back to article Venezuela floats its own oily cryptocurrency to save the world economy

Venezuela has launched what it claims is "the first State-issued cryptoasset" and asserts it will fix long-standing problems caused by the USA's 1933 abandonment of the gold standard and restore order to the world economy. The "Petro" has also been given the job of realising a "vision of turning the country into a blockchain- …

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    1. streaky

      Re: That's the theory, anyway...

      More important than how many there are is how many they sell. Protip: it'll be less than the maximum.

  2. streaky

    Should have called it..

    The Pedro.

    Just saying.

  3. Mark 85

    Market Saturation coming?

    Off the wall question... does the Petro smell like tulips?

    Seems that at some point, the market will be saturated by crypto currencies.. then what? The bottom falls out and the only one's who make any money are the ones who cashed out ahead of time. I have a feeling that this one might be the start after reading the article and I'm thinking it's wishful thinking on Maduro's part. Somehow, he and his government are going to control this? Mining isn't an option or is it since the currency will be "issued"?

    1. Anonymous Coward
      Anonymous Coward

      Re: Market Saturation coming?

      Crypto currencies make a lot of sense when you have an economy suffering from hyperinflation as you don't need wheelbarrows to carry money around. However Petro's aren't really a crypto currency. They sound more like a cross between a futures contract and a digitally signed IOU for oil.

      1. I ain't Spartacus Gold badge

        Re: Market Saturation coming?

        Hyperinflation has historically been quite easy to stop. As soon as people are convinced that the government is even vaguely competent and determined to stop it, hyperinflation stops. That might not even require Maduro to resign - he'd just have to publicly admit "mistakes have been made" and bring in a new economic team.

        Getting inflation into single figures (or even low double figures) is much much harder mind. But economies can cope relatively well with 20% inflation.

        I hope this is a cunning wheeze by the Venezualan government. As they do at least spend some of their money on social programs - so when all those foreigners inevitably find they've lost their money, that which the government haven't stolen, will go to good use.

        But I suspect what's much more likely is someone has approached them with the idea, and whoever's running the scheme will end up stealing most of the money before Maduro's lot can.

        1. Anonymous Coward
          Anonymous Coward

          Re: he'd just have to publicly admit "mistakes have been made"

          Sorry, no es possible. By definition these types cannot ever make a mistake. Ask Castro, Lula, Morales.

      2. Anonymous Coward
        Anonymous Coward

        "as you don't need wheelbarrows to carry money around"

        Yes, it's far easier to store a couple of billions on a smartphone to buy a roll of toilet paper, if you can find one. And you don't need a scale to weight them for the purchase.

        1. handleoclast
          Coat

          Re: "as you don't need wheelbarrows to carry money around"

          Yes, it's far easier to store a couple of billions on a smartphone to buy a roll of toilet paper, if you can find one.

          Yes, but then you find there is no toilet paper (or anything else) in the shops. At least if you have a wheelbarrow of worthless bank notes you can wipe your arse with them. A smartphone (with or without a notch) isn't as good in that situation.

      3. Warm Braw

        Re: Market Saturation coming?

        Crypto currencies make a lot of sense when you have an economy suffering from hyperinflation

        It doesn't have to be a crypto currency - the dollar is usually the currency of choice in this situation as there are so many around a few more heading south of the border will make very little difference. However, you actually have to apply it to the internal economy of the country for it to actually work - which seems to be where this falls at the first hurdle...

        1. Anonymous Coward
          Anonymous Coward

          This will encourage citizens to use dollars

          Not like they didn't already have an incentive to, but they can't pay their taxes etc. in dollars, so they had to exchange their dollars into local currency - and usually get screwed in the process. They will probably get a better deal when exchanging dollars for petros, and they would be able to wait until the last minute to do it.

          Since petros are an electronic currency they could do the exchange minutes before they do an electronic transfer to pay the tax. The roundabout way black market "unofficial" currencies are exchanged means it can take a bit of time, and having more time with your money in a hyperflating currency is a bad thing!

    2. katrinab Silver badge

      Re: Market Saturation coming?

      Given that it is government issued, and the government does accept it as payment of taxes, then it will be similar to the Bolivar in terms of a reliable store of value. Obviously, that doesn't mean it will be any good.

    3. Anonymous Coward
      Anonymous Coward

      Re:... does the Petro smell like tulips?

      I suspect they will smell of stuff used to make tulips (and other plants) grow, if you catch my drift.

  4. frank ly

    Oh, how the world changes

    "... US sanctions designed to punish its government for weakening democratic institutions."

    1. I ain't Spartacus Gold badge

      Re: Oh, how the world changes

      I don't think the US sanctions are all that important. Venezuala's problems are much more about the hideous mismanagement of the state oil company. Then they ramped up the price controls. They tried fixing the price of imported goods, which made it uneconomic to sell them, so they were no longer imported. Kicking off inflation. Hence the nation shortages of things like toilet roll. And it's not like they weren't running the economy badly enough before that.

      1. Anonymous Coward
        Anonymous Coward

        Re: Oh, how the world changes

        Inflation is probably more because the government has been printing money like there's no tomorrow. But even without that the problems you've mentioned would bring the economy to its knees.

    2. Anonymous Coward
      Anonymous Coward

      Re: Oh, how the world changes

      As far as I'm aware these are targeted sanctions, i.e. against specific individuals in the government & state enterprises.

  5. Lars Silver badge
    Unhappy

    Perhaps

    There is also a good reason to ponder about a two party system where the opposition leader is accused of rooting for a similar system.

    Shame on you.

  6. ibmalone

    I wonder what they could have tied it to that's more volatile than oil?

    (Though as another commenter observes, it's kind of an oil futures for them to get foreign currency held by residents, pay them now and at some later point redeem it against money you owe them, and their income is tied to the oil price. Doesn't say anything about being able to sell them at that rate...)

    1. BebopWeBop

      Simple - the Bitcoin - makes oil look like a smooth plane bubble in comparison

  7. FelixReg

    Are sanctions effective?

    Aside from Serbia during the Yugoslavian break up, have sanctions ever been effective?

    They have certainly been ineffective. Castro/Cuba comes to mind. NK comes to mind. Iran comes to mind. Iraq comes to mind. The Soviet Union comes to mind.

    I've always wondered whether sanctions were something championed by closet Marxists in the US government. Incompetents, that is. Never ascribe to malice ...

    Oh, sanctions *do* give the sanction-ee an excuse - someone to blame. The OP's list of excuses for Venezuela's condition may have missed a minor detail or two, after all.

    1. I ain't Spartacus Gold badge

      Re: Are sanctions effective?

      Sanctions worked on the Iran nuclear deal. At least so far as we know - obviously they've been caught in the past breaking their committments to the IAEA - and hiding entire nuclear installations.

      It may have taken over a decade, but we went from a situation of Iran developing a nuclear device with Israel (and maybe the US?) set to bomb them if they looked like getting close. Israel having already bombed the Syrian and Iraqi nuclear programs... To a situation where we now have a deal that they won't. Without creating even more chaos in the Middle East than there already is.

      Sanctions may have worked to deter Putin from even more intervention in Ukraine. They certainly brought him to the negotiating table, though those agreements weren't kept. But there don't appear to be whole Russian military units intervening in battles in Ukraine now, even though I'm sure the special forces are still there.

      Sanctions had an effect in South Africa. Not sure how strong.

      They also may not have deterred Saddam's Iraq in the 90s, but they certainly stopped him from re-arming. Which he'd have done if he'd been getting the oil money still.

      Myanmar have liberalised (at least somewhat) in exchange for removing sanctions. Though that policy is looking like a failure now - but they have a civilian government, which is an improvement - it's just not in control of the army.

      1. Mark Honman

        Re: Are sanctions effective?

        Sanctions against South Africa definitely resulted in the pullout from Angola. We could not compete with the Russian weapons systems used by the Angolans & Cubans.

        I don't think sanctions contributed much to the end of apartheid. Rather, the end of the cold war meant that the superpowers were no longer interested in sponsoring our internal conflict. I would like to believe that Gorbachev's reforms in the USSR gave the SA government the idea that they too could open up; but have no evidence!

        1. Lars Silver badge
          Coat

          Re: Are sanctions effective?

          "I don't think sanctions contributed much to the end of apartheid".

          It did when the Americans joined, while it did take some time.

          The US meddling in Venezuela is however largely about sour grapes regarding the oil.

          1. I ain't Spartacus Gold badge

            Re: Are sanctions effective?

            America doesn't need Venezuelan oil. The US is pretty close to being an oil exporter nowadays. They're also building LNG export terminals. Fracking has changed the oil and gas industry a huge amount. At least in the short to medium term.

            1. Lars Silver badge

              Re: Are sanctions effective?

              @ I ain't Spartacus

              "America doesn't need Venezuelan oil",

              I do agree but my "sour grapes" is the type that even today inserts the "Suez" in comments.

              I am not that much into that country but somehow I have a feeling they have to sort it out without the help of the US.

              Visited the country long ago, as a crew member, or to be more honest, a brothel, even twice, but the damned thing refused to get exited, spilled milk, and every right not to be an expert on Venezuela.

              No icon for this.

      2. Omgwtfbbqtime

        Re: Are sanctions effective?

        "... even though I'm sure the special forces are still there."

        I am certain there will be no one wearing a Spetznaz uniform operating in Ukraine.

        wait what?

      3. MonkeyCee

        Re: Are sanctions effective?

        "Sanctions may have worked to deter Putin from even more intervention in Ukraine. They certainly brought him to the negotiating table"

        That's a slightly different kettle of fish.

        The normal sanctions, where one set of countries bans exports to another, have been used against Russia and made sweet FA difference. Caused more issues for EU suppliers to Russia than anything else.

        The sanctions against specific individuals (and companies controlled by them) had, and continues to have an effect, because it fucks with the people at the top of the state/mafia power structures and prevents them from enjoying their spoils in the US, UK etc. It's also quite hard for the Russian state machine to do much in retaliation, which potentially makes Putin et al look a bit weaker.

        So sometimes sanctions work, but they need to be pretty specific. Otherwise you're generally punishing a population for the actions of their leaders, and the same leaders can blame the external actors for the hardship.

        We killed more Iraqis with sanctions than in two invasions.

    2. Anonymous Coward
      Anonymous Coward

      Re: Are sanctions effective?

      The effectiveness of sanctions depends on what other sources you can use. Cuba could ignore them as long as CCCP/Russia kept on sustaining it, and European tourist sliked the easy availability of beaches and women - still you can't ignore how obsolete Cuba is in many areas. North Korea can ignore them as well as long as China and Russia sustain it, and the population anyway is forcefully used to ignore almost any good which is easily available elsewhere.

      Iran was more hit because it is a far larger country with more ambitions, being unable to sell oil, and the access easily Western technology for its industries and modernize its economy was a bigger issue, although it could smuggle in a lot of material thanks to triangulation, but it still preferred to have sanctions removed.

      Sanctions against South Africa helped to terminate the apartheid. Inside EU, some sanctions could work against Poland and Hungary keep on establishing their authoritarian regimes, they need EU funds badly, stopping them would hit them, although the consequences could be unknown.

      Anyway, sanctions are often used when you have to show you're doing something, but can't do anything more, and you apply them regardless of their real effectiveness.

      1. I ain't Spartacus Gold badge

        Re: Are sanctions effective?

        There are a couple of other points about sanctions. Obviously they don't always work, and if they do they take ages.

        But create a cost for behaving in a certain ways. So those cost may persuade a government not to try certain things, because they know what will happen.

        If a government is determined to ignore them at least you know you've weakened them. Sometimes they may actually strengthen a dicatorship politically (making foreign enemies can be useful), but they'll be weaker economically and militarily.

        South Korea's defence budget is now bigger than North Korea's entire GDP - even though the South only spend about 3% of GDP on defence.

    3. FelixReg

      Re: Are sanctions effective?

      Thanks, all, for the comments and information helping to answer this question.

  8. codejunky Silver badge

    Erm

    "Venezuela needs new industries and sources of cash because it's economy has tanked, partly because its over-dependence on oil exports but also due to US sanctions designed to punish its government for weakening democratic institutions."

    This article seems to have skipped over the massive mismanagement where ideology was chosen over economics. McDonalds couldnt even get buns. People eating zoo animals. Hell a crowd of women charged the border so they could go buy luxuries such as toilet paper because the socialist ideal of setting the price of toilet paper below the cost to make it shockingly results in having none.

    Yes they need a new currency, but when the state was taking over private business for ideology reasons it does cause problems for attracting investment.

  9. adam payne

    It's all well and good running a country based on ideology but there comes a point when it needs to take a back seat for the good of the country. Let's hope they soon see this.

    1. Lars Silver badge
      Happy

      @ adam payne

      Talking about Brexit I presume.

  10. Cuddles

    A plan with no drawbacks

    "Venezuela needs new industries and sources of cash because it's economy has tanked, partly because its over-dependence on oil exports"

    Venezuela's economy is screwed largely because it's almost entirely dependent on oil, which has significantly dropped in value. So to solve this problem, they're creating a new currency which is... even more explicitly dependent on the value of oil. What could possibly go wrong?

    1. I ain't Spartacus Gold badge

      Re: A plan with no drawbacks

      Their economy being dependent on oil is a problem. The drop in prices hurt, because they import a lot and because they have a lot of debt owed to foreigners. But the government has also actively damaged other business sectors - by forced nationalisations (often without compensation) or stealing confiscating their stock - supposedly for breaches of the prices policy, but those goods never seem to make it to public auction.

      They also pissed a lot of that oil revenue away. On schemes like subsidies to Cuba. And do you remember that weird scheme where Chavez was selling subsidised diesel to Transport for London - after some weird deal with Ken Livingstone. Turns out it's better him making unwise comments about Hitler, than siphoning much-needed money away from Venezuala.

  11. Naselus

    "asserts it will fix long-standing problems caused by the USA's 1933 abandonment of the gold standard and restore order to the world economy."

    Pretty sure you're referring to Nixon's 1971 suspension of dollar-gold convertability rather than 1933, tbh.

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