Venezuala Crisis - Will it Happen Soon in the US

I thought the Bolivar was the currency of Bolivia? named after the guy who freed that country from Spain, Simon Bolivar?
Yep, Venezuela currency is the Bolivar, never new that, thank you Google.

a reply to: FamCore

You can read about Venezuelans economy here: en.wikipedia.org...

To fully understand the problem see: en.wikipedia.org... which is referenced in the article above.

As I understand it, the problems have been exacerbated by expropriation, price controls and curbs on financial transactions. Some would say this is an example of extreme socialism fail. But really I see it as sort of assembly of all the worst economic ideas from extreme socialism to Marxist communism. It isn't anything like the EU socialist models.

originally posted by: introvert

originally posted by: FamCore

originally posted by: introvert
[Venezuala's] real problem lies within their currency controls.

Introvert, can you please talk more about this? What about their fiscal policy has led to this huge mess

The country has very strict currency controls and they refuse to bow-down to the IMF and big banks. They also refuse to deal in the US dollar. What this has done is make it difficult to convince other nations to trade with Venezuela.

This has also created a black market in which many goods, such as food, are smuggled out of Venezuela to neighboring countries in which the goods can be sold for US dollars, or another currency that has more value than the Venezuelan bolivar.

That is not strictly true. They attempt to peg their currency to the US dollar, which while perfectly possible (only arguably advantageous) when you have sufficient export value to maintain the peg. With the drop in the value of oil the government can no longer keep the same rate to the dollar hence the shortage of goods.

originally posted by: ScepticScot

originally posted by: introvert

originally posted by: FamCore

originally posted by: introvert
[Venezuala's] real problem lies within their currency controls.

Introvert, can you please talk more about this? What about their fiscal policy has led to this huge mess

The country has very strict currency controls and they refuse to bow-down to the IMF and big banks. They also refuse to deal in the US dollar. What this has done is make it difficult to convince other nations to trade with Venezuela.

This has also created a black market in which many goods, such as food, are smuggled out of Venezuela to neighboring countries in which the goods can be sold for US dollars, or another currency that has more value than the Venezuelan bolivar.

That is not strictly true. They attempt to peg their currency to the US dollar, which while perfectly possible (only arguably advantageous) when you have sufficient export value to maintain the peg. With the drop in the value of oil the government can no longer keep the same rate to the dollar hence the shortage of goods.

Define "peg". In Venezuela all transactions are to take place in the bolivar and the dollar is only accepted under the table or in black market situations. All official trade must also take place in the bolivar. That is the major reason for the shortages because outside suppliers rarely accept the bolivar for payment.

This practice is one major factor in the decline of the Venezuelan manufacturing industry. They can't get raw materials shipped in.

a reply to: introvert

Not disagreeing with your general point it was the refusing to deal with the dollar statement (I believe the US arsstile there biggestlbiggest trade partner).

It was as you say the artificialy high/controlled Bolivar making trading unattractive to outside suppliers that is proably the main cause of the economic difficulties.

Unfortunately they have now backed themselves into a corner as overreiance on oil exports and lack of diversification has left the economy with no where to go without a lot of painful readjustment.

a reply to: FamCore

All considered, I suspect that some in power WANT that sort of problem here, and worse. Tensions are mounting on many fronts these days, and violence is escalating. At the rate things are going, enough of an increase could mean no election.

Some people, myself included, talked about that a few years ago.

a reply to: introvert

introvert, thank you for your detailed response. I now better understand why a country would want to "bow down" to the IMF and big banks - a bit discouraging it is.

When the rest of the world decides they have enough U.S. dollars expect shortages of imported goods going into the U.S.. Now who will trigger the first shortages of stuff going into the U.S. because they will feel the U.S. Military coming at them? I thought about this long and hard, the situation is already ridiculous and known to everyone, it's trillions of un-spendable U.S. dollars in storage outside the U.S.. The trigger will be very subtle indeed, are you ready to know? the trigger will be demand for slightly more U.S. dollars in exchange for the same amount of goods being supplied by the rest of the world. But not for storing those U.S. dollars, so they can spend them very quickly as happens in these situations.

"Venezuela’s 30 million people can’t seem to get cash fast enough, said Steve H. Hanke, an expert on troubled currencies at Johns Hopkins University. “People want cash because they want to get rid of it as fast as they can,” he said."
www.wsj.com...

This snowballs more and more without a specific point of blame for the U.S. military to attack until the final collapse of dollars.