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Hyperinflation in Venezuela
| July 29th, 2018 at 9:17:23 PM permalink | |
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 | BACKGROUND ECUADOR The Ecuadorian sucre's IMF par was devalued to 15 per dollar in 1950, to 18 per in 1961, and to 25 per in 1970. The sucre maintained a fairly stable exchange rate against the US dollar until 1983, when it was devalued to 42 per dollar and a crawling peg was adopted. Depreciation gained momentum and the free market rate was over 800 per dollar by 1990 and almost 3000 per in 1995. When it reached 25,000 sucre's per dollar the US dollar became legal tender in Ecuador March 13, 2000, and sucre notes ceased being legal tender on September 11. The largest denomination sucre banknote was exchanged at US$2. Ecuador was forced to shoulder the burden of acquiring the US cash at "face value" because the aforementioned bill did not pass. Although the plan caused the overthrow of the government, the newly elected President of Ecuador felt that the situation was so desperate that he had no choice but to dollarize anyway.  Venezuela removed three zeros from it's currency as of 1 January 2008. The plan was to issue new notes and remove another 3 zeros, but the newest proposal that has been changed to make it 5 zeros. Right now the conversion is on hold. I've mentioned this before, but the "International Monetary Stability Act" was once supported by high profile Republicans including Paul Ryan, Representative for Wisconsin's 1st congressional district. The original bill was written by Connie Mack III, Republican Senator from Florida January 3, 1989 –January 3, 2001 When a Latin American currency becomes worthless the government could approach the USA and say they want to "dollarize". Instead of selling them dollars at face value, we would recognize that cash is just secure paper and provide this cash to them at a reasonable rate that represented it's cost to produce. In exchange the country would have to sign some agreements to assure the US that the cash wouldn't be used to launder drug money or that it would be given to a handful of powerful people. The decision to do this would not only help the people in the country, but would have benefits to the USA. The least of which is it would help stem a tide of hungry illegal immigrants in a suicide dash to get into the USA. But the official statement follows
The bill as originally proposed did not have a political test for the country. |
| July 30th, 2018 at 2:24:31 AM permalink | |
| AZDuffman Member since: Oct 24, 2012 Threads: 135 Posts: 18204 |
A problem is that creating all of that money creates the potential for inflation in the USA and anywhere dollarized. For a small economy this is little problem. But Venezuela would probably be the largest economy to date to try it. Would it cut back illegal immigration? Maybe, but only if stability accompanied it. Venezuela should have plenty of USD from oil sales, but it has squandered her wealth for socialist policies. The President is a fink. |
| July 30th, 2018 at 4:30:29 AM permalink | |
| Dalex64 Member since: Mar 8, 2014 Threads: 3 Posts: 3687 | Venezuela's inflation is due to oil prices, lack of savings, public debt, and defaults on that public debt, not socialism. "Everyone is entitled to his own opinion, but not to his own facts." Daniel Patrick Moynihan |
| July 30th, 2018 at 5:34:58 AM permalink | |
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
Venezuela has 32 million people, so if you print $500 per person that would be $16 billion in currency. That is such a pittance that it would have zero effect on the outside world. Remember that the bulk of money in a country is electronic money generated by commercial banks, and while working in a stable currency would help , it would not create extreme wealth overnight. The Bureau of Engraving and Printing produced $41.50 billion dollars in three denominations last year. For them to produce another $16 billion for Venezuela would require compensation for labor and materials. $4.58 : $5 $2.62 : $10 $34.30 : $20 $41.50 billion Ecuador continued to mint their own coins, and they use a dollar coin. Such a program would be designed to provide a stable currency for the ordinary people, many of whom will only use coins anyway. They certainly don't need $50 or $100 banknotes. Not that it would happen anyway. Even though the original proposal was made by Republicans, it would create a firestorm of political controversy. Venezuela will issue new banknotes and in ten years they will probably be worthless and a million people will try to make it to America.  |
| July 30th, 2018 at 7:25:08 AM permalink | |
| Evenbob Member since: Oct 24, 2012 Threads: 146 Posts: 25011 |
Nothing to do with Chavez taking over every company making a good profit? Like every good socialist does? If you take a risk, you may lose. If you never take a risk, you will always lose. |
| July 30th, 2018 at 7:59:08 AM permalink | |
| Fleastiff Member since: Oct 27, 2012 Threads: 62 Posts: 7831 | No. It has its leader, his closest cronies, the police and military and a smattering of other loyalists but no one else counts for beans so you might as well count the mosquitoes. |
| July 30th, 2018 at 9:13:33 AM permalink | |
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
One finding of the draft IMSA was that Official dollarization would make it impossible for governments to print domestic currency to pay for government programs, thereby promoting fiscal discipline I picked $500 per person as the amount needed, because that is roughly what Mexican banknotes are worth. The draft IMSA in reality states: Face value may not exceed the dollar value of the local currency in circulation in the dollarizing country prior to the certification of that country as officially dollarized But given an inflation rate that changes daily, I don't know how you would calculate "the dollar value of the local currency in circulation". |
| July 30th, 2018 at 10:27:35 AM permalink | |
| Dalex64 Member since: Mar 8, 2014 Threads: 3 Posts: 3687 |
Only in so far as being the one leader of the whole operation, his poor decisions affected the entire economy. That's not the fault of socialism, that's the fault of him and his government. The Socialist Democratic Party, I think it is called, would instead have individual companies owned by the workers of those companies. "Everyone is entitled to his own opinion, but not to his own facts." Daniel Patrick Moynihan |
| July 30th, 2018 at 11:09:53 AM permalink | |
| petroglyph Member since: Aug 3, 2014 Threads: 25 Posts: 6227 | Comparison between Socialism [Communism] and our Democracy ; https://www.libertyzone.com/Communist-Manifesto-Planks.html Add to that, the w.o.d., private prisons, asset confiscation, perpetual foreign wars, etc. The last official act of any government is to loot the treasury. GW |
| July 30th, 2018 at 11:11:03 AM permalink | |
| Evenbob Member since: Oct 24, 2012 Threads: 146 Posts: 25011 |
Already being done, here's a list. If it's done in a capitalist country, it can work in a limited way. Notice none of the countries listed are socialist. https://en.wikipedia.org/wiki/List_of_employee-owned_companies If you take a risk, you may lose. If you never take a risk, you will always lose. |