Chronology of a plunder

The nation's savings

The nation’s savings

So, at the same time I was writing some silly post about telenovela actors, Omar was writing an incisive, accesible, brutal, and altogether awesome post about the chronology of when, exactly, the Central Bank lost its way.

The (inorganic) money quote (translated):

“Eight years on [after the approval of the reform of the law of the Central Bank, creating so-called “excess reserves”], the results are self-evident. As our colleague Ronald Balza points out in an interesting article on Fonden, up until the first semester of 2013, the government had extracted US$ 55 billion from the nation’s foreign reserves it had declared as “excessive” and transferred them to Fonden – including, amazingly enough, US$ 3 billion in the first semester of 2013(!) when it was patently clear that our economy’s access to currency was severely constrained. The bottom line could not be starker: contrary to what the law says, the methodology for how they come up with the “excess reserves” calculation is a mystery to everyone, and it has never been published or shared with the National Assembly. Contrary to what the law prescribes, Fonden’s investments have not been incurred in foreign currency alone, which has only made the reform’s harm all the more acute.”

Which begs the question: shouldn’t the BCV presidents, from Merentes on down, be held accountable for this once the dust settles? Just throwin’ that out there.

Do go and read the post.

19 thoughts on “Chronology of a plunder

  1. Accountability? This is a country where the Minister of Planning and the President of the Central Bank said that US$ 20 billion of Cadivi money was fake orders and they were in charge! Merentes still argues that it is not proven that too much monetary liquidity causes inflation. He will argue ignorance probably.


  2. The thing that gets me is that the Bs.300 billion BCV printed up fresh to finance PDVSA’s shortfall…isn’t that in the same order of magnitude as the cost of the gasoline subsidy over the last few years?!

    Which means this WHOLE postapocalyptic clusterfuck with people skirmishing for perniles inside fuerte tiuna, with a roll of toilet paper become a national treasure, the whole chaotic monetary mess, this whole damn mess has been done JUST SO PEOPLE CAN FILL UP FOR LESS THAN THE COST OF A BUS RIDE!

    Kindly suck on the aforementioned tangerine sir.


    • I dunno. Probably if they had had the subsidy money, they’d had found a way to make the same mess. Don’t underestimate chavismo’s ability to squander money.


    • The vicious circle: shipping service providers depend as a whole on trucks so every government will shit their pants while thinking about leveling gasoline prices for it will boost inflation rates.

      Ain’t nothing to do with your car, buddy.


  3. I’m starting to think Ron Paul and the other libertarians are right. The whole of central banking is just one big Ponzi scheme…


      • Calling something a “Ponzi scheme” is just name calling, comparable to calling the stock market a “Mob Casino”. In fact, both institutions, properly run, have important roles to play, as the relative success of capitalism over the last eighty years shows.


        • Umm, saying social security in the US works as a Ponzi scheme is actually quite accurate. An investment firm becomes a Ponzi scheme when it starts to pay people’s dividends from money other people put in rather than from the yields of the investments. I wouldn’t call social security a fraud because it’s not really swindling people, but the way it works is definitely Ponzi-like.


          • The whole reason to call something a Ponzi scheme is to suggest that participants will be cheated, that it is not sustainable. Ron Paul is using the term pejoratively, as is JC Nagel, right above. The justification you suggest is like calling somebody a Nazi, then claiming later that you were referring to the development of the Volkswagen, but not anything negative about Nazis.


    • I’m on the side of: We tried it, we failed, let’s move on. Having a currency that doesn’t depend on the Venezuelan State is a feature.


  4. The real money quote is this:
    “PDVSA se ha convertido en un mucho mejor productor de dinero inorgánico, que de petróleo.”


  5. Until then Oficialismo was limited to squandering State funds, including PDVSA’s but no more. From then on they could use Other People’s Money to lend to themselves and spend without any controls, the holy grail of Petrostate Populism had been reached.

    You might recall at the end of 2006 we had presidential elections, so a mountain of uncontrolled discretionary spend was required to fuel the electoral machine and guarantee the result of the election.

    I just want to point out Chavez famous remarks to the Central Bank Governor at the time, “just give me Un Millardito … no más”. I am sure you can find the famous “Alo Presidente” in the revolutionary interwebs.


    • There you go … “The Central Bank approves PDVSA to provide the 1 Billion requested by Chavez” …. in all its Revolutionary Media glory … and as icing on the cake nominating Giordanni for a Nobel Prize for coming up with the Excessive Reserve idea.

      The grab for PDVSA funds was very clear from the start.

      Interesting chronology … he asks and gets the Millardito just prior to the Revocatory Referendum campaing in 2004, he then gets the new law approved and starts with an already on-going fund of 6 Billion just prior to the Presidential campaing in 2006.

      What happened to Armando Leon after agreeing with the Millardito ?

      Is he still the one approving the PDVSA billions being siphoned to uncontrolled black box funds ?

      What happened to Giordanni’s missing 20 Billions ?


    • The kicker is the BoA bit of offering to sell dollars at “something less than the official rate.” Has no one told them that’s illegal? And why would they want bolivaris?


    • The swap would allow Venezuela to keep its exposure to gold, with the nation posting the precious metal or cash to a margin account if the price falls and Goldman Sachs posting U.S. dollars if it rises, the documents show.

      LOL. Investing in quality Kentucky bloodhorse futures is less crazy.


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