Venezuela Government "Occupies" Electronics Retail Chain, Enforces "Fair" Prices

Tyler Durden's picture

The socialist paradise that is Venezuela has already shown the Federal Reserve just how the world's greatest "wealth effect" can be achieved courtesy of the Caracas stock market returning over a mindblowing 475% in 2013. Of course, while the US inflation is still slightly delayed (if only for non-core items and those that can't be purchased on leverage) Venezuela's own 50%+ annual increase in prices is only part of the tradeoff to this unprecedented "enrichment" of society, or at least 0.001% of it - after all, it's all about the égalité.

More problematic may be the fact that in addition to a pervasive toilet paper shortage, a collapse in the currency, a creeping mothballing of the local energy industry due to nationalization fears, and a virtual halt of international trade as the country's FX reserves evaporate, Venezuela's relatively new government has adopted arguably the best and brightest socialist policy wielded by both Hollande and Obama, namely the "fairness doctrine."

However, in this case it is not about what is a "fair" tax for the wealthy (as taxes in Venezuela's socialist paradise will hardly do much to build up the desperately needed foreign currency reserves), but what is a "fair" price for electronic appliances like flat screen TVs, toasters, and ACs. The result is that Maduro's government now determines what equilibrium pricing should be.

The reason for this latest socialist victory over the tyranny of supply and demand is that overnight Venezuela's President Nicolas Maduro ordered the "occupation" of a chain of electronic goods stores in a crackdown on what the socialist government views as price-gouging hobbling the country's economy. Various managers of the five-store, 500-employee Daka chain have been arrested, and the company will now be forced to sell products at "fair prices," Maduro said late on Friday.

In essence Maduro is simply going now where Abe soon, and Mr. Chairwoman will go eventually, and in an attempt to offset inflation (at last check Y/Y inflation was over 50%) has effectively "nationalized" prices by forcing retail managers to ignore such trivial things as import prices, and to see well below cost, or at what the government has determined is a "fair" price. Maduro has stopped short of more outright nationalizations, in this case saying authorities would instead force Daka to sell at state-fixed prices. Needless to say outright nationalizations are the next step.

That this is the absolute idiocy of any socialist regime in its final, pre-hyperinflation dying throes is well-known to anyone who had the privilege of visiting Eastern Europe just after the collapse of the USSR. However, for the Millennial generation it should serve as a harbinger of things to come to every socialist country that thinks it can rule by central-planning ordain, through a monetary politburo, and is absolutely certain can contain inflation in "15 minutes" or less.

From Reuters:

State media showed soldiers in one Daka shop checking the price tags on large flat-screen TVs. And hundreds of bargain-hunters flocked to Daka stores on Saturday morning to take advantage of the new, cheaper prices.

 

"We're doing this for the good of the nation," said Maduro, 50, who accuses wealthy businessmen and right-wing political opponents backed by the United States of waging an economic "war" against him.

 

"I've ordered the immediate occupation of this chain to offer its products to the people at fair prices, everything. Let nothing remain in stock ... We're going to comb the whole nation in the next few days. This robbery of the people has to stop."

 

The measure, which comes after weeks of warnings from the government of a pre-Christmas push against private businesses to keep prices down, recalled the sweeping takeovers during the 14-year rule of Maduro's predecessor Hugo Chavez.

Venezuela's people obviously are delighted:

"Inflation's killing us. I'm not sure if this was the right way, but something had to be done. I think it's right to make people sell things at fair prices," said Carlos Rangel, 37, among about 500 people queuing outside a Daka store in Caracas.

 

 

Rangel had waited overnight, with various relatives, to be at the front of the queue and was hoping to find a cheap TV and air-conditioning unit.

 

Soldiers stood on guard outside the store before it opened.

But how is that possible: is the wealth effect from a 475% YTD return in the Caracas stock market not enough to make everyone perpetually happy and content?

Or did the uberwealth of the 0.001% not trickle down just yet? No worries: it will only take another executive decree to strip the wealthy of their assets, just like it took one order to determine what is "fair pricing" on 50 inch plasma TV, and to enforce "trickle down" economics in this utopia gone bad.

As for what is left of the remaining retail sector, they have gotten the message:

Opponents also blame excessive government controls and persecution of the private sector for shortages of basic goods ranging from flour to toilet paper, and for price distortions and corruption caused by a black-market currency rate nearly 10 times higher the official price.

 

"This ridiculous show they've mounted with Daka is a not-very-subtle warning to us all," said a Venezuelan businessman who imports electronic goods and is an opposition supporter.

 

Under price controls set up a decade ago, the state sells a limited amount of dollars at 6.3 bolivars, but given the short supply, some importers complain they are forced into a black market where the price is nearly ten-fold higher.

 

Maduro showed astonishment at a fridge on sale in Daka for 196,000 bolivars ($31,111 at the official rate), and said an air-conditioning unit that goes for 7,000 bolivars ($1,111) in state stores was marked up 36,000 bolivars ($5,714) by Daka.

 

"Because they don't allow me to buy dollars at the official rate of 6.3, I have to buy goods with black market dollars at about 60 bolivars, so how can I be expected to sell things at a loss? Can my children eat with that?" added the businessman, who asked not to be named.

Who expects your children to eat, citizen? After all they didn't build that negative profit margin. Just eat your peas, be replete of hopium, sell for a "fair price", be happy you don't have to sign up for healthcare.ve under gunpoint, and don't forget to sing the praises of a socialist central-planning utopia. And always remember: BTFATH!