Máximo 0 por Persona

"Would you like freedom with that?" - Moscow's First McDonald's, 1990

“Would you like freedom with that?” – Moscow’s First McDonald’s, 1990

So it’s never fun to retract a post once someone lets you see you had it totally backward, but sometimes that’s just how it goes…and yeah, I really mangled this one.


It’s worth taking a minute to ponder the Soviet Economy as it was circa 1983 for clues about what we have coming.

By then, the Soviet economy had hit so many production and distribution bottlenecks in so many markets straining under misaligned prices for so long that shortages became generalized.

We’re not talking about the kinds of shortages that Venezuelans have been getting used to, with problems concentrated on a limited number of basic products and bare shelves sitting alongside shelves full of non-price-controlled products.

By the early 1980s, it was hard for Russians to buy anything, except via the ration book, in strictly limited quantities, or after a kilometric line (which amounts to the same thing: rationing-by-willingness-to-wait rather than rationing-by-bureaucratic-fiat).

The funny thing is that Russians had plenty of rubles in their pockets. It’s just that there wasn’t anything they could do with them.

I write this because plenty of people much smarter than me seem to be increasingly worried about a collapse in the demand for bolivars, and the hyperinflationary freakout that it could bring about.

In this view, “financial repression” – coercive government measures to force people to keep bolivars, by limiting their access to other assets, like dollars – has just barely staved off a collapse so far, but is inherently unstable and could come apart at any time. Well, yes, maybe.

Or maybe not. Maybe shortages, taken to their logical extreme, are the ultimate in financial repression: a way of forcing people to hold bolivars simply because there is literally nothing you can trade them for. Maybe, to a guy like Maduro, generalized shortages look much more politically palatable than hyperinflation: a way of destroying the money system consistent with his staying in power.

These guys, after all, are disciples-of-Fidel: shifting as much of the adjustment as possible onto the empty shelf comes naturally to that mindset.

Fidel long ago mastered the way to leverage a Shortage Economy into a technique for regime survival, forcing people to spend so much time and energy just trying to secure the basics they’ve no time to try to overthrow you.

Like Russians before them, Cubans today know only too well what it is to have pockets full of basically useless money. In neither case did we end up in a hyperinflationary situation, in both cases the debasement of money was subtler and much more sustainable in the long term. The Soviets, lest we forget, managed to claw on to power over 8 decades, all of them shortage plagued. And the Cubans are not too far behind.

The generalization of price controls in Venezuela, their extension to fashion retailers and of course appliance shops, suggest this kind of future to me.

The governing clique is dumb, but they’re not that dumb: they know full well that the aggressive fiscalizaciones of the last few weeks will dramatically worsen the supply situation in a few months’ time, as store after store simply finds it impossible to replenish stocks. That they’re doing it anyway suggests to me that they think a generalized shortage economy is compatible with their perpetuation in power in ways a hyperinflationary economy isn’t.

Whether a society as steeped in consumerism as ours will stand for it is…something we will find out.

72 thoughts on “Máximo 0 por Persona

  1. “Whether a society as steeped in consumerism as ours will stand for it is…something we will find out.”

    You say that as if though society had any power not to “stand for it”. All the government needs to do is to keep the military relatively happy (they are the only ones who can really give a coup). Not to mention that there is at least a 20% of the population who are extreme radicals and will support the government no matter what. Anyone trying to protest will be labeled as a fascist and repressed.

    If the government has any doubts about how to do all this, they can just ask the Cubans for a tutorial…


  2. “a society as steeped in consumerism as ours”
    It is indeed – it thinks it can’t live without the cargo brought from the US or China (preferably the US). A lot of people even in Parapara upon Parapara dream of having an iPad and what not. They watch US films all the time. And yet: it is amazing the image most people who have never been abroad – and that is the clear majority of Venezuelans – have of the rest of the world, what it is the normal life of Pedro Pérez in Bogotá or John Wayne in Houston or José García in Madrid.


    • You talk to them and they’d say things like:

      “The whole world is in crisis, look at Spain, Europe and the US, they are firing people en masse, but in Venezuela we can have a job at least”.

      “Everyone is so violent these days, and not just here, in other countries there’s lots of crime too”

      It’s sad how detached to reality they get from the propaganda aired by state media and private tv stations. The other day, the maintenance lady at work asked how much was a dollar worth, because she figured that due to the “recent measures” it must have been at VEF 20-25 to 1 USD.

      Venezuelans are not all economists, criminologists and political scientists. I know I’m not. Venezuela also isn’t full of anglophones who can just get their news and info from any source. Public figures need to explain to people step by step how each governement measure has affected their day to day life, propose alternative measures and explain the likely results.

      But they can’t do this just from Ivory Towers in academia, like IESA forums, or from the token Globovision interviews. That’s the stuff of rallys, of subversive panfletes, of small books passed from one person to another, etc.


      • I know, I know.
        I was recently at the European Parliament for a Venezuelan event. I started to ask people where they came from in Venezuela. Over 90% of them were from Caracas, a couple from Maracaibo and Valencia. And these are the average expats who are vocal abroad.
        Caracas proper makes around 10% of Venezuela’s population…and although many of the ones present came from working class, they were under-represented.

        Most Venezuelans have never ever been abroad.
        They might be followers of Barcelona or Madrid, they may have a “Facebook friend” in Japan or France. Many cannot even imagine a school teacher can earn enough to be able to rent a normal flat and buy all books for her children and even a car.
        They see on VTV or else how the poorest of the poor live in the USA, in Spain, in Greece. They see, indeed, how people get thrown out of their houses. They don’t know about percentages, about how really the average lives.


        • I think many people has actually forgotten that you could rent an apartment in Venezuela with a teacher/degree requiring job and how that has became impossible thank to the rent regulations. Many people simply don’t make the associations.
          I don’t think that Venezuelans are that much less knowledgeable of politics, economics, and crime around the world than Peruvians, Mexicans or even Americans. Its just that in these countries, the political system is at least conscious enough not to implement economical policies, such as monetary irresponsibility, FEX controls, price caps, expropiations, draconian rent control laws. I think the blame is not on the average Venezuelan, the problem is our political elites or the hacks that pass for a political elite in Venezuela.

          On this matter you can see this video.


          • You are probably right.

            When it comes to the time when we have to hit the road, be vocal, I am really really really appalled at the way opposition people from better-off Venezuela – both in the main cities and abroad – talk about things. So many never ever think about saying something in the name of the average Venezuelan. At this stage and given the few opportunities we have to express our opinion everybody with certain means should be aware he or she should think as an ambassador to the people in El Tocuyo or Maturín.

            I would love one of those senoras del Cafetal to say to the cameras something about “whereas a school teacher cannot rent a flat and buy the books for her kids in this country…”


            • Yes,
              The thing is that many people in the opposition would like that the proven-by-experience failed policies of chavismo (several of them taken from the 1958-1998 period) to continue. They want their Cadivi with less folders and more dollars (regardless of the fact that the state is subsidizing your vacations abroad with money that could be spent on hospitals or the fact that experience has proven that FEX controls never work), they want inamovilidad (although is proven that it hinders job performance ) they agree on price controls porque chico acá la gente es especualdora (Very little people I know with college degrees make the association betweenthe excess of liquidity with inflation ) But the thing is that the discourse from both the government and the opposition takes its cues from the worst misconceptions of Venezuelans instead of actually correcting. I’m going to sound patronizing and un p.c., but I think it is a duty of the political elites to protect and instruct the average citizen who doesn’t know much about politics, economics and crime and a falling into traps and Venezuelan politicians have failed spectacularly at this.


          • Cacr210, I know that this is off-topic, but a quick caution regarding the video that purports to show ignorant Harvard students who do not know the name of the capital of Canada: Though the majority of the video was filmed in the Harvard Yard (some of the interviews are filmed in front of Weld Hall), do not assume for one second that all of the “students” are from Harvard. The Harvard Yard is very much a public space (except during graduation ceremonies), and is filled with non-Harvard students/people/tourists. In any case, if the point of your post is to show that people in the US are geographically ignorant, I would agree with you.


            • Not only there. In England I met an English guy who wanted to get into postgraduate studies. He was nagging about the US Americans all the time, how ignorant they were. Then he asked me where I was from. I said Venezuela. He: oh. I smiled and asked him where Venezuela was. He blushed, stuttered and guessed it must be close to New Zealand.


        • I think we are in our own Pre-Marielito phase of emigration. So far Venezuelan emigration has been mostly the well-to-do, the middle class, professionals and some skilled labor. Even though some of them are working as bartenders, waiters or blue collar jobs.

          But most unskilled labor and minimum wage workers in Venezuela aren’t considering, for example, going to Colombia through the bush roads to work as undocumented migrants as street vendors. We haven’t reached that point yet, to my knowledge.


  3. There is no doubt that Chavez’s plan for eternal power was to follow the Cuban model of impoverishing the people so that they would always be in survival mode and would have no time, energy or resources to oppose him. This can be seen in his rhetoric against being rich, against the unsustainability of developed countries, in his own pet ideas for programs like “gallineros verticales”, “ruta de la empanada”, communal money. Also in his efforts to replace private businesses by competing unfairly with them like Mercal, Pdval or by simply expropriating them.

    Yet Chávez was always cautious, moving at a slow pace, never rushing, never going for broke or being too radical. Even backtracking at times, possibly conscious of the limitations of his own people, or fearful of the consequences. He seemed to simmer the pot slowly always with a rhetoric much more fiery than his actions. Promising that socialism was coming around the corner but never delivering.

    Is Maduro following the same long term plan?
    Is he perhaps precipitating the plan because he feels he is running out of time?

    Maduro finds himself in a much tougher spot than Chavez did, economically and politically speaking. Without Chávez’s charisma, support and money, he has much less space to maneuver. Maduro may feel he is running out of time to implement the Cuban model and thus may be pressing the issue.

    Or, he may be following Eudomar Carrillo’s model: “Como vaya viniendo vamos viendo”
    All this may just be a tactical move trying to get pass the 8D hurdle without thinking of the consequences.

    What kind of president is Maduro?
    Is Maduro following a master plan from Cuba or does he make his own decisions as he goes along?
    Is Maduro the shrewd strategist or the short sighted improviser?
    Which is it?


    • I can only speak from impressions.

      When someone grows up in a household where communism is the Bible and rote thinking the rule,
      where viveza against the system has long roots (cf. cedulación),
      where one affects a particular persona (cf. father was a so-called economist while working as a bus driver),
      where one follows the job footsteps of the father, meaning, getting the job through ‘palanca’, but doesn’t take it seriously (reposero),
      where one goes to Cuba for early training
      where one uphold the lies of one’s father (cf. cedulación),
      where one displays limited capacity for delivering the goods (cf under Chávez’s command),
      where one shows limited attention span and periodic flights of fancy…

      I’d have to say that Maduro is not making his own decisions, is not a shrewd strategist nor a short-sighted improviser.


      • In that case it begs the question:
        Did Chávez make his own decisions?
        Or like Maduro today, was he a following a script written by someone else?

        The reason I ask is that Maduro (or whomever governs him) seems to be blindly following Chavez’s playbook in circumstances that no longer apply. Chavez was all about winning the next election, usually compromising Venezuela’s economy in the process just to achieve that victory. Winning the election would give him enough political capital (legitimacy) to continue strong in the government and the economy would hopefully rebound afterwards. His project of socialism/communism was always postponed or secondary to this “strategy”.

        Maduro on the other hand, seems to be forcing the issue by willfully breaking the private economy and replacing it with more state institutions and state control, in the process bringing Venezuela to the verge of hyperinflation and possibly chaos. Are these measures just a misguided attempt to win 8D or is he trying to make the communism/socialism project a reality? Quico seems to argue for the latter.

        Will Maduro reign in the money printing machine after 8D or will he keep it apace?
        If hyperinflation is set in motion Maduro is going to be very unpopular.

        I guess my real question is: are they (Maduro and cia.) following a carefully laid out plan or just fumbling their way around?


        • I don’t have an answer for you, amieres. And I don’t really know who to believe. A recent video produced by the global hacker group Anonymous (whose hidden manipulations I don’t buy, even though their reproduced findings might be true) tries to answer part of your question. Proceed to listen at your own risk …


          • Oh God. That is a TRAP. It’s preposterous in general.

            It purports to create a crisis within Chavismo by pitting nationalists against cubaphiles, but actually calls for a crisis within MUD pitting firebrands against conciliators. It seeks to motivate our hot heads into not voting or working withing the system, going back to the 2002-2003 guarimba mentality.

            It’s a SEBIN/G2/whatever doble ploy disguised a CIA ploy.

            They lost me at “el guerrillero Castro-Comunista Teodoro Petkoff, ése que se hace llamar de oposición”. That’s like the ultimate long con: from 1971 onwards. I don’t buy it.

            Plus, the cuban dialogues are reminiscent of a bad guy monologue in a bond movie. If Cubans wanted to annex Nicaragua and Venezuela, they wouldn’t send a guy with proof of it to loose it in Venezuela. They also don’t make much geopolitical sense.

            Remember that Anonymous isn’t an organized group, therefore it doesn’t accumulate credibility. Anybody can take the mantle and do a good deed, and then any unrelated random joe can take the same mantle a do a bad deed.


          • Interesting audio, although it doesn’t sound authentic to me, everything is spelled out so clearly and its all oh so simple and direct: “Chavez just wants the Gran Colombia, we want the Gran Cuba, lets replace him. Talk to the Cimeq”

            This Anonymous guy, whoever he is, sounds very petty and infantile. He only likes politicians with frontal styles. Everyone else is a collaborator of the government. He lives in his own fantasy world of conspiracies and intrigue. Reminds me of some of the “foristas” of NoticieroDigital. I guess he is in the right place, playing Anonymous and V for Vendetta.


          • Very bad fake at every level. Real human conversations don’t follow that pattern. That might be for some crappy soap opera but not for real life.


  4. A feature of Soviet life in the last two decades was that people lined up for purchases. Not only that, but lined up without knowing what was on sale at the other end of the queue. Whatever it was could, after all, be used, or traded for something else.

    There was no inflation, but the money one was paid had no actual use much of the time.


    • We definitely have that feature now. Every day, when I go to work at 7:00 I see people queuing outside the local supermarket. They are not queuing for a specific item, they are not queuing for items in the store, they are queuing for the chance to buy whatever arrives that day IF anything arrives that day at all.

      It’s queues of Hope (pardon my orwellism).


      • It’s the same for electronics, it’s the same for lingerie, for clothes. They queue for anything, not for something specific. They queue for the right to go inside. They queue for the right to change their useless bolivares for something they can sell later, and with a profit.


  5. Russia was able to build a wall around itself, and Cuba is an island. Neither ever had much of a middle class. Their revolutions threw off onerous oppressive regimes. The people of the Soviet Union had no idea what life was like on the outside, and Cubans, newly married, have nowhere to live, and there is no memory of better times. Venezuelans have acute memories to compare to, just a few years ago, and those were better times!
    Chavismo came to power promising better times and a Cuban styled economy wasn’t expected! Who on earth would want that? Only fear and oppression could entrap Venezuela into that kind of life! Chavismo can hardly manage prison uprisings, let alone a full-scale uprising. The Chavistas that I know are optimistic idealists. They won’t support an economy based on lines and shortages!


    • Really, Gordo? Do you know the median age of a Venezuelan? Do you know how many Venezuelans have been abroad? We need to be cautious about how we think “the Venezuelan” sees the world.


      • I experienced huge Chavistas marches, and I spoke with many young and old crazed Chavez worshipers. All they talk about is a future paradise with hospitals and schools and jobs and everything plentiful. I have argued with Chavistas in various government positions who tell me that everything now that’s bad will get better, they just need more time. When I talk to Chavistas in leadership positions, they tell me to be careful about what I say.


        • sorry, don’t mean to be a pain… but you say chavistas wouldn’t stand behind the current government if the economy were based on lines and shortages, yet it is and they do.


    • please allow me to

      “Russia was able to build a wall around itself, and Cuba is an island.” > that’s why Venezuela had to create a more sophisticated mechanism where access to foreign currency is seriously restricted. Wanna fled the country? Cool, just exchange your awesome BsF 250K lifelong savings for roughly US$ 4K and see how long that gets you elsewhere.

      “Their revolutions threw off onerous oppressive regimes. The people of the Soviet Union had no idea what life was like on the outside, and Cubans, newly married, have nowhere to live, and there is no memory of better times. Venezuelans have acute memories to compare to, just a few years ago, and those were better times!” > have you seen State-owned media at all over the last 14 years? The message is clear: chavismo arrived to end the oppressive and tyrannical 4th republic to finally give Venezuelans the happiness they deserve and never had!


      • OK, I misunderstood you. Yes, we agree then.
        And this is the amazing thing.
        I think we have a certain advantage vis-a-vis the Russians, for instance: Venezuela is part of the Spanish speaking world and that world has a lot of different examples (not precisely the best, but better than Venezuela). Russians are mostly monolingual as well and can look at Ukraine and Belarus only. Still, Chavismo has managed to indoctrinate an awful lot of Venezuelans


        • And I think we should use those examples. Because the Swiss, Norwegians and South Koreans may seem alien to the average Venezuelan.

          But Colombia, Brasil, Uruguay, Ecuador, Panama, Dominican Republic, Costa Rica or Mexico could illustrate the outcomes of different policies than the ones we have.

          I wouldn’t use Argentina, Honduras, Nicaragua, El Salvador, Paraguay or Bolivia as examples, since I wouldn’t leave Venezuela for any of those (but that’s a subjective personal preference)… except for arguments like “EVEN in they don’t have this problem”, or ” already took this proposed measure and look where it got them”.


          • Indeed. One of the problems is that our most vocal people have spent much more time in the US or Canada or even in Europe than in Colombia, Brazil, Uruguay, Ecuador, Panana, Dominican Republic, Costa Rica or Mexico…admittedly: that’s also my case…but I am aware of that.
            I remember when I was a child my dad, a Venezuelan-Venezuelan-Venezuelan-Venezuelan, would from time to time buy El Tiempo in Valencia. That was back in the eighties, when we still saw Colombia as “oh, dear!” I am sure almost all other buyers of El Tiempo in Valencia were Colombians.

            We need to build more bridges to those countries.


  6. “Like Cubans before them, Venezuelans today know only too well what it is to have pockets full of basically useless money. In neither case have we yet ended up in a hyperinflationary situation, in both cases the debasement of money was subtler and much more sustainable in the long term. The Cubans, lest we forget, have managed to claw on to power over 6 decades, all of them shortage plagued. And the Venezuelans are not too far behind.”

    yep, checks out.


  7. The big difference with cuba is that venezuela is enormously resource wealthy and that will drive conflict indefinitely. Cuba is dirt poor in comparison. In addition to some agriculture and tourism it seems to have little to fight over. They wouldn’t be bartering with people -medical staff – as payment otherwise. In that sense russia is nearer venezuela, beyond geopolitical importance it is inherently resource wealthy. Add to that the size of venezuela and it appears clear that you could see unique scenarios develop there – an east/west split of the country for instance.


  8. Interestingly, The black market in The Russia of the 80’s became the main source of supply for many goods. A few of the russian oligarchs started off by selling jeans and other difficult to-come-by merchandise through the informal economy.

    I think that many of the young wanna-be oligarchs without any connections to chavismo and no dollars to import will venture into formalized buhonerismo. Their merchandise will come from generals and chavistas currently in the import business in needs of risky intermediaries willing to pay above “precio justo”.


  9. No, no. I think you are missing the main point of my post. I guess you can have the ‘cuban’ equilibrium where you don’t find real uses for your cuban pesos. But what is really incompatible with this ‘shortage’ economy of yours, is having the freaking money machine working 24/7. That is what makes the money demand really unstable, and you didn’t have that neither in Cuba or the CCCP.


  10. There are many more consideration. What was the level of national consensus when those systems were established in the USSR, Cuba or N. K.? Something tells me that in all those the consensus was much larger.

    Another thing that’s tricky here is how nationalist/military and commie/radicals cope. They seem to be getting along well enough these days, but that balance may shift and may do so suddenly.

    I think often of what happened in Colombia, Chile and Anrgentina and how those democratic regimes were thorn. We are at risk of the whole system collapsing, and the interesting thing is that to me, it seems like if a coup happens, it will have nothing to do with our clueless, self-centered opposition leaders. In many cases it will not have anything to do with keeping the FAN happy. Did the FAN feel particularly bad in 1992? I don’t think so. The coup happened not for pursuing better conditions for their kin but for the pursuit of power.

    Also, all systems mentioned (Cuba, USSR and NK) relied heavily on repression.


  11. Francisco, I must point out some inaccuracies in this post. As a person who live in the USSR in the 80s, I can tell you that the shortages were not generalized. Food staples were always available, and there were no ration books, those have disappeared in the 50s or 60s (not sure exactly, it happened before I was born)


    • Indeed. I was not sure to comment on this here but wanted to ask some friends. I didn’t live there but I had friends on the Eastern Block. The situation really sucked in Romania, though. And that is one of the reasons why Ceasescu ended as he did (apart from the fact he murdered a couple of thousand people in the weeks prior to his execution).

      When the nineties came and they didn’t have enough money for a lot of things, the former Soviet citizens went through the trauma of their lives (unless they happened to be some of the ones who became oligarchs).

      A worker in Soviet Russia had a humble but rather decent standard of living compared to that in many Latin American countries…he might not been able to buy the jeans or the car and could not think of political dissension.


  12. One difference I see is that in the former soviet block, the corruption was inconspicuous. In Venezuela, the corruption is hugely conspicuous. Will the boligarchs put up with having to go overseas to buy their luxury goods all the time?


  13. Quico, I think you’re starting from a wrong premise. Implicitly you’re assuming that people are going to hold on to their bolivares if they can’t find goods to spend on, and somehow they are going to value their bolivares more because they can’t get rid off them. It’s in fact the opposite. First, if money is losing its value, people are going to find ways to spend it, especially if it’s losing value fast. Second, people hold money because they can buy stuff with that. If they can’t buy stuff with that money (either because there are massive and extreme shortages or any other reason), money loses its value. This amounts to increases in prices, “shadow” prices if you will, even if official inflation statistics don’t show it. So, actually shortages may make things worse.
    Now add to that an ever-increasing money supply (thanks to http://distortioland.blogspot.ca/2013/11/que-es-lo-peor-de-nuestra-mala-politica.html). That is “echarle gasolina al fuego.” People are going to find themselves with even more money in their pockets when they are already trying to get rid off their “old” money holdings. That can only mean that the value of money is going to fall even faster, and we already know what that means.
    In conclusion, even if the official inflation rate doesn’t show hyperinflation, in the not-so-distant future we could very well live in an economy with very similar characteristics.


    • “with very similar characteristics.”
      You do mean we could very well have the traditional, well-recognised hyperinflation, right? Not some other unimaginable form of inflation in the “H. P.” Lovecraft sense of it?


      • Kepler, we could very well have the typical hyperinflation. That is, two-digit monthly inflation rates (10, 20 or the more common 50 percent…make your pick, these is a somewhat arbitrary threshold). However, due to price control and shortages, the official inflation rate might not be so high but still you have a collapsing money demand and other effects associated with hyperinflation episodes.


    • So far, the only foreign nation that trades VEF is Colombia. Since the CaDakazo, the black market rate dipped a little (from 61 to 59-58 and now is 60-ish again) because demand for VEF was soaring at the border, the main guess being that Colombians wanted some of those cheap appliances too.

      But when the time comes that there’s nothing to be bought with VEF. I think the Colombian demand for VEF may plummet thus closing one of the main sources of non-CADIVI USD.

      Is this scenario likely to trigger well-past-50% inflation? Or to put the dollar well above VEF 100?


    • The generally accepted definition of hyperinflation is the lnternational Accounting Standard Board´s 1989 definition of 100% cumulative inflation over three years. According to this generally accepted definition, Venezuela entered into hyperinflation in November 2009.


      • Or if you want to you can follow Prof Steve Hanke and wait for 13 000% annual inflation, i.e., 50% monthly inflation – i.e., the 1956 Phillip Cagan definition of hyperinflation followed only by Hanke and a handful of other economists.


        • Currently, no-one in the world – except Profs Salemi and Hanke – would patiently wait till prices increase by 50% per month (13 000 per annum) before implementing measures to try and stop prices rising so fast: not even Nicolas Maduro, although his measures are totally wrong and worsen the situation.

          Companies on the Caracas Stock Exchange and foreign multinationals with subsudiaries in Venezuela, have been following the IASB´s definition (as adhered to by millions of accountants world wide, i.e., in all countries implementing IFRS) of hyperinflation being 100% cumulative inflation over 3 years, since Nov 2009 – the month Venezuela officially entered into hyperinflation. They have been implementing IAS 29 Financial Reporting in Hyperinflationary Economies which mistakenly requires these companies to continue implementing Historical Cost Accounting (as they did during low inflation) and then to restate these HC financial statements at the end of the year at the year-end CPI.

          IAS 29 was implemented during hyperinflation in Zimbabwe too – with no positive effect at all.

          It is also not having any positive effect in Venezuela because what is needed is for IAS 29 to REQUIRE it to be implemented in terms of a Daily Index instead of the monthly published CPI as it is currently being implemented with no positive effect. See disussion on http://caracaschronicles.com/2013/11/26/whats-it-going-to-cost-us-for-maduro-to-appear-not-to-be-pissing-on-chavezs-legacy/


  14. People asses the acceptability of a regime different ways , for the fanatic supporter , the regime can fail in every thing and yet deserve its support because all failures are justifiable or blameable on someone else ( the human capacity for self delusion is almost limitless) . for the average joe, what they do is compare their current standard of living vs that of the past or that which they feel they might be able to attain under normal conditions ( if they had a different govt) and if they see a slump they may not go out to the streets screaming bloody murder but they are going to be chronically critical and disgruntled , peremnially reticent subjects of the regime , ready to explode into protests if they see any weakness in the regimes repressive capacity , and then there is the middle class which is usually more open to what happens outside the country , can draw comparisons not only between their former lives and their current lives but between the lives of other people like them in other countries and are generally dissatisfied with the cheap theatrical thrills and shoddy explanations which the regime offers to prod up its position , the middle class represents in Venezuela the hard core opponent , they are however not very inclined to violence or to exposing themselves to direct regime repression .!! Long time ago Lord Beaverbrook used his vast fortune to buy many papers in Britain only to learn that his readers paid little heed to his papers opinions if they found them uncongenial . Lots of people overestimate the capacity of the media to totally forge public opinion , Of course after a long time people who have never known any different form of life will take for granted that they live in a sort of limbo paradise in suspended animation , if thats what official media tells them constantly . Even them some people never become stooges to official propaganda . Thats what happened in Eastern Europe , the fire of discontent never went out even if if had few outlets for expressing itself. Vopos guarding the iron curtain in East German where recruited from the one province in which Western German TV could not be recieved , because they were they only ones which could be trusted with the job , any other east german who was exposed to the corrupting images of west german tv was suspect of being ideologically weak and potentially traitorous . Consumerism is deeply rooted in Venezuelans psyche , even in the poorest of them , Maduros latest ploys demonstrate his understanding of that . A system that systematically denies the access of people to the pleasures of consumerism will never count on the support of most Venezuelans .!! In this regard Venezuela is never going to be another Cuba or another Soviet Union !!


    • Sounds like Lincoln famous quote:
      “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”

      Unfortunately, as true and seemingly comforting as the quote is, it still leaves the possibility of fooling most of the people most of the time.


      • Wao! In Belarus foreigners from outside the former Soviet Union currently have to pay prices similar to Western Europe for such things as hotels and museums but they pay that in the local currency.
        And what are these USD prices? At the official rate? That would be mental.


        • Aren’t those the prices expats pay when visiting home? A while ago people here were complaining about ponying up the USD thousands required to travel from abroad to Venezuela.

          In the other thread I made my legal argument against demanding USD payments for anything inside Venezuela, and the hypocrisy of the chaverment setting USD price for these particular service.


  15. Quico,

    Just to add to your point. I think It used to be well known that the USSR entered the economic transition period with a huge monetary overhang, as did many countries in the communist block, I.e., real monetary balances seemed huge measured by the CPI. This was the monetary counterpart to the generalized price controls, as you point out. Once the controls were removed inflation caught up with the accumulated monetary expansion in a couple of years.

    In Venezuela, we are in a strange hybrid world in which elements of the above story already coincide with accelerating inflation and a decline in real money demand (Omar’s story), depending on which prices you look at. Clearly there is a monetary overhang when measured by TV prices, not so much when measured by food prices (it would seem), and even less when measured in paralelo dollars.

    But as you say, Whether Maduronomics can push us all the way into Soviet territory, and whether the Venezuelan consumer will take it, remains to be seen.


  16. You got one thing perfectly right, though. The destruction of Venezuelan economy is deliberate and aimed at preventing the capacity to build unrest. It’s the same logic that brought us Holodomor. A horrible prospect, although I doubt it’ll go quite as far. Venezuela is the new Zimbabwe though, with little prospect of revival within a generation.
    There are two small hopes yet, this election – or rather the outrage at it being stolen – could result in an uprising, or else severely destabilize Chavizmo. The next election of legislative could also herald change, if the popular support for MUD and opposition to Chavizmo reaches unprecendented heights.
    If neither materialzes, I doubt Venezuela will recover to the pathetic state it was in 1998 within our lifetimes.


    • TV,
      The thing is that it is more difficult to see how stolen elections are if, as Francisco Toro has very well pointed out on several occasions, we are talking about over 300 separate, very confusing election processes with local caudillos.
      Even if we have tried to make this into a referendum, reality is that all around Venezuela many of those who are representing us are far from optimal…they are often local caudillos or wannabe caudillos, people who often come from very discredited sources…or people who do not necessarily convey proximity with the people:
      we have often tended to select the merchant over the professor, the engineer, the teacher. In a pre-capitalist, rather feudal nation highly dependent on one product controlled by the State, a merchant or contractor or construction businessman or landowner are not precisely the most optimal candidates.
      We also have quite some good people, but we should only have had good people as candidates…or at least people who don’t provoke such mixed feelings.


      • The idea is that if enough people vote against Chavizmo, it will falter, suffer from internal coup and division. It could well be reinforced by the common enemy, but it could also suffer from opprotunists within it’s ranks.

        That doesn’t mean this will happen, not by a long shot. But these elections are one of the last options to save Venezuela from the Pit.


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