An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Tuesday, June 21, 2016
telesur — Venezuelan Private Sector Siphoned Off $259B in Public Funds
Working the scam. Floating the exchange rate would have prevented this, and it is not too late.
That's a good point Matt, is an other figure of speech...
But this applies to any market really, markets are not 'continuous', they are a set of joint of discrete transactions over time.
However it can make sense to analyze them 'continuously' in certain cases if we are to discover certain attributes of them ;) Specially if you lack the whole set of discrete data to analyze them 'discretely' if you lack the dataset of all the discrete events and you only have some abstract aggregated data over periods of time.
The Central Bank would provide the dollars at the preferential rate reserved for essential goods of 6.3 Bolivars to one U.S. dollar.
There are TWO rats here, I suspect, not just the preferential rate. First, how did the Central Bank get those U.S. Dollars? By creating Bolivars to buy them? But a central bank should only create fiat for the monetary sovereign, not for the private sector.
But then who would sell Bolivars to get U.S. Dollars? Logically, the two remaining possibilities are the Venezuelan private sector and the Venezuelan government. But a government should only use its own fiat and NEVER use another country's fiat lest it devalue its own fiat.
That leaves only the private sector to do foreign exchange with the monetary sovereign providing the necessary fiat via equal fiat distributions to all citizens.
How would this help? Well, for one thing the Bolivar would float. For another, I can't think of a fairer way to devalue the Bolivar since all citizens would get equal fiat distributions.
Its interesting to see Brian react that way... over here in engineering disciplines the students are educated thru inter-disciplinary methods for about the first two years undergraduate then they transfer over into the specific engineering discipline for about the last two years...
They take Math/Physics/Chemistry, etc... taught by those Departments and then take that knowledge out of there and apply/adapt it to the Engineering disciplines...
Over at Jason's there was a comment: "Heat is the motion of molecules and molecules are discrete. Of course so many of them move at the same time that you can treat heat as a continuous flow with no meaningful errors. Same with electricity which, technically, is the motion of discrete entities called "electrons" but can be calculated as a flow with no noticeable errors. Cannot the same be true for money?"
I would not use the word "money!" here nor would I be mainly interested in ALL transactions but I sympathize with the commenter.... what I am thinking about is looking at (when operating a numismatic system...) the leading USD flows from the govt accounts in this way...
The USDs go to the state owned oil companies then the state CB changes them out at some rate...
The telsSur people are in some sort of a leftist mental infinite regress.... eventually they will be looking at the alleged political affiliations of the atoms and molecules....
They have to stop trying to control prices all over the place.
The problem is not 'monetary'... they are creating the opportunities for arbitrage and absurd situations like exporting goods in the markets because it's better than producing and consuming them.
They have to take the hit for their Dutch disease no matter what and start working onto improving the REAL economy instead of all this fringe financialism/monetarism and stupidity.
Do you want to change the underlying economic and social structures? Then change the REAL production economy instead of playing with prices and currency.
Why people does get the causality backwards!? Attributing magical properties to money which doesn't have... The left needs to understand that there is no easy 'monetary' fix to change social and material conditions, you need to actually do real work for that.
And for the government, any regulation of prices has to be as a price setter though consumption (which means the only effective tool is the government can set price floors, to set price roofs it has to act through the real channel on the supply side). This is not the problem Venezuela has right now... but much of their problem is of their own doing because stupidity.
My assumption is that all of the really qualified people to do those things end up leaving due to the corruption/nepotism....
"The left needs to understand that there is no easy 'monetary' fix to change social and material conditions"
Not arguing but we can say the same thing about the right/neoliberalism.... no free lunches out there... but what looks like happens is that neoliberal policy helps retain the qualified people... those people that are qualified in material systems have a basic material orientation so they end up having to save/invest/build wealth etc... so as the left goes to war against those types of behaviors with their "inequality!", etc..., then the materially qualified people just leave the country and the material conditions of course degrade....
this is similar to how we see the left MMTers advocate against interest on savings with their ZIRP... its a bad policy as it pisses off the savers and creates a whole host of problems...
ZIRP isn't necessarily the problem; it's how it is achieved that's the problem. The ethical way to achieve ZIR is equal fiat distributions to all citizens - not asset purchases or lending by the central bank from or to the rich.
One would think ethics would be the FOREMOST consideration wrt fiat creation but it ISN'T unless in a reverse/perverse way.
The left needs to understand that there is no easy 'monetary' fix to change social and material conditions, Ignacio
Of course there is - reform the money and credit system to make it ethical. But the Left is most often interested in replacing thievery by the Right with thievery by the Left, as if who does the stealing matters to the victims. But for the record, it appears the victims prefer being victimized by the Right since the Left tends to be very meddlesome besides thieving.
you need to actually do real work for that. Ignacio
Of course real work is needed, so the thieving needs to stop.
Matt then if the left wants to change behaviour of people and motivations other than "money" and "capitalism/free markets!" then they will need to find a different way to anchor people who can get the job done at the places they need to be at. I'm not talking about Venezuela but also on western democracies where a lot of people is on the 'left' spectrum (even those who thing are on the 'right') on economic policy (social policy is a bit more tricky).
The 'left' has been winning the cultural wars over the last half century in many ways and educationally, but this is not quite well translating to material conditions and motivations. IMO this is because induced material scarcity changes people's goals towards a more cutthroat behaviour ("everyone for himself").
If we cannot provide the people with sufficient material needs a far reaching behavioural change won't be possible and the "left" will continue to fail making material and structural changes and continue to be bitter at "capitalism/free markets!".
Unfortunately is a bit of an egg and chicken situation, but I think we need to setup the infrastructure to at least provide people with material needs so they are able to get charge of their own lives then we would be able to push further structural changes on how we organise our society (the conundrum of capitalism of being antithetical of democracy as Tom would say).
In other words: until we do not have the proper conditions so the bargaining power of labour over capital is stronger we cannot push further 'structural' 'left-leaning' changes (ie. we need decently designed and in-place JG/BIG or mixed solutions in place and probably worldwide to avoid massive migrations that would be more disruptive even and trigger reactionary behaviour).
Of course there is - reform the money and credit system to make it ethical.
You can't reform when the wrong incentives are in place because we have a situation with induced material scarcity which promotes social darwinism and everyone for himself. The system promoted 'unethical' behaviour, and you can't go from 'unethical' to 'ethical' without some sort of benevolent dictator with absolute powers, it just doesn't work.
As I just posted, unfortunately it's a bit of an egg's and chicken situation where we have a self-fulfilling/reinforcing feedback loop between the financial and the real material conditions.
(the conundrum of capitalism of being antithetical of democracy as Tom would say). Ignacio
What capitalism? What we have is a system of government subsidized private credit creation whereby the least so-called credit-worthy, the poor, are looted by the banks for the benefit of the rich, the most so-called credit-worthy.
Capitalism is not about fairness or ethics, capitalism ain't even about trade.
Capitalism is about ownership, who owns what, and in capitalism property rights trump everything else. That is the only thing capitalism is about, it says nothing about how capital is created and distributed.
You can't reform when the wrong incentives are in place Ignacio
Just the proper abolition of government-provided deposit insurance might easily require more than $20,000 be given to every US citizen to finance the xfer of deposits from currently insured accounts at banks to inherently risk-free individual citizen, business, etc. accounts at the Federal Reserve.
That's not incentive?!
So where's the MMT crowd wrt to this? Pretending they can't hear?
Capitalism is about ownership, who owns what, Ignacio
Interestingly, the Old Testament puts restrictions on run-away wealth accumulation via a ban on usury from fellow Hebrews, debt forgiveness ever 7 years, and family farms that could not be lost for more than 50 years.
And yes, creating new fiat for someone just because he has collateral is unjust and is a cause of unjust wealth inequality.
Andrew That Old testament thing is antithetical with capitalism too, and wouldn't be impossible to pass without political action either in a democracy or an autocracy. Not that i think that we should be following the Old Testament for anything really... But just adds to the point.
Kind of why we have a 'mixed' system nowadays...
That's not incentive?!
No for the people who would have to do the reforming...
That Old testament thing is antithetical with capitalism too Ignacio
Franko may have led you to believe the Old Testament is passé but it is STILL part of ALL Scripture and is to be read and respected by all Christians - a very sizeable and politically powerful group in the US.
Btw, your antipathy toward the OT is largely uncalled for, ie. the God of the OT is SLOW to wrath and longs to be GRACIOUS instead.
No for the people who would have to do the reforming... Ignacio
Once the population is aware it could be done without increasing total purchasing power then who'll dare oppose it? On what grounds? That they love injustice and misery?
I don't have antipathy, I've apathy towards the Old Testament, in any case the point stand still... All those regulatory suggestions are antithetical to capitalism, they have to be imposed through the dominant political system (not qualifying them as bad or good, as that's besides the point).
Anyway, policies have to make sense on their own, without any appeal to authority, even less so religious authority. I'm also apathetic towards religious books as sources of policy tbh, I would prefer to have actual historical records tbh.
Is hard enough to come with non-distorted "recent" data (K&R lol).
Neoliberalism would be much better than whatever you want to term what they have down there now...
ReplyDeleteExchange rates can't float because they are a series of discrete transactions.... ;p
ReplyDeleteThat's a good point Matt, is an other figure of speech...
ReplyDeleteBut this applies to any market really, markets are not 'continuous', they are a set of joint of discrete transactions over time.
However it can make sense to analyze them 'continuously' in certain cases if we are to discover certain attributes of them ;) Specially if you lack the whole set of discrete data to analyze them 'discretely' if you lack the dataset of all the discrete events and you only have some abstract aggregated data over periods of time.
The Central Bank would provide the dollars at the preferential rate reserved for essential goods of 6.3 Bolivars to one U.S. dollar.
ReplyDeleteThere are TWO rats here, I suspect, not just the preferential rate. First, how did the Central Bank get those U.S. Dollars? By creating Bolivars to buy them? But a central bank should only create fiat for the monetary sovereign, not for the private sector.
But then who would sell Bolivars to get U.S. Dollars? Logically, the two remaining possibilities are the Venezuelan private sector and the Venezuelan government. But a government should only use its own fiat and NEVER use another country's fiat lest it devalue its own fiat.
That leaves only the private sector to do foreign exchange with the monetary sovereign providing the necessary fiat via equal fiat distributions to all citizens.
How would this help? Well, for one thing the Bolivar would float. For another, I can't think of a fairer way to devalue the Bolivar since all citizens would get equal fiat distributions.
Objections?
Ignacio,
ReplyDeleteIts interesting to see Brian react that way... over here in engineering disciplines the students are educated thru inter-disciplinary methods for about the first two years undergraduate then they transfer over into the specific engineering discipline for about the last two years...
They take Math/Physics/Chemistry, etc... taught by those Departments and then take that knowledge out of there and apply/adapt it to the Engineering disciplines...
Over at Jason's there was a comment: "Heat is the motion of molecules and molecules are discrete. Of course so many of them move at the same time that you can treat heat as a continuous flow with no meaningful errors. Same with electricity which, technically, is the motion of discrete entities called "electrons" but can be calculated as a flow with no noticeable errors. Cannot the same be true for money?"
I would not use the word "money!" here nor would I be mainly interested in ALL transactions but I sympathize with the commenter.... what I am thinking about is looking at (when operating a numismatic system...) the leading USD flows from the govt accounts in this way...
AA,
ReplyDeleteThe USDs go to the state owned oil companies then the state CB changes them out at some rate...
The telsSur people are in some sort of a leftist mental infinite regress.... eventually they will be looking at the alleged political affiliations of the atoms and molecules....
"Venezuelan private sector": this has to be a joke right?
ReplyDeleteMovies can't be watched because they are a series of discrete photographs.... ;p
ReplyDeleteThey have to stop trying to control prices all over the place.
ReplyDeleteThe problem is not 'monetary'... they are creating the opportunities for arbitrage and absurd situations like exporting goods in the markets because it's better than producing and consuming them.
They have to take the hit for their Dutch disease no matter what and start working onto improving the REAL economy instead of all this fringe financialism/monetarism and stupidity.
Do you want to change the underlying economic and social structures? Then change the REAL production economy instead of playing with prices and currency.
Why people does get the causality backwards!? Attributing magical properties to money which doesn't have... The left needs to understand that there is no easy 'monetary' fix to change social and material conditions, you need to actually do real work for that.
And for the government, any regulation of prices has to be as a price setter though consumption (which means the only effective tool is the government can set price floors, to set price roofs it has to act through the real channel on the supply side). This is not the problem Venezuela has right now... but much of their problem is of their own doing because stupidity.
Ha good one Six...
ReplyDeleteIgnacio,
ReplyDeleteMy assumption is that all of the really qualified people to do those things end up leaving due to the corruption/nepotism....
"The left needs to understand that there is no easy 'monetary' fix to change social and material conditions"
Not arguing but we can say the same thing about the right/neoliberalism.... no free lunches out there... but what looks like happens is that neoliberal policy helps retain the qualified people... those people that are qualified in material systems have a basic material orientation so they end up having to save/invest/build wealth etc... so as the left goes to war against those types of behaviors with their "inequality!", etc..., then the materially qualified people just leave the country and the material conditions of course degrade....
this is similar to how we see the left MMTers advocate against interest on savings with their ZIRP... its a bad policy as it pisses off the savers and creates a whole host of problems...
ReplyDeleteZIRP isn't necessarily the problem; it's how it is achieved that's the problem. The ethical way to achieve ZIR is equal fiat distributions to all citizens - not asset purchases or lending by the central bank from or to the rich.
ReplyDeleteOne would think ethics would be the FOREMOST consideration wrt fiat creation but it ISN'T unless in a reverse/perverse way.
The left needs to understand that there is no easy 'monetary' fix to change social and material conditions, Ignacio
ReplyDeleteOf course there is - reform the money and credit system to make it ethical. But the Left is most often interested in replacing thievery by the Right with thievery by the Left, as if who does the stealing matters to the victims. But for the record, it appears the victims prefer being victimized by the Right since the Left tends to be very meddlesome besides thieving.
you need to actually do real work for that. Ignacio
Of course real work is needed, so the thieving needs to stop.
Matt then if the left wants to change behaviour of people and motivations other than "money" and "capitalism/free markets!" then they will need to find a different way to anchor people who can get the job done at the places they need to be at. I'm not talking about Venezuela but also on western democracies where a lot of people is on the 'left' spectrum (even those who thing are on the 'right') on economic policy (social policy is a bit more tricky).
ReplyDeleteThe 'left' has been winning the cultural wars over the last half century in many ways and educationally, but this is not quite well translating to material conditions and motivations. IMO this is because induced material scarcity changes people's goals towards a more cutthroat behaviour ("everyone for himself").
If we cannot provide the people with sufficient material needs a far reaching behavioural change won't be possible and the "left" will continue to fail making material and structural changes and continue to be bitter at "capitalism/free markets!".
Unfortunately is a bit of an egg and chicken situation, but I think we need to setup the infrastructure to at least provide people with material needs so they are able to get charge of their own lives then we would be able to push further structural changes on how we organise our society (the conundrum of capitalism of being antithetical of democracy as Tom would say).
In other words: until we do not have the proper conditions so the bargaining power of labour over capital is stronger we cannot push further 'structural' 'left-leaning' changes (ie. we need decently designed and in-place JG/BIG or mixed solutions in place and probably worldwide to avoid massive migrations that would be more disruptive even and trigger reactionary behaviour).
Don't have much hope right now...
Of course there is - reform the money and credit system to make it ethical.
ReplyDeleteYou can't reform when the wrong incentives are in place because we have a situation with induced material scarcity which promotes social darwinism and everyone for himself. The system promoted 'unethical' behaviour, and you can't go from 'unethical' to 'ethical' without some sort of benevolent dictator with absolute powers, it just doesn't work.
As I just posted, unfortunately it's a bit of an egg's and chicken situation where we have a self-fulfilling/reinforcing feedback loop between the financial and the real material conditions.
(the conundrum of capitalism of being antithetical of democracy as Tom would say). Ignacio
ReplyDeleteWhat capitalism? What we have is a system of government subsidized private credit creation whereby the least so-called credit-worthy, the poor, are looted by the banks for the benefit of the rich, the most so-called credit-worthy.
Capitalism is not about fairness or ethics, capitalism ain't even about trade.
ReplyDeleteCapitalism is about ownership, who owns what, and in capitalism property rights trump everything else. That is the only thing capitalism is about, it says nothing about how capital is created and distributed.
Is a feature, not a bug.
You can't reform when the wrong incentives are in place Ignacio
ReplyDeleteJust the proper abolition of government-provided deposit insurance might easily require more than $20,000 be given to every US citizen to finance the xfer of deposits from currently insured accounts at banks to inherently risk-free individual citizen, business, etc. accounts at the Federal Reserve.
That's not incentive?!
So where's the MMT crowd wrt to this? Pretending they can't hear?
I'm ready to witness the Venezuelan government's epitaph. Venezuelans are too.
ReplyDeleteCapitalism is about ownership, who owns what, Ignacio
ReplyDeleteInterestingly, the Old Testament puts restrictions on run-away wealth accumulation via a ban on usury from fellow Hebrews, debt forgiveness ever 7 years, and family farms that could not be lost for more than 50 years.
And yes, creating new fiat for someone just because he has collateral is unjust and is a cause of unjust wealth inequality.
What if one Hebrew family had 12 children and another had only 4?
ReplyDeleteKill the 8 additional in the other family?
Left: Hey I cant play guitar like Eric Clapton and I would like to so I say ban all Eric Clapton concerts....
ReplyDeleteNeoliberalism would be much better than whatever you want to term what they have down there now...
ReplyDeleteThat's the neoliberal plan. Scuttle anything else and claim TINA.
Andrew That Old testament thing is antithetical with capitalism too, and wouldn't be impossible to pass without political action either in a democracy or an autocracy. Not that i think that we should be following the Old Testament for anything really... But just adds to the point.
ReplyDeleteKind of why we have a 'mixed' system nowadays...
That's not incentive?!
No for the people who would have to do the reforming...
... and claim TINA. Tom Hickey
ReplyDeleteLargely true as far as ethical solutions are concerned.
That Old testament thing is antithetical with capitalism too Ignacio
ReplyDeleteFranko may have led you to believe the Old Testament is passé but it is STILL part of ALL Scripture and is to be read and respected by all Christians - a very sizeable and politically powerful group in the US.
Btw, your antipathy toward the OT is largely uncalled for, ie. the God of the OT is SLOW to wrath and longs to be GRACIOUS instead.
No for the people who would have to do the reforming... Ignacio
ReplyDeleteOnce the population is aware it could be done without increasing total purchasing power then who'll dare oppose it? On what grounds? That they love injustice and misery?
Yeah its to be read as an example of what doesnt work...
ReplyDeleteRead Galatians...
I don't have antipathy, I've apathy towards the Old Testament, in any case the point stand still... All those regulatory suggestions are antithetical to capitalism, they have to be imposed through the dominant political system (not qualifying them as bad or good, as that's besides the point).
ReplyDeleteAnyway, policies have to make sense on their own, without any appeal to authority, even less so religious authority. I'm also apathetic towards religious books as sources of policy tbh, I would prefer to have actual historical records tbh.
Is hard enough to come with non-distorted "recent" data (K&R lol).