ADSactly World - Venezuela and the currency exchange control

In the previous article it was covered how private property was systematically attacked under the excusea of protecting people’s right to affordable products and services, when the real intention was simply to expand as much as possible the government’s control over the national economy and making it easier for them to appropriate as many resources as possible.

Today, I want to cover another important aspect that has been conditioning Venezuela’s economy for more than 15 years, and explaining why this was, yet another strategy to keep everything that happens in Venezuela under their control.

Understanding why a currency exchange control is implemented

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To completely control the economy of a country it is necessary to implement a currency exchange control, which consists in taking the currency of the country and forbid exchanging it for other currencies. For example, an American could exchange his dollars for euros, but after implementing a currency exchange control, he can no longer do so. His dollars aren’t accepted anywhere else in the world because it would be illegal, and in America people wouldn’t be able to find other currencies legally. Crazy thought, but it has been happening in less known countries with their local currencies

When the currency exchange control is implemented, the government tries to deceive the people by telling them the intention is to stop some rich individuals with a lot of capital to move their investments to another country. I even remember some people literally giving this as a reasonable justification to implement such a thing. We need to have in mind that for this deception to take place, the people need to have a lack of understanding regarding individual freedom and the right to our own property, because it is absurd to think that forbidding individuals to do with their own property (like capital, investments, stocks) whatever they want is something that could be considered as good. This is why one of the most important problems in countries like Venezuela is a flawed mentality and a distorted way of understanding concepts such as freedom.

Anyways, the currency exchange control is a necessary measure because people with companies do business in the country and then change the money to other currencies and take the money abroad. With this measure the politicians promise the citizens to take care of the welfare of the nation.

But as we already know, the real intention is very different from that. When a currency exchange control is implemented, a black market appears almost instantly. It happens because although exchanging currencies is not allowed that doesn’t mean the people are going to stop with their desire to freely make transactions with companies or individuals from another country. It is the same as what happens with laws prohibiting alcohol or drugs. People continue to consume alcohol even if they have to buy it ten times more expensive and illegally.

In this way, the dollar for example ends up with 2 different prices:

• The official one: which is the supposed value of the national currency relative to the dollar.

• The black market price: which is what people are willing to pay for it with a distortion thanks to the government intervention.

Since the politicians are the ones who control who has access to the official price when doing this type of exchanges, they do illegal business in which they multiply the money they have at their disposal. Imagine that in your country a certain currency is used and people earn their salaries in said currency. Inflation is high and the government devalues the currency constantly so a lot of people come to the conclusion that if they want to save some of the value they are receiving now, the best decision would be to put their savings in a currency that is considered as stable. Thus, at the end of each month, a lot of people are exchanging the money that they have been able to save for the more stable currency.

Now think about the government forbidding people the access to other currencies and dramatically devaluing the one they are forced to use, people would certainly find themselves in a difficult position. But a government official who has legal access to dollars is willing to sell them “under the table”. Obviously, this person won’t sell the dollars at the legal price, that would not make sense for him, he will sell them 4 times more expensive (in practice it is much higher than just 4 times more expensive). The citizen trying to escape inflation takes that into account and decides that it is worth it, after all at the rate the local currency is losing value, the longer it takes to do the exchange the worse it would be.

So business is made between the corrupted government official and a regular citizen, the first one is taking advantage of his privilege by being a member of the corrupted government, and the second one is doing the best he can to protect his wealth. Then, the corrupted government official uses the money he earned by selling 4 times more expensive, and makes a new purchase using the official price, but this time, he can obviously buy 4 times more than yesterday. Now imagine doing that over and over again, day after day, year after after. That is how corrupted politicians get rich after implementing a currency exchange control.

But the currency exchange control is not only an attractive mechanism for corrupted people without limits, the most alarming thing is that it has a second intention. When you forbid citizens to exchange their money for other currencies while also having the highest inflation in the country’s history, nobody can build anything because building is something that is done in the long term, but in these conditions what they receive today will not be worth anything tomorrow. So the people has to live one day at a time. What they receive today they use it today and that’s it, savings become something non existent. Nobody has the ability to create a company, or to accumulate money.

With a currency exchange control and high devaluation, the money of the country itself becomes practically worthless and unable to be used outside the country, it is kind of an economic prison, it also works as an invisible wall in the country’s border. If nobody accepts the currency, how are people going to get out without having problems?. Therefore, it is fair to say this type of measure allows the people in power to steal as much as possible, turning the country into a spectrum of what it once was.

Recent events

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Just a few days ago, it was announced that freely exchanging the local currency called Bolivares for any other currency from another country would stop being illegal starting August 20, this means that the black market should cease to exist after that date, allowing for any person to not have any problem in case they want to have their savings in what can be considered as stable currencies. Since this is something that was announced on August 2, we will have to wait a few more days to see what will happen regarding the exchange rates, because the little information that has been published was lacking a lot of explanations.

There is another factor that was also announced very recently and will need to be taken into account but there is not sufficient information to understand it nor to explain it properly, and it is they plan to somehow link the value of the local currency, to that of the (more than likely fraudulent) crypto currency they created called Petro. Supposedly, this petro token is back up by some oil reserves, but this seems like another disastrous failure being elaborated by this government. Both announcements will certainly have important people to the economy, but it is necessary to have more time in order to fully understand what could be the implications and the potential results, although failure from whatever they plan is totally expected.

Conclusion

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The currency exchange control has been a cornerstone of this government planning to have as much control as possible, to then use this control and do pretty much whatever they want with the people's property and resources.

Every measure that reduces the freedom of the citizen is not something that is done for his benefit, freedom is something extremely valuable and more people around the world should realize this fact and act accordingly, especially when it is being destroyed little by little. With a proper understanding about the importance of freedom, and the ways totalitarians use to attack it, disasters like the one happening in Venezuela wouldn't be possible.