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Venezuela Is Now The Most Expensive Country In The World
Submitted by Simon Black via SovereignMan.com,
Forget Norway. Japan. Iceland. Switzerland. Or any of the other places around the world that are notorious for being painful on the wallet.
Venezuela is now the most expensive country in the world, hands down.
To give you an idea, the cost of a 15-minute taxi ride to the beach yesterday afternoon totaled an eye-popping $158.
(I paid less than that to rent a helicopter in Colombia last week.)
With all of its vast mineral resources, Venezuela should be the most prosperous country in Latin America by far. And it once was.
But years of corruption, incompetence, and central planning have taken their toll.
Normally, when huge companies like Exxon Mobil extract oil out of the ground, they reinvest a portion of their profits back into improving their operations.
They spend money on more infrastructure, technology, and exploration. In short, they invest in the future.
But in Venezuela, guys like Hugo Chavez and his successor Nicolas Maduro spent years funneling oil revenues into idiotic social programs designed to keep themselves in power.
Venezuela did not invest in the future. Now its oil infrastructure is rotting. Production is in serial decline. And the oil price has collapsed to boot.
This is bad news for a government that generates a huge proportion of its revenue from oil exports.
And just like how the United States and most of the West can’t balance their budgets without going even further into debt, Venezuela’s government also spends far more than it generates in revenue.
Especially now. With the government’s budget deficit at 14% of GDP, they’re barely able to make their debt payments this month without defaulting.
In fact, Venezuela is so screwed up that the government doesn’t have a hope of balancing its budget unless the oil price is between $100 and $120 per barrel.
Thus, they’ve had to resort to even more destructive ways of making ends meet.
Like most governments, that means printing money.
The problem is: the Venezuelan bolivar isn’t used as a reserve currency around the world like the US dollar or euro.
That is what has enabled the US to get away with its relentless printing so far, as much of the resulting inflation is simply exported abroad.
Instead, here when they print bolivars, Venezuelans are stuck with all of it. Zimbabwe style.
Inflation in Venezuela has been among the highest in the world, with some private estimates as high as 800%.
Once that became a problem, their solution was to introduce price controls, which failed miserably. Venezuela infamously tried fixing prices in the grocery stores and ended up with crippling shortages of everything from beef to toilet paper.
Then they decided to try capital controls by forcing a completely absurd ‘official’ exchange rate to the local currency.
And that’s what makes this country so expensive.
The official rate of the bolivar is 6.3 per US dollar. But the black market rate is over 60x higher.
Last night I met up with a local guy who had sacks of cash hidden all around his house, and I changed $50 for 20,000 bolivares. That’s a rate of 400 per US dollar.
It’s an unbelievable difference. 6.3 under the official rate. 400 in the black market.
My taxi ride yesterday really cost me 1,000 bolivares. Using the black market rate, that’s a pittance at just $2.50. But using the official rate, it’s $158.
So depending on which exchange rate you use, Venezuela can either be one of the cheapest countries in the world, or the most expensive.
But as you can imagine, exchanging currency in the black market carries SEVERE penalties.
And that’s not all they’re doing to prevent people from protecting themselves against a rapidly depreciating bolivar.
They’ve even tried blocking access to Bitcoin-exchange websites to prevent people from purchasing crypto-currency.
(Though these efforts are easily defeated by using a VPN.)
Desperate to make ends meet in an environment where they see their savings and standards of living deteriorate by the day, many people have been driven to crime.
Caracas used to be a paradise; now it’s one of the most dangerous cities in the world.
It’s a damn shame too, because this is a really wonderful country. And were it not for the crime, Venezuela would be a top retirement destination, attracting many an expat looking to live like royalty on $1,000 per month.
But that’s not the case. Instead, Venezuela is sinking to rock bottom, and people here are suffering immeasurably.
All of this was brought on by yet another experiment in ‘central planning for the greater good’ gone dreadfully wrong.
Too much spending created too much debt and too much money printing, which in turn created too much inflation.
Inflation then led to price controls. Capital controls. Media controls. Destroying people’s standards of living. Appalling levels of violent crime.
They say the road to hell is paved with good intentions. Venezuela is a case in point, and shows just how short that road can actually be.
Westerners always think that these sorts of consequences can’t happen where they live, as if the laws of the financial universe only apply south of the border.
It’s not to say that the West will become Venezuela.
But if your government is already making its way down this path, taking on $60+ trillion in debt and printing limitless quantities of money, it’s seriously foolish to assume that that it will not end up somewhere similar.
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Gas is about 6 cents a gallon in Venezuela. And $7.20 a gallon in Hong Kong
http://www.globalpetrolprices.com/Venezuela/gasoline_prices/
But there's nowhere to go.
You may want to drive out of the country given its high crime.
“Gas is practically given away here,” Rivas says. It costs him less than a dollar to fill up his 16-gallon tank for the entire day. A ride on the metro costs more than that. Gas prices aren't even posted here because they have stayed the same since 1996. It’s so cheap that people tip gas station attendants more than the price of the gas.
http://www.pri.org/stories/2015-02-12/venezuelas-4-cents-gallon-gas-set-...
Everyone blames the politicians but the bankers back the stooges that will run up the debt most. Chaves knew where his power came from, never missed a payment to Goldman or Oppenheimer.
BS to blame stupid 4th grade educated politicisms when they are only the front buffoons for the bankers.
Oppenheimer and Goldman were wetting their pants when oil was $100 a barrel and encouraging the stupidity all the way to bankruptcy.
Simon,
I know that this is the extreme to make the point. But....
First, you are a gringo.
Second, the nearest beach to Caracas is 30 clicks away 60 clicks round trip and in Tokyo it is more expensive to go from narita airport by taxi to Tokyo station, than fly economy off season from US to Narita.
Get real. I do not know anyone who has access to USD that will pay the official FX rate.
Instead of taking a taxi to the beach he should have rented another helicoper and parachuted into the water
"Instead of taking a taxi to the beach he should have rented another helicoper and parachuted into the water "
Unfortunately, the Helicopters have been nationalize for use in money drops. (aka Helicotper money)
They took you for a ride.
Is the customer from Venezuela?
If No, charge 10 time more than the rate for locals
What about the hookers.
One would imagine this is where the term "$2 whore" comes from.
This article is not correct. Venezuela is most expensize only of you consider official exchange rate. In black market, Bolivar is worth 95% less than government price. Instead of exchanging dollars at official government rate, the author should have bought local currency from the black market and the taxi ride would have cost $10 instead of $158.
The real question here is why did he not ride his Unicorn to the beach instead.........
In addition to the vast oil wealth, nice climate, and Miss Universe winners, another thing Venezuela has is extensive hydropower potential. They already have a couple of the largest dams in the world, but the capability to do much more is there. So with all these things it is strange they can't keep toilet paper on the shelf. I would guess they need better central bankers. I know the Bernank isn't too busy lately, call him.
try reading the articles before commenting.
I concur.
The article says this:
Frankly, I "can't" imagine people "not" using the black market. I can't imagine the government preventing it. They can't risk "severe penalties" because that would just invite "immediate" revolt.
Who could have ever guessed that playing Their game by Their rules could result in record profits for the Corporations and abject poverty for the masses......?
$60 Trillion in debt? More like over $200 Trillion at this point...
But if I retire on 1000 USD a month in Caracas I can only afford 6 cab rides a month.
Mr. Black, how will Chile fare, now that they will be part of TPP?
Should people in Chile (Chilean banks and US expats) expect that they will become subjects of FATCA?
Venezuela is America in another 10 years. Socialism and central planning is what the majority of Americans want. Once the petrodollar is disembowled, people will be wiping their asses with federal reserve notes because they won't be worth shit.
Think we'll get ten years? I feel better already!
The leftists want it, most people just want to make a living without government taxing them to death
damn...sorry y'all
dupetastic
Then China imports their inflation to us?
60x higher? More like twice that. Dolartoday had it at over 900-1 last week.
So they keep printing, until the currency is worthless. Then they have to put signs on the public toilets like they did in Zimbabwe, to please not use currency for toilet paper, as it clogs the pipes. Next, they get to put their 100 and 200 trillon dollar bolivars on eBay, and sell them for four dollars as collectors items. After that, they're really screwed.
Has Paul Krugman moved there yet?
Sounds like they need expert help...maybe Benny Bernankid can make a difference...or Alan Greenspeak..they saved our economy from dire consequences..
Total BS.
Those prices are acorrding to official currency exchange.
1.00 VEF = 0.157495USDReal exchange is more like 1vef=0.0015
NOONE uses fixed exchange rate.
Same was in Poland 35years ago.
RIF (reading is fundamental) before commenting.
This is the second person in this thread who jumped right down to the comments section after reading the first two paragraphs.
Funny how the author cant use the word Socialim.....
I noticed the same thing.
What's Socialim?
But if your government is already making its way down this path, taking on $60+ trillion in debt and printing limitless quantities of money, it’s seriously foolish to assume that that it will not end up somewhere similar.
The trouble is, no government anywhere can survive on taxes. They must have inflation (i.e. counterfeiting money to pay their dependents, suppliers, employees, and contractors). Governments "never" pay their debts. They just roll them over ... and that's default.
In a properly managed Medium of Exchange (MOE) process, DEFAULTs must be immediately countered with like INTEREST collections. The governing relation is:
If a government anywhere instituted (or allowed) a properly managed MOE process, they would be signing their death certificate. The government would have to reduce to 1/3 or 1/10th of its current size.
Do I detect the foul stench of kike manipulation and the creeping of Jew cockroaches in the shadows?!?
'To give you an idea, the cost of a 15-minute taxi ride to the beach yesterday afternoon totaled an eye-popping $158."
That's some crazy shit there....an air conditioned cab ride in Davao city for about 15 minutes cost me $1.40 about three weeks ago.
Taxis are really a luxury in Venezuela now, as there are no spare parts available to repair them and owners need to spend fortunes when trying to do so. Compared to Asia, Venezuela isn't cheap but you can get really good deals. Good Hotels paid in Bolivars come in for as little as 10-20 Dollars a night. That's difficult to find elsewhere in South America.
I don't know what exchange rate this guy used but at the current black market rate that ride would have cost him 1.5 USD max. with a 1000 bs. I guess he got ripped of when changing money.
In any case if you come with Dollars you can be king in Venezuela, I was there this year I know what I'm talking of. But if you don't speak Spanish, I would not recommend it, there is so much corruption and violence right now, it's easily the most violent country in all of Latin America and that's saying something in a continent that is used to violence.
The Police and Military have literally resorted to living from smuggling, stopped working altogether and squeezing as much rent out of the system as possible while the 'party' lasts. This also means military checkpoints are very frequent and as a foreigner you get harrased.
The guy writing about toilet paper lacking, that was maybe a concern two years ago when this started, now we're reaching a stage where it really hurts and people suffer terribly, often lacking basic staple food such as rice or corn flour. The worst hit are as usual the poorest of society, those which Chavez and Maduro profess(ed) to support and lead a way out of misery.
One only wonders and hopes that their nightmare ends and Maduro and the crony military, which Chavez put in power soon get the punishment they deserve.
Bright side in all of this for me? Venezuela gets spared some of the hordes of spring-break American party goers that are invading its neigbouring Colombia in ever larger numbers...
SOCIALISM.
I remember flying into Rangoon from Bangkok in 2005. At the exit gate on either side of the aisle were official Tatmadaw Exchange Booths where you could buy Burmese Khat for 50 to the USD. I had read up a bit so didn't buy there. Our taxi driver changed some of our dollars at 90 per. Later at the Scott Market downtown I got 115 to the dollar, using crisp new $100 bills. Countries like that, bring new clean bills and you will get the best rate. The Scott Market was pretty much an open air black market and anything you wanted was just below the counters.
Freedom isn't free, but then again, neither is serfdom.
I'm guessing you can't grab the 1000 bolivars and go to a bank and exchange them back to dollars at 1:6.3 ....