Venezuela's currency value depends largely on one guy at an Alabama Home Depot · 5:46am Dec 3rd, 2016
The socialist government led by President Nicolás Maduro has had to contend with the collapse of oil prices, corruption and high inflation. For ordinary Venezuelans, that means their currency, the bolivar, has become mostly worthless — mostly, but not entirely. And right now, any value the bolivar does have depends largely on one guy who works at a Home Depot in Hoover, Alabama.
His name is Gustavo Díaz, and his website, DolarToday, has become a handy financial tool for Venezuelans trying to navigate the underground economy — so handy, in fact, that it affects the price of just about everything in Venezuela.
In Venezuela, the government officially sets the currency rate and it’s illegal to publish exchange rates for black-market dollars. But Díaz’s website does just that, basing the rate on actual street prices that Venezuelan consumers are paying for food, medicine, cars and everything else.
Venezuelan authorities have accused Díaz of leading an "economic war" against the government and have threatened to jail him.
“Well I don't care because I'm a US citizen right now," Díaz says. "We have freedom of speech in the US."
In the meantime, he also has his other job in a hardware aisle at Home Depot. There, he fields questions about screws and bolts while DolarToday helps set prices for those same products back in Venezuela.
“At Home Depot I serve the people and like to do that because it's a way also to liberate all the stress about what's going on in Venezuela,” says Díaz.
But during his lunch breaks, Díaz says he routinely checks for bolivar rate fluctuations and news headlines to add to the website.
Just remember, next time someone complains about how America is suffering economically, you can tell them that we're so rich that people who work retail here manage entire third world economies in their free time.
More seriously, if you actually read the article, you'll discover that the man is actually a Venezuelan political refugee who, when he was a part of the Venezuelan military, was part of an unsuccessful coup against Hugo Chavez. The website more or less exists to screw over the Venezuelan government, which is trying (and failing) to prevent hyperinflation.
The government claims that the Bolivar is worth $0.10 USD, or 10 Bolivar to 1 USD. The real-world exchange rate is about 4,000 Bolivar to 1 USD. There are few ways to get the government exchange rate, limiting opportunity for arbitrage, but apparently the Venezulan government does allow you to exchange 30,000 Bolivar for $3,000 USD if you book a flight to the US.
Which has now predictably lead to a bunch of empty flights.
Now, to actually write. I can't write anything weirder than this headline, so it is all uphill from here in terms of believably.
From the comments on the article on Reddit:
I... wow. I am so not qualified to make a good statement on this without way more research than I really want to do.
So here's my half assed comment.
He's a screw guy. Find you the right screws to build a shed while screwing his old country.
Donald Trump is the next US president
4327074
screwing Venezuelan government ≠ screwing Venezuela
Well, that beats my spare-time hobby of writing horse-words.
Former military and he works in home depot, almost feels like the guy got screwed doesn't it?
Or, America's so screwed that a person capable of managing an entire economy is stuck working at Home Depot.
And the person not capable of managing a home depot retail job is stuck working as President.
4327499 Sir, I find that comment deeply offensive, I'm quite confident that the incoming President-Elect could handle a junior level Home Depot retail job. (Aisle managers don't actually negotiate bulk discounts, right? They just restock shelves).
4327651
#MakeHomeDepotGreatAgain
Down my way we've a saying that, loosely translated, means "I would not leave him in charge of as much as two painted[1] goats." (It flows a lot smoother in the original) It seems oddly fitting at this point in time.
[1] As in "drawn on a piece of paper."
4327653 Hmmmm. I think he could handle two painted goats, provided we mean paintings of goats. (If one gets ruined, you still have a spare).
4327499 "And the person not capable of managing a home depot retail job is stuck working as President."
Yeah, for another month.
Anyway, Venezuela has substantial natural resources, good people, a thriving cocaine trade... Um... I mean agriculture. Technically, it's a Republic, practically, it's a bad case of Tropico dictatorship, where the incoming Presidente (Hugo: 1998) crammed socialist rule across the country using brute force and intimidation. Anybody with money left, anybody with money remaining had it forcefully taken away from them, the oil reserves that had been propping up the country were mismanaged by the state oil company to the point where they have to *import* oil, and the whole system is spiraling down the familiar path of socialists who have run out of Other People's Money to spend. One would have thought somebody should have seen this coming. Oh, wait. They did.
“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
This is known as "bad luck.”
― Robert A. Heinlein
pajamasmed.hs.llnwd.net/e12/instapundit/wp-content/uploads/2016/12/socialistsanta-600x450.jpg
4328624
No, no, this one would blow up the home depot on the off chance that a terrorist might be in it or near it or thinking about it or in another Home Depot altogether. But you know. When all you have is a fleet of drones and no conscience, everything looks like a terrorist nail.
I don't like any of your politicians, Georg, though for different reasons.
Hate socialism if you wish, but know your economics: Venezuelan oil is among the most viscous on the planet. So dense, in fact, that extracting it compares favorably only to fracking (which famously only works if oil is above about $100 per barrel). As a result, extracting it is simply not economical if the price of oil per barrel is below a certain value. Since there is currently a pump-and-dump situation in the oil market, the price is pretty low and it was lower still when it all went off a cliff in 2014. This is hurting all petroleum exporting countries, of course, but first, those with light and sweet crudes are having an easier time of it, and some have backup plans. Saudi Arabia is holding on due to its vast cash reserves, and Russia is holding on due to having every natural resource known to man in superabundance. Venezuela has neither and is stuck with vast reserves that are only profitable in a different economic climate and, thus, they have cratered bad.
Imagine, if you will, how America would handle gas spiking to, say, $6 a gallon. Cracks would begin to show, no? Well it is much like this in small oil-rich countries without a plan B, and Venezuela is particularly bad.
If you wish to object to anything Venezuela has done, object to them not having the foresight to predict disarray in the OPEC and to plan accordingly with a nest egg. Instead they've spent their cca. 2008 windfall. This is not known as "bad luck." It is known as "macroeconomics." You can say that capitalism would have helped and maybe it would have (not sure how), but no system thrives when a revenue hole opens on their books.
Well. Except America, which has impressed everyone so much during the post-WWII boom that everyone adopted their currency as a reserve and so it now has a cheat code that lets it print as much money as it likes with the rest of the world picking up the tab.
4328715
Fracking doesn't cost $100 a barrel; if it did, US oil production wouldn't have shot up like a rocket. In fact, it was the very fact that we managed to get cheap oil again that more or less destroyed global oil markets; the US was a huge importer, but now we're importing much less, and are actually a net exporter of gasoline due to our refining capacity. The break-even point on fracking is about $25/barrel, though because of high start-up costs, it is not worth opening up a new fracking operation at less than about $50-60/barrel.
Venezuela's problem is that Chavez didn't invest in the future; he threw a bunch of money at his base to make them happy, but didn't throw much at capital infrastructure. In fact, oil exploration has gone way down in Venezula; they simply haven't been building any more extraction capacity. As a result, they actually are in long-term decline in oil production due to lack of new oil infrastructure. This, combined with the declining price of oil, has been disasterous for the country.
It isn't just that oil prices have fallen; it is also that their production capacity has been decaying for a long time now due to lack of investment. And because of Venezuela's government, foreigners aren't exactly eager to invest there, either.
No investment means a long-term revenue problem. It was always Future Venezuela that was going to have to deal with it. But now they are Future Venezuela.
This is why countries like Saudi Arabia and the UAE have been investing in diversifying their economies, so that they aren't so entirely dependent on oil; having a diverse economy like the US makes you much more resilient to a particular market tanking.
The US national debt is not especially ridiculous; it only seems so because the US is so wealthy. Relative to GDP, our debt is not that much worse than a lot of countries in Europe. If the US went up to 200% of our GDP in debt, it would be a problem for us, the same as anyone else. The only difference is we'd drag the entire global economy straight off the side of a cliff with us.
4328715 "...I don't like any of your politicians, Georg, though for different reasons...."
That's ok. We don't like them either.
4328800
You sure about the fracking? I've read quite a reputable thing that mentioned the profitability floor, though of course tech could have changed that.
As for the rest: yup. Chavez planned for the gravy train to never derail. It did. Whoops.
4328894
Yes. The price fell considerably. That's what triggered the American oil boom. It was $100/barrel; then it fell by a bunch, which made it ridiculously profitable to frack, which is why American oil production almost doubled between 2008 and the present.
It is also worth noting that there are two different numbers - start-up costs and per-barrel costs. It isn't worth the capital investment opening up a new fracking well at much less than $60/barrel, but once you've already opened up your well, the incremental per-barrel costs are only about $25/barrel. Once your well is already open, you've already sunk the infrastructure costs, so even if the price drops below $60/barrel (so you might not have wanted to open up the well in retrospect), you've already spent the money so you might as well at least make what money you can off of it.
4328942
I stand corrected regarding fracking. It's just a shame it leaves the surrounding water table in shambles.
Though I think Venezuelan oil is still difficult to exploit? Unless you have news on this front as well?
I've seen speculation that new fracking is now at around $50-$55/bbl, it keeps going down. There's some beardmuttering that this is a heavy hand on the market going too gangbusters above that floor.
But the Venezuelans haven't just not invested in the oil industry future - they seem to have plundered their existing resources to the point where the existing maintenance draw-down has shut down more and more wells and fields. Last time I heard, there are entire tankers currently sitting idle in the southern Caribbean because they can't afford the fuel and port fees to deliver contracted deliveries at the other hand. Venezuela's about to get hit for a lot of nondelivery charges.
How did I miss this wonderful bit of Kafkanium?