tag:blogger.com,1999:blog-4080946.post2191414064366430687..comments2024-03-18T19:50:24.376+01:00Comments on Venezuela News And Views: Devaluating the devaluationDanielhttp://www.blogger.com/profile/12128609182544333477noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-4080946.post-58262607445824324782013-02-15T06:00:07.710+01:002013-02-15T06:00:07.710+01:00Stefan
Except that normal people have not enough ...Stefan<br /><br />Except that normal people have not enough cash to buy a house. There are no mortgages in Venezuela anymore besides the few offered by the government because no one can afford a 20%+ mortgage. The real estate market for upper middle class and the rich is cash only. The other social classes can only afford housing if they inherit something, if they already own something they can trade up, or if they are in a governmental program.<br /><br />Do not forget that the Venezuelan economy is highly distorted in its cost structure and things are dirt cheap that should be more expensive and things are expensive that should be cheap. You need to think in war torn country economics models when you think about Venezuela, you know, black market, far from the front, connections, etc... which is what gives you the "market" value rather than the actual costs of replacement, or international comparisons.Danielhttps://www.blogger.com/profile/12128609182544333477noreply@blogger.comtag:blogger.com,1999:blog-4080946.post-20417563243264391652013-02-15T03:19:56.679+01:002013-02-15T03:19:56.679+01:00That you may find it difficult to find a buyer for...That you may find it difficult to find a buyer for your house or your business is not due to inflation/devaluation. Both forces would actually play in your favour, as they make people rush into tangible assets. The other thing which you said is correct: A potential buyer would apply a steep discount because of the economic (and other) repression in Venezuela. The devaluation cannot be blamed for this, however. The scary term "devaluation" means nothing else than recognizing reality, bit by bit. In reality, reflected by the market (that is, the so-called "black" market), the bolivar has already been devalued and loses more of its value on a daily basis as the government prints more and more money (much like the German inflation after 1914 which peaked in 1923 when a pound of butter cost trillions of German marks). However, chavistas pretend that they can ignore the laws of nature/economy most of the time and set an artificial exchange rate. For some time, they pretend that it works. Time and again, however, even they have to admit that it doesn`t, that the rules of the market still apply in Venezuela. Subsequently, they have to adjust the "official" (propaganda) exchange rate to the real one. To call it "devaluation" is not entirely correct because the currency has already been devalued before, by the actions of the government.Stefannoreply@blogger.comtag:blogger.com,1999:blog-4080946.post-77003744769412296242013-02-14T17:48:45.481+01:002013-02-14T17:48:45.481+01:00My modesty being my main quality :)
Kidding aside...My modesty being my main quality :)<br /><br />Kidding aside, I did write this indeed on purpose, not only to see if someone would pick it up and call on me (you did, you get a gold star) but to grossly underline the lack of common sense in the country. And the poor arithmetic skills when the only thing that matters is political effect in a polarized country. Be it from Capriles or from Giordani it is simply impossible to have a coherent discussion these days.Danielhttps://www.blogger.com/profile/12128609182544333477noreply@blogger.comtag:blogger.com,1999:blog-4080946.post-17761570891882369442013-02-14T17:45:41.355+01:002013-02-14T17:45:41.355+01:00I could reply that actually my business is worth 0...I could reply that actually my business is worth 0% of what it was worth in 1999 because no one in his sane mind will buy a business in Venezuela these days. In short, if I wanted to sell, with inflation and economic repression I would get a fraction of its true worth if this were a normal country. The net loss on my investment makes it 0% a good looking figure....<br /><br />My house? I can sell it here but in bolivares that I cannot take out of the country or invest. If I sell it is to buy immediately something else. Or buy dollars at the black market at 20. In short, I also lose a lot, A LOT of equity, and this if I can find a buyer interested in my house and paying it at, say, 10 equivalent. That is, it would assume that my real estate as value for the future and the investor has enough idle bolivares to split with me the loss. This applies only to real estate in some desirable areas of Caracas, where in a distant future the buyer can recover his investment so that buyer is willing to buy just to preserve this one. In San Felipe? Tough luck!Danielhttps://www.blogger.com/profile/12128609182544333477noreply@blogger.comtag:blogger.com,1999:blog-4080946.post-57463107974386710892013-02-14T14:29:08.952+01:002013-02-14T14:29:08.952+01:00"to say in all modesty." LOL, right. :-)..."to say in all modesty." LOL, right. :-)jsbhttps://www.blogger.com/profile/16526596147319229399noreply@blogger.comtag:blogger.com,1999:blog-4080946.post-90901067294598656952013-02-14T05:37:28.191+01:002013-02-14T05:37:28.191+01:00"In other words, your house, your business, y..."In other words, your house, your business, your paycheck is worth roughly 10% what it was worth in February 1999...."<br /><br />I would question if "your house" is also affected like e.g. certainly one's paycheck. Real Estate is usually a good hedge against devaluation and inflation. But since in Venezuela everything is upside down, I am not sure if it is true.<br /><br />MikeAnonymousnoreply@blogger.com