Venezuela and the devaluation of the bolivar

[Shawshank]

I am not a person who likes giving strong advice on financial investments, basically, because economics are tied to many unpredictable factors. However, this time, I would make people from Venezuela to reconsider how safe their savings are.

The currency of Venezuela, the bolivar, does not float freely in the market. It is pegged to 4,30 bolivars per dollar. Historically, currencies pegged to external currencies, with very different fiscal policies, such as the bolivar and the dollar, finish being devalued quite heavily. A really sad example was the Argentinian peso and the "corralito" it ensued in 2001.

I attach a link in Spanish where a heavy devaluation of the bolivar is likely, because of the huge difference of current inflation between Venezuela and the US.
http://www.eluniversal.com/opinion/120103/cuando-sera-la-devaluacion

No government should have the right to wipe out their citizens hard-earned money. Venezuelans may consider putting part of their savings in Bitcoin.

[1713570374]

1713570374

[Phinnaeus Gage]

I am not a person who likes giving strong advice on financial investments, basically, because economics are tied to many unpredictable factors. However, this time, I would make people from Venezuela to reconsider how safe their savings are.

The currency of Venezuela, the bolivar, does not float freely in the market. It is pegged to 4,30 bolivars per dollar. Historically, currencies pegged to external currencies, with very different fiscal policies, such as the bolivar and the dollar, finish being devalued quite heavily. A really sad example was the Argentinian peso and the "corralito" it ensued in 2001.

I attach a link in Spanish where a heavy devaluation of the bolivar is likely, because of the huge difference of current inflation between Venezuela and the US.
http://www.eluniversal.com/opinion/120103/cuando-sera-la-devaluacion

No government should have the right to wipe out their citizens hard-earned money. Venezuelans may consider putting part of their savings in Bitcoin.

Here's a better article that won't get lost during translation: http://www.nasdaq.com/article/venezuela-may-devalue-exchange-rate-further-after-electionscapital-economics-20120111-00469

[pointbiz]

I am not a person who likes giving strong advice on financial investments, basically, because economics are tied to many unpredictable factors. However, this time, I would make people from Venezuela to reconsider how safe their savings are.

The currency of Venezuela, the bolivar, does not float freely in the market. It is pegged to 4,30 bolivars per dollar. Historically, currencies pegged to external currencies, with very different fiscal policies, such as the bolivar and the dollar, finish being devalued quite heavily. A really sad example was the Argentinian peso and the "corralito" it ensued in 2001.

I attach a link in Spanish where a heavy devaluation of the bolivar is likely, because of the huge difference of current inflation between Venezuela and the US.
http://www.eluniversal.com/opinion/120103/cuando-sera-la-devaluacion

No government should have the right to wipe out their citizens hard-earned money. Venezuelans may consider putting part of their savings in Bitcoin.

Two thoughts....

1) The bolivar does float freely on the black market in Venezuela.

2) How can Venezuelans buy bitcoins? Is there an exchange there? Are there any mining farms there?

RowIt shows 27 nodes from Venezuela. I'm curious why they wouldn't be more interested. Maybe it needs to be "spanish slashdotted" or whatever the equivalent is...

[minero1]

There is also a currency exchange cap in place in Venezuela so is nearly impossible to transfer funds overseas, being mining the only method to get a hold on bitcoins.

2) How can Venezuelans buy bitcoins? Is there an exchange there? Are there any mining farms there?

No exchanges.

By now i only have 2.5GH/s, i'm unable to provide that service.

I know of other 2 guys running over 1GH/s. Some of my clients must be connected too, i've been evangelizing a lot, when they walk into my shop first thing they see is Mt.Gox live in a 32" TV, they all ask.

Si eres Venezolano enviame un MP y nos pondremos en contacto, hay mucho en lo que podemos apoyarnos!

[99Percent]

Its really disgusting what the Venezualan government is doing to their people.

The Mexican Peso suffered this type of currency control for decades. The rich, the bureacrats and the political elite simply wiped out billions of dollars out of the economy. Lopez Portillo, a president at the time during one of catastrophic the devaluations even blamed the banks and nationalized them!

If I were a venezuelan I would buy a lot of super cheap imported hashing power and mine bitcoins like crazy with the subsidized electricity (or gasoline generated electricity).

[Bro]

if it's devaluated, that means cheap electricity, so they can convert their bolivar in watts, and their watts in bitcoins

[molecular]

if it's devaluated, that means cheap electricity, so they can convert their bolivar in watts, and their watts in bitcoins

How does it mean cheap electricity? The income (in bolivar) of the population wouldn't magically rise, even fall (in USD). Their savings would be devalued. Even with electricity cost staying the same (in bolivar), which is unlikely because the power company probably depends in some form or another on stuff they have to pay in hard currency, it doesn't magically become more affordable, does it?

[99Percent]

I heard gas prices in Venezuela are one of the lowest in the world (at cents per gallon) because its heavily subsidized. This mean that electricity costs are probably ridiculously low, at the very least one should be able to generate electricity cheaply with a power generator.

Imports are super cheap with the bolivar *over* valued, so hashing hardware should be much cheaper too.

[minero1]

Its really disgusting what the Venezualan government is doing to their people.

Yet they (the socialist) have been legitimaly elected by the majority of the population three times and i really don't know for sure why, well, i guess i do, the lack of decent a opposition leader, the huge social spending programs people like so much, the natural charisma of the guy (Chavez) to name a few, they all appeal to the mostly uneducated majority. Democracy can be a bitch i tell you.

I hope people change their minds before the presidential election this october, i believe in alternancy in the exercise of power.

if it's devaluated, that means cheap electricity, so they can convert their bolivar in watts, and their watts in bitcoins

Hashing hardware is not cheap at all, the official exchange rate is for the food industry, well connected individuals, corrupt politicians, and the presidential family so no luck on that one but on the other side the electricity here is super cheap and so is the gasoline, if you wish to generate your own power.

As of february 25th of 2012 price is 0.015 US Dollars per litre (0.06 for the gallon) of poorly-refined-highly-contaminant-but-still-working-gasoline (over 800ppm of sulfur) and 0.011 US dollars per kWh from the grid and with that i think it qualifies as the cheapest in the whole world, can't complain.

Bring on the FPGA we will keep going the GPU way!

[labestiol]

Is there any gov source saying that ? Because suppose you're the opposition in Venezuela, that's a nice rumor to start if you want a better score
Not saying they won't do it, especially since they did it before. Just saying that it's the kind of propaganda both sides will use before elections.

to minero1 :
 - how does investing in precious metals work in Venezuela ? caps, taxation ?
 - was trying to understand the black market value of bolivars. Basically there are people willing to give away bolivars to get usd. Question is why ? Is there some products available only in USD ? or is it mainly for savings ? (abroad ?)

[jago25_98]

if venezuela is anything like argentina then the black market dollar exchange will be to protect savings from devaluation.

Best not to get too offtopic into politics but chavez is on the no.1 hitlist and economic attack must surely be a real threat. But fighting the market seems impossible to me.

If i was to fly in with mining equipment what's the likelyhood of getting siezed/taxed/hassle? Also, what's the state of internet censorship over there? What's the penalty forblack market moneychanging? It's interesting to know. I also wonder what the moneychangers do with all thier bolivars once they have them.

[99Percent]

I am surprised hashing hardware would be expensive in Venezuela. Usually populist governments allows for free import of computer hardware because it is believed it helps education, business, blah blah.

The black market money changers turn their bolivars back to dollars at the fixed official rate because they are well connected. That is why it is so corruptible system.

As a Venezuelan, the last thing you want to hold are bolivars, if a devaluation is inevitable. It is very shocking to see how big of a drop it makes, *always* much more than expected.

[wachtwoord]

If Chavez is in power I think the best thing to do as a Venezuelan is emigrate ...

[labestiol]

For sure inflation is worse in Venezuela or Argentina than is US. So i guess it makes sense to save in dollar to protect from it. But USD is also being devalued, so...
What about precious metals ? It sure seems a better idea compared to USD

[cbeast]

Some say the best investment is rocks, some say paper, I've always been partial to scissors.

[Kettenmonster]

The money is meant to be spent. So where is the problem with devaluation?
Take those Bolivars and do something reasonable with it. Buy a goat and make cheese or so.
Most people support the habbit of a regular meal now and again. Thus cheese can be safely considered a safe harbour.

[labestiol]

Money is meant to be spent, obviously. But you should have freedom about when you spend it.
Saving is not something bad in itself, you should be free to choose when to earn/save/spend
Devaluation means that you loose some part of you earnings before spending it. Taxation basically, which isn't bad either.

The real problem to me with devaluation is that it's a kind of stealth taxation, and also because one can evade easily.

[Kettenmonster]

... you should be free to choose when to earn/save/spend ...

uhm ... why?

[labestiol]

... you should be free to choose when to earn/save/spend ...

uhm ... why?

Is it a real question or some high level trolling ?

[Kettenmonster]

Is it a real question or some high level trolling ?

Yes please, just answer that question. But make sure to give some resilient arguments, otherwise we just end up in some postmodern chit-chat.
Could be you are expressing your opinion. Fine with me, but to convince me it takes a bit more.

The point is: Being free when to spend contradicts the idea of spending money fast. It is about speed, so being slow in spending is punished.
Your assumption "be free to choose when" is simply wrong in my eyes. Simply wrong in the sense that this simplification is wrong.
There has to be something that pushes you to spend piled money. ... uhm why? For trivial economical reasons.

p.s.
Troll-1: Is answering a question with a question an answer or a question?
Troll-2: yes!

[wachtwoord]

Very simple reason: there is no reason for this to be forced by external factors.

There has to be something that pushes you to spend piled money. ... uhm why? For trivial economical reasons.

This statement is incorrect. People spend money when they wish to receive something in return (services or goods). if they do not, they hold on to the cash. This was the first idea of cash as well, something to preserve wealth in a liquid fashion. A farmer wishes to exchange his crops for other goods, but goods that hve gone bad cannot be traded so he exchanges them for precious metals to spent on some not yet determined point in time. 

[labestiol]

There has to be something that pushes you to spend piled money. ... uhm why? For trivial economical reasons.

Before i answer, can you tell me what are these trivial economical reasons ?

[Kettenmonster]

The factors are intrinsic not external. Plus inflation does not force you to spend your money. You can easily keep it. Oh it looses its value? Value compared to what? Fiat money carries no value in itself. Thus very simple reasons can simply be false although heavily and frequently ventilated.

[Kettenmonster]

Before i answer, can you tell me what are these trivial economical reasons ?

yes I can, ... you read the troll story didn´t you? 

*scnr*

[labestiol]

Then you'll understand i won't answer, for trivial reasons 

[molecular]

The point is: Being free when to spend contradicts the idea of spending money fast. It is about speed, so being slow in spending is punished.
Your assumption "be free to choose when" is simply wrong in my eyes. Simply wrong in the sense that this simplification is wrong.
There has to be something that pushes you to spend piled money. ... uhm why? For trivial economical reasons.

I don't agree. Saving (spending later rather than sooner) has a function (of course with the current money-printing going on, saving seems to be a pretty stupid idea). The function of saving (note that saving results in investment, because the bank you save with will loan the money to the player that are investing) is to "tell" the economy: "it's all good so far, I have enough products to conduct my daily life, please put the money into making production more efficient (future production) or invent new good/services for me to consume.".

Where do you get this idea of "spending money fast"?

[Kettenmonster]

Where do you get this idea of "spending money fast"?

It was him in first place: http://en.wikipedia.org/wiki/Silvio_Gesell

Despite of favouring fiat money or not, it carries no intrinsic value. Thus being unreliable it has to prove its worth as soon as possible.
It is of no importance for fiat money who is saving that stuff. As long as its not hanging around in your pockets.
Did you ever wonder why banks perfer credit cards over cash? Here you are.

[99Percent]

It really depends on the inflation rate and whether you are getting good interest vs this inflation rate when saving money.

That it is fiat currency you are saving is not very important if its "fiatness" is worthy (ie lots of people trust it).

It can be dumb and short sighted to spend all money you earn immediately just because you think it might not be worth any tomorrow..

[Kettenmonster]

It really depends on the inflation rate and whether you are getting good interest ...

You are still talking about Bolivar aren´t you?

[99Percent]

It really depends on the inflation rate and whether you are getting good interest ...

You are still talking about Bolivar aren´t you?

No, I am talking of currency in general. The bolivar is not very strong fiat wise obviously.

[minero1]

to minero1 :
 - how does investing in precious metals work in Venezuela ? caps, taxation ?
 - was trying to understand the black market value of bolivars. Basically there are people willing to give away bolivars to get usd. Question is why ? Is there some products available only in USD ? or is it mainly for savings ? (abroad ?)

I am surprised hashing hardware would be expensive in Venezuela. Usually populist governments allows for free import of computer hardware because it is believed it helps education, business, blah blah.

You mean like saving in gold/silver? no caps, no legislation. But the VAT applies to it like it does to everything else.

Black market it is thriving because the oportunist merchants have an excuse to sell their goods at twice the price just by stating they DON'T buy imports at the official rate even when they do enjoy it making prices high enough for anyone to consider importing themselves and saving a buck, yes the black market rate is twice as high the official rate. And i think that answers why hardware is so expensive.

If i was to fly in with mining equipment what's the likelyhood of getting siezed/taxed/hassle? Also, what's the state of internet censorship over there? What's the penalty forblack market moneychanging? It's interesting to know. I also wonder what the moneychangers do with all thier bolivars once they have them.

100% likely to being taxed when nationalizing imports. 0% seized, BIG HASSLE. Maybe some penalties for excess power consumption if you are going big, i'm sure i'm gonna.

internet censorship?? haha that's only a US and China thing. Here, i don't think they even monitor the internet. But like in any other country (i assume) bitcoin is a grey area, not exactly legal but not ilegal either, if you get caught exchanging bolivars outside of the official channels you'll get fined by twice the amount you are exchanging/carrying, this is the most hypocritical law ever because the government is known to issue bonds and sell them at black market rates.

I prefer to not hold currency at all nor bolivars or dollars, i feel a lot better when it is invested

[labestiol]

to minero1 :
 - how does investing in precious metals work in Venezuela ? caps, taxation ?
 - was trying to understand the black market value of bolivars. Basically there are people willing to give away bolivars to get usd. Question is why ? Is there some products available only in USD ? or is it mainly for savings ? (abroad ?)

I am surprised hashing hardware would be expensive in Venezuela. Usually populist governments allows for free import of computer hardware because it is believed it helps education, business, blah blah.

You mean like saving in gold/silver? no caps, no legislation. But the VAT applies to it like it does to everything else.

In Europe there's no VAT on "investment gold", meaning coins, bars.
But there's VAT on silver and other metals

[minero1]

so, frankendoodle, nice english for a Venezuelan...

i encourage you to check this list http://www.cadivi.gob.ve/empresasdivisas.html, i found some very interesting surprises there, for me mostly some local shops from Coro-Punto Fijo (where i'm from) that i'm sure they are selling at non-official rates but have cadivi approvals on the tens of millions USD 

i'll keep increasing my mining op as much as i can but with the hardware prices and shipping costs its kinda steep but i've converted some friends to bitcoin and they are willing to fund my efforts, it's actually a lot easier when you show them your rigs, they all go like WOW! what is that? i show 'em the numbers, the heat output, the power consumption and the profit of course and BAM! they're sold

[fabrizziop]

Venezuelan here, to both of you, please contact me