Slashdot Mirror
In Venezuela, 'Cutting-Edge' Cryptocurrency is Nowhere To Be Found (reuters.com)
Venezuelan president Nicolas Maduro has made ambitious claims that the nation's petro cryptocurrency is backed by 5 billion barrels of petroleum reserves. But when reporters of Reuters conducted a months-long investigation, they found that petro is getting little to no traction in the nation or elsewhere. Reuters: Located in an isolated savanna in the center of the country, Atapirire is the only town in an area the government says is brimming with 5 billion barrels of petroleum. Venezuela has pledged those reserves as backing for a digital currency dubbed the "petro," which Maduro launched in February. This month he vowed it would be the cornerstone of a recovery plan for the crisis-stricken nation. But Atapirire residents say they have seen no efforts by the government to tap those reserves. And they have little confidence that their struggling village has a front-row seat to a revolution in finance. "There is no sign of that petro here," said homemaker Igdalia Diaz. She launched into a diatribe about her town's crumbling school, pitted roads, frequent blackouts and perpetually hungry citizens.
It turns out that Venezuela's petro is hard to spot almost anywhere. Over a period of four months, Reuters spoke with a dozen experts on cryptocurrencies and oil-field valuation, traveled to the site of the pledged oil reserves and scoured the coin's digital transaction records in an effort to learn more. The hunt turned up little evidence of a thriving petro trade. The coin is not sold on any major cryptocurrency exchange. No shops are known to accept it.
It turns out that Venezuela's petro is hard to spot almost anywhere. Over a period of four months, Reuters spoke with a dozen experts on cryptocurrencies and oil-field valuation, traveled to the site of the pledged oil reserves and scoured the coin's digital transaction records in an effort to learn more. The hunt turned up little evidence of a thriving petro trade. The coin is not sold on any major cryptocurrency exchange. No shops are known to accept it.
Oil in the ground ultimately isn't really worth that much when you can't extract, process, and ship it. And Venezuela's aging oil infrastructure has been struggling for years now. Case in point this article from Routers that reports that Venezuela's tankers have been banned from some ports because they're so poorly maintained that they leak unacceptable amounts of oil into the local area. https://www.reuters.com/articl...
At the end of the day this really does show one of the weakness of socialist monoculture economies. If the one good you can sell starts too loose value you'll quickly find yourself in a pretty dire situation. Even more so if you're government is both corrupt and too incompetent to modernize your industrial equipment.
nationalization is not a requirement of socialism
That's just one way to steal property.
Socialism is a range of economic and social systems characterised by social ownership and workers' self-management of the means of production[10] as well as the political theories and movements associated with them.[11] Social ownership may refer to forms of public, collective or cooperative ownership, or to citizen ownership of equity.[12] There are many varieties of socialism and there is no single definition encapsulating all of them,[13] though social ownership is the common element shared by its various forms.
A prerequisite of socialism is the appropriation of private property from it's original owners - nationalization is just one way of doing that taking.
Of course, that means another prerequisite of socialism is authoritarianism - a socialist society has to force unwilling private owners to give up their property.
Norway basically nationalized its oil industry, but did so with some forethought and planning, creating a sovereign wealth fund with the intent of maximizing the benefit of oil revenues for Norwegians, rather than simply enriching oil companies and skimming royalties off the top. You can call that socialism if you like, but the fact is that Norway's sovereign wealth fund is now large enough to both pay for a fairly generous welfare state and sit there as a protection against what can be a fairly volatile international market.
What Venezuela did under the Chavistas is to use oil revenues to pay for its welfare state, but also to enrich the Chavistas and their generals, and try to buy influence with other Latin American countries (Venezuela basically underwrote the Cuban economy for years by selling oil to the country at what amounted to almost give-away prices). If Venezuela had duplicated the Norwegian model, it would actually have weathered the storm that came with the collapse of oil prices reasonably well. To be fair, it's not like previous right wing regimes were all that cautious, and certainly while Norway is a fairly advanced country firmly in the developed world, while Venezuela has much higher poverty rates, but still, looking at Venezuela is to see a socialist state that also basically functions as a kleptocracy, that managed to keep afloat when oil prices were very high, and the Chavistas gambled that that would always be the way.
To be even fairer, Venezuela was hardly the only petro-jurisdiction to squander the wealth. Up in my neck of the woods, Alberta had the Heritage Fund, with the idea that it would function like Norway's sovereign wealth fund, but has squandered much of it as well. North Dakota was similarly irresponsible.
The world's burning. Moped Jesus spotted on I50. Details at 11.
*sigh* Inflation doesn't happen because people think it will happen. It happens because the government is printing too much money. If you double the amount of currency in the system, everyone figures it's worth half what it used to be, so prices double to compensate. Usually, governments resort to this if they're spending more than they're bringing in via tax revenue. Germany did this in the 1930s to try to pay back war debt. Venezuela does it to try to maintain their socialist paradise ("free" services for everyone). A government spending more than it brings in has two options - keep the debt on the books, or print money to pay for it. When a government prints more money, it's basically stealing from its citizens by devaluing the currency. The money a citizen has in his wallet is worth half of what it used to be, and the value of the other half gets transferred to the government in the form of extra currency it has printed. It's a way to tax people without actually needing them to actually hand over the money to a tax collection agency.
What saved Brazil was reforms that got government spending under control. Their new currency may have helped people put more faith in the currency, but it's not what stopped inflation. As Venezuela is finding out. Same thing nearly happened to Greece, except they were on the Euro. So their government over-spending ended up being paid for by other countries using the Euro. Which is why they banded together and gave Greece an ultimatum - adopt spending and economic reforms ("austerity"), or be kicked out of the Eurozone.
Everything that's consumed has to be produced, so productivity is the true fundamental currency of an economy. The money you choose to use is just a representation of that productivity. If you manipulate your monetary currency only to the extent necessary to keep its value more or less constant relative to productivity (what governments do with a fiat currency), then it remains stable, leaving the economy free to operate on its own. But when you start screwing around with your money supply to try to fix other problems (like pay for massive government debt), it shows up as a deviation between your money's value and the value of productivity - the value of your currency changes by a large amount. Basically, manipulating your currency is like changing the markings on a ruler. It may change the number of your measurements (number of Bolivars needed to buy a dozen eggs), but the fundamental distance (productivity needed to raise chickens to produce a dozen eggs) does not change. All you do is create additional overhead as citizens have to spend more time and effort trying to keep track of and compensate for changing currency values (i.e. waste productivity on financial bookkeeping, rather than on producing actual goods and services).
U.S. sanctions have nothing to do with it. A healthy economy is mostly domestic - most trade happens inside the country (U.S. imports + exports are only about 20% of its domestic GDP), so can't really be hurt by foreign sanctions. U.S. sanctions end up hurting Venezuela only because its government has completely crippled its domestic economy with its boneheaded economic policies.