate the economic calamity and reduce the dollar crime wave, the government this week announced it was extending the SICAD program to individuals and private businesses. The hope is that with greater access to dollars, store shelves will be full again and that crime would then fall.

But the new program, known as SICAD II, just creates another shifty exchange rate. PDVSA doesn't have enough dollars to fulfill the needs of all the businesses in Venezuela, let alone those of individuals. This means the government would need to issue dollar-denominated debt to fulfill that demand. Considering Venezuela's junk credit rating, which was recently cut by S&P in December to B- with a negative outlook, it won't be easy.

The details of the auction haven't been released, but it is doubtful that SICAD II will cure Venezuela's economic woes or have any meaningful impact on the protests or the crime rate. With so many people competing for such a limited supply of dollars, the SICAD II exchange rate will probably just end up mirroring the black market. There are simply too many desperate people looking to get rid of their worthless bolivars.

At the same time, today's protests risk fizzling out without broad-based support from the lower classes. So far, Venezuela's poor have stayed neutral in the conflict. The government has painted the protesters as a bunch of treasonous "spoiled brats" out to destroy Venezuela. That narrative worked well for Chavez, but as crime spreads and food becomes increasingly scarce, even for the lower classes, it is unlikely to work forever.

http://finance.fortune.cnn.com/2014/03/14/venezuela-protests-inflation/

dario73

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #1 on: March 18, 2014, 11:55:41 AM »
That is the result of complete control by the government on resources, subsidies and benefits.

Taking over businesses, over land, over anything that the populace produces for the supposed good of the whole.

Controlling where you live, what you eat and what you earn. Not creating jobs. Just steal from the wealthy, from the landowners, from the middle class and distribute it to the poor.

That is what democrats want. That is their utopia.

LIBTARD IDEOLOGY HAS NEVER WORKED!! NEVER!!!

loco

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #2 on: March 18, 2014, 12:00:41 PM »
dario73 ain't lying.   :(

RRKore

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #3 on: March 18, 2014, 12:11:17 PM »
dario73 ain't lying.   :(

He probably ISN'T lying, he's just mistaken. 

It's fine when he's just giving his opinions but you have to be skeptical when he tries to present "facts".  He's just not well-informed enough to say a lot of the things he says without qualification.

If you can, get him talking about how there's no contradiction between god's omniscience and man's free will if want to really see what I'm talking about.

loco

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #4 on: March 18, 2014, 12:24:52 PM »
He probably ISN'T lying, he's just mistaken.  

It's fine when he's just giving his opinions but you have to be skeptical when he tries to present "facts".  He's just not well-informed enough to say a lot of the things he says without qualification.

If you can, get him talking about how there's no contradiction between god's omniscience and man's free will if want to really see what I'm talking about.

What's that have to do with Venezuela's socialist utopia sinking into poverty and violent crime?    ???

dario73

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #5 on: March 18, 2014, 12:29:32 PM »
Liberals desire the government takeover of every aspect of our lives.

While they claim something else and make silly remarks like another poster on this thread, their support of the laws passed by the democratic party shows clearly where they stand.

They think government can fix everything, should take care of everyone and citizens only exist for the government. Nothing belongs to the citizen and anything they have can be taken against his/her will by the government and given to everyone else. For the supposed greater good. A "good" according to their own perception of what "good" is.

That is the basic nature of the laws that liberals have supported for years. Despite what they spew or post on boards like this.

Venezuela, Greece, most of Europe represents our future if we let libtards run amok.


LIBTARD IDEOLOGY HAS NEVER WORKED!!! NEVER!!!

blacken700

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #6 on: March 18, 2014, 01:28:30 PM »
this has to do with the
LIBTARD IDEOLOGY HAS NEVER WORKED!! NEVER!!!   it shows it has worked
 
Day in the Life of Joe Middle-Class Republican  .


Monday, 10 October 2011 16:23 

Print    PDF   
.

Joe gets up at 6:00am to prepare his morning coffee. He fills his pot full of good clean drinking water because some liberal fought for minimum water quality standards. He takes his daily medication with his first swallow of coffee. His medications are safe to take because some liberal fought to insure their safety and work as advertised.

All but $10.00 of his medications are paid for by his employers medical plan because some liberal union workers fought their employers for paid medical insurance, now Joe gets it too. He prepares his morning breakfast, bacon and eggs this day. Joe’s bacon is safe to eat because some liberal fought for laws to regulate the meat packing industry.

Joe takes his morning shower reaching for his shampoo; His bottle is properly labeled with every ingredient and the amount of its contents because some liberal fought for his right to know what he was putting on his body and how much it contained. Joe dresses, walks outside and takes a deep breath. The air he breathes is clean because some tree hugging liberal fought for laws to stop industries from polluting our air. He walks to the subway station for his government subsidized ride to work; it saves him considerable money in parking and transportation fees. You see, some liberal fought for affordable public transportation, which gives everyone the opportunity to be a contributor.

Joe begins his work day; he has a good job with excellent pay, medicals benefits, retirement, paid holidays and vacation because some liberal union members fought and died for these working standards. Joe’s employer pays these standards because Joe’s employer doesn’t want his employees to call the union. If Joe is hurt on the job or becomes unemployed he’ll get a worker compensation or unemployment check because some liberal didn’t think he should loose his home because of his temporary misfortune.

Its noon time, Joe needs to make a Bank Deposit so he can pay some bills. Joe’s deposit is federally insured by the FSLIC because some liberal wanted to protect Joe’s money from unscrupulous bankers who ruined the banking system before the depression.

Joe has to pay his Fannie Mae underwritten Mortgage and his below market federal student loan because some stupid liberal decided that Joe and the government would be better off if he was educated and earned more money over his life-time.

Joe is home from work, he plans to visit his father this evening at his farm home in the country. He gets in his car for the drive to dads; his car is among the safest in the world because some liberal fought for car safety standards. He arrives at his boyhood home. He was the third generation to live in the house financed by Farmers Home Administration because bankers didn’t want to make rural loans. The house didn’t have electric until some big government liberal stuck his nose where it didn’t belong and demanded rural electrification. (Those rural Republican’s would still be sitting in the dark)

He is happy to see his dad who is now retired. His dad lives on Social Security and his union pension because some liberal made sure he could take care of himself so Joe wouldn’t have to. After his visit with dad he gets back in his car for the ride home.

He turns on a radio talk show, the host’s keeps saying that liberals are bad and conservatives are good. (He doesn’t tell Joe that his beloved Republicans have fought against every protection and benefit Joe enjoys throughout his day)  Joe agrees, “We don’t need those big government liberals ruining our lives; after all, I’m a self made man who believes everyone should take care of themselves, just like I have”.

loco

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #7 on: March 18, 2014, 01:38:25 PM »
Day in the Life of Joe Middle-Class Republican

STOP spamming my thread.    >:(

blacken700

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #8 on: March 18, 2014, 01:40:34 PM »
not spamming has to do with the topic

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #9 on: March 18, 2014, 04:10:52 PM »
R
Y

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #10 on: March 18, 2014, 04:11:34 PM »
A
Y

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #11 on: March 18, 2014, 04:12:19 PM »
C
Y

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #12 on: March 18, 2014, 04:13:09 PM »
I
Y

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #13 on: March 18, 2014, 04:14:11 PM »
S
Y

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #14 on: March 18, 2014, 04:16:31 PM »
T
Y

doison

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #15 on: March 18, 2014, 04:18:44 PM »
HTH
Y

24KT

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #16 on: March 18, 2014, 04:43:18 PM »
He probably ISN'T lying, he's just mistaken. 

It's fine when he's just giving his opinions but you have to be skeptical when he tries to present "facts".  He's just not well-informed enough to say a lot of the things he says without qualification.

If you can, get him talking about how there's no contradiction between god's omniscience and man's free will if want to really see what I'm talking about.

Don't you just love it when ignorant misinformed people try to place everything within the confines of their own limited bubble reality? Making assumptions that political labels have the same meaning from one jurisdiction to another. Being a "Liberal" means different things in different countries, ...and different countries face entirely different situations for different reasons. Next, he'll be blaming ObamaCare for the problems in Venezuela.
w

whork

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #17 on: March 20, 2014, 08:46:43 AM »
this has to do with the
LIBTARD IDEOLOGY HAS NEVER WORKED!! NEVER!!!   it shows it has worked
 
Day in the Life of Joe Middle-Class Republican  .


Monday, 10 October 2011 16:23 

Print    PDF   
.

Joe gets up at 6:00am to prepare his morning coffee. He fills his pot full of good clean drinking water because some liberal fought for minimum water quality standards. He takes his daily medication with his first swallow of coffee. His medications are safe to take because some liberal fought to insure their safety and work as advertised.

All but $10.00 of his medications are paid for by his employers medical plan because some liberal union workers fought their employers for paid medical insurance, now Joe gets it too. He prepares his morning breakfast, bacon and eggs this day. Joe’s bacon is safe to eat because some liberal fought for laws to regulate the meat packing industry.

Joe takes his morning shower reaching for his shampoo; His bottle is properly labeled with every ingredient and the amount of its contents because some liberal fought for his right to know what he was putting on his body and how much it contained. Joe dresses, walks outside and takes a deep breath. The air he breathes is clean because some tree hugging liberal fought for laws to stop industries from polluting our air. He walks to the subway station for his government subsidized ride to work; it saves him considerable money in parking and transportation fees. You see, some liberal fought for affordable public transportation, which gives everyone the opportunity to be a contributor.

Joe begins his work day; he has a good job with excellent pay, medicals benefits, retirement, paid holidays and vacation because some liberal union members fought and died for these working standards. Joe’s employer pays these standards because Joe’s employer doesn’t want his employees to call the union. If Joe is hurt on the job or becomes unemployed he’ll get a worker compensation or unemployment check because some liberal didn’t think he should loose his home because of his temporary misfortune.

Its noon time, Joe needs to make a Bank Deposit so he can pay some bills. Joe’s deposit is federally insured by the FSLIC because some liberal wanted to protect Joe’s money from unscrupulous bankers who ruined the banking system before the depression.

Joe has to pay his Fannie Mae underwritten Mortgage and his below market federal student loan because some stupid liberal decided that Joe and the government would be better off if he was educated and earned more money over his life-time.

Joe is home from work, he plans to visit his father this evening at his farm home in the country. He gets in his car for the drive to dads; his car is among the safest in the world because some liberal fought for car safety standards. He arrives at his boyhood home. He was the third generation to live in the house financed by Farmers Home Administration because bankers didn’t want to make rural loans. The house didn’t have electric until some big government liberal stuck his nose where it didn’t belong and demanded rural electrification. (Those rural Republican’s would still be sitting in the dark)

He is happy to see his dad who is now retired. His dad lives on Social Security and his union pension because some liberal made sure he could take care of himself so Joe wouldn’t have to. After his visit with dad he gets back in his car for the ride home.

He turns on a radio talk show, the host’s keeps saying that liberals are bad and conservatives are good. (He doesn’t tell Joe that his beloved Republicans have fought against every protection and benefit Joe enjoys throughout his day)  Joe agrees, “We don’t need those big government liberals ruining our lives; after all, I’m a self made man who believes everyone should take care of themselves, just like I have”.


This is golden.

bears

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Re: Venezuela's economic nightmare takes an ugly turn
« Reply #18 on: March 20, 2014, 08:51:55 AM »
Venezuela is simply a case of government getting too big, taking too much power away from the people, and suffering the consequences.

this article is simply showing the reader what's going on there.  we can quibble about the details but the undeniable fact is that its not a nice place to be a tax paying citizen right now.

so what does everyone do?  well they post an article making fun of conservatives so we can laugh at them for 5 minutes in order to ignore facts that are staring us in the face.