The Glade 4.0

http://www.foxnews.com/story/0,2933,582 ... latestnews

How the F's sake does this work? Maybe I am slow in the morning, but the two tiered economic system. Ignore the usual Chavez paranoia part.



[quote]The priority exchange rate will be allotted for food, health care products, school supplies, machinery and equipment for economic development, among other things, Chavez said.

He said the new rates aim to boost the productive economy, "braking imports that are not strictly necessary and stimulating export policy."

Imports that will fall under the less favorable rate include automobiles, telecommunications goods, computers, appliances, alcohol and tobacco.

The currency's official exchange rate has been held steady by the government at 2.15 bolivars to the dollar since 2005.

The currency devaluation is expected to have a mainly domestic impact, and limited effect internationally. The government has maintained strict currency exchange controls during 2003 to try to contain capital flight, and has set a fixed exchange rate that overstated the bolivar's value on the black market and in bond trading.

Chavez also said the government will intervene in the lucrative parallel bond market, where the rate has been hovering at about 6 bolivars to the dollar, nearly one-third the official rate. He did not give details about what actions the government would take.

The devaluation comes as the oil-exporting country struggles with a recession and 25 percent inflation, the highest in Latin America.[/quote

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"Life isn't divided into genres. It's a horrifying, romantic, tragic, comical, science-fiction cowboy detective novel. You know, with a bit of pornography if you're lucky."
— Alan Moore

When you're a socialist with ultimate control, the laws of economics obey your will that's how.

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I prefer to think of them as "Fighting evil in another dimension"

It's basically Mercantilism all over again. The idea is that exporting is good and importing is bad, so we must take every available measure to prevent as much importing as possible. China is doing the same thing.

Seems to be working pretty well for China.



Which kind of refutes the notion that they are laws?

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It feels like all the people who want limited government really just want government limited to Republicans.
---The Daily Show

Montegue:

Not at all. Socialist nations always have thriving black markets and clandestine trade mechanisms to solve the problem of over-the-top government regulation. Ironically, this is something the Keynesians always like to forget: human beings will fill the vacuum created by government economic management. It happens here, even in the United States. And, amazingly, the law of supply and demand continues to work while the government idiots continue to fix prices at the store.

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A black market exists only because regulation exists. Obviously, without regulation, there would be no laws to prosecute people who sold illicit materials, because there would be no such thing. I wouldn't dispute that. It's a lot like the externalities that Austrians seem to ignore.

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It feels like all the people who want limited government really just want government limited to Republicans.
---The Daily Show

The fundamental laws of economics do not change based on monetary policies. What artificially controlling monetary supplies (whether through pegs or interest rate) does is suppress or artificially prop up ventures.

This is nothing more than attempting prices controls, though for items traded between the United States and Venezuela. It can be treated as an excise on items Venezuela imports from us that do not get to be considered "priority". This makes these items more expensive for Venezuelans buying non-priority US imports and drives down demand for those items, curtailing business in that area. On the flip side, non-priority Venezuelan exports become cheaper (compared to priority) for US.

But a currency cannot work like that. Basically, what they are doing, is that for items that exported from Venezuela that are non priority (primarily oil), they are going to inflate the value of that transaction by artificially creating money to supplement the higher peg on that item. Petrol is still traded in dollars, not Bolivars so this has no effect on the international market. Like any kind of inflation, this will drive up prices ... but it's a kind of trade specific, selective (at the whim of Sr. Hugo) inflation.

Like all inflations, this drives up aggregate prices for things bought in Bolivars. What it also does, because it is selective, is overvalue their petroleum industry even more. Think how bad it would get if they pegged their Bolivars 100 to 1 USD for exportation of petrol. What it means is the health of their economy (even more than previously) will be tenably linked to their petrol exportation.

It can only work in a highly communistic country where you can strictly control things coming in and out. It amounts to telling people what commodities are worth relative to each other, which never happens because a black market will appear to correct price imbalances. Note that a black market literally need not be people in alleys trading things.

My guess is the first sign of petroleum contraction, Chavez will vilify the US as trying to starve his country, when in reality, this was due to his peg. Even funnier: the biggest growing areas of petroleum consumption are emerging Asian markets. This peg doesn't effect trade against the Chinese Yuan. They are gonna get donkey **** by this idiotic idea.

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"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones

A monetary supply, by it's nature, is artificial. In fact, the entire concept of money is arbitrary, regardless of it's basis or form. When you introduce a state-created currency into the equation, you have regulation.



Of course not. It is, however, still illegal. And that means it will always be more expensive and risky to do business in that market.



Probably.

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It feels like all the people who want limited government really just want government limited to Republicans.
---The Daily Show

I have no idea what you are trying to say. You seem to be confusing the difference between money and currency. Paper currency is not the same thing as using gold (money) for currency. Money is anything of worth. Money is not arbitrary, currencies are. Saying "gold will be our currency" or "dollars will be our currency" is arbitrary. People electing to trade in ounces of gold, pints of milk or hours of work spent painting a house are not the same thing. People will trade in the absence of a money which is considered an "official" currency, and they will trade in the absence of an official currency in general. They will barter and use various other forms of money to trade. It is not arbitrary that people find horses to be more valuable than an individual coconut or bunch of bananas. It is not artificial that a 2 tons of rice, might be worth more than a dead or sick and diseased horse.

You're going to have to explain what you are trying to say differently, because I have no idea what it means and I cannot address how it may or may not apply to what I posted ...



It is not more expensive and more risky to due business in a black market. Otherwise, people wouldn't do so. If it was cheaper to business over the table, that's how it'd be done. It may be cheaper if it were legal, but that's not what is being posited.

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"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones