The US Ban On Venezuela’s Petro Is A Bad, Bad Idea – Let It Fail Alone

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The United States has decided to ban – in the form of sanctions – transactions in Venezuela’s new cryptocurrency, the Petro. This is a bad, bad, idea. For it plays right into the hands of the usual idiots who insist that the only reason the socialist revolution has never worked in Latin America is because of the Damn Yanquis. This not actually being the cause, rather, Latin American socialism has always been destined for failure on the grounds that Latin American socialism is never going to work, Damn Yanquis or not. Better to leave well alone and allow them to fall flat on their faces than to intervene and grant yet another excuse:

President Donald Trump on Monday signed an executive order barring any US-based financial transactions involving Venezuela’s new petro cryptocurrency, as American officials warned that it was a “scam” by President Nicolas Maduro’s government to further undermine democracy in the Opec country.

“The ‘petro’ is a desperate effort by a corrupt regime to defraud international investors,” a senior US administration official told reporters, strongly warning that any transactions in the petro digital currency would violate American sanctions.

It could be that the Petro is a desperate attempt by a corrupt regime to defraud investors. I’d certainly agree with two of the descriptions there, desperate and corrupt. Not sure I’d credit them with the ability to actually think through a fraud attempt but still.

The Petro is quite clearly going to fail because it’s just another fiat currency. And we can see how Venezuela, under the Bolivarian Socialists, handles fiat currencies. Inflation is expected to be 18,000 percent this year. Or whatever other vague hand wavey but very large number you care to mention. There’s absolutely nothing about the Petro that indicates it will be different. That supposed link to oil doesn’t exist. It’s not like the Rentenmark was, specifically linked to a revenue stream or asset. It is nothing more than we’ve got oil, our currency is therefore worth something!

Well, maybe, depends how much is issued, doesn’t it?

Note that US sanctions mean a great deal more than that Americans, in America, cannot transact in it. The US claims sovereignty over all dollar transactions worldwide. Bit of a stretch, maybe just about arguable. Then they go further and insist that this sovereignty – perhaps not as a legal matter but people act as if it is true in a de facto manner – means that they’ve control over the other activities of anyone who transacts in dollars. US sanctions on the Petro thus pretty much kill it. At least as a useful financial tool.

As I say, why give everyone that excuse? Just wait 6 months and it’ll fail anyway.

17 COMMENTS

  1. You are correct Tim.

    But it is understandable. Having to watch socialist evil wreck yet another country and see the miseries it is –and always will— cause is galling to say the least. The desire to hit back at vile leftist scum is a decent human emotion.

    • I misread that as ‘see the miniseries’. Then I thought, why are there so many TV series about the evils of capitalism and none about the metastatic economic failure of socialism. Not the tyranny and violence just the commonplace and inevitable misery of failed economics.

      • I can’t see a big audience for a show about the failure of socialism. But socialism’s inherent failure to allocate resources would be a neat subplot showing why events unfolded as they did, why a plan did not reach fruition. The real problem is that no one in Hollywood wants to show that resources cannot be allocated well by simply relying on their fellow Glitterati.

  2. Jez must have done something to get this lucky.

    Those days of cringing when someone asked “Do you still support Venezuela?” are now gone. Back are the days when he can point the gnarled old finger at the naughty US of A and snarl “Fascists!”

  3. And, of course, the damage it might do to the nascent crypto-currency movement, by association. Although one could think the US government might be quite favourable to poisoning that particular well. Except. The Donald, Shitlord in-Chief, doesn’t seem much interested in the concerns of the Establishment.

  4. And, anyway. You refute your own argument. The Yanquis are always going to get the blame for socialist failures in Latin America. It’s a given. So whatever brings down the Petro, it’ll be Amerika’s doing.

  5. Agreed on the substance.

    Just a note on the sanctions. It’s complicated, but the US has jurisdiction over Americans anywhere in the world, and over transactions in America. It’s very hard to do anything in dollars without clearing through an American institution, and almost everything (credit cards, bank transfers, the lot) clears through New York. Either way the sanctions are triggered, transactions are supposed to be blocked, etc, etc. But two Zimbabwean banks can clear locally in dollars and not be subject to US sanctions. So it’s not the ambition of the authorities that gives the nearly-world-wide effect, it’s how the plumbing works.

    • Well, yes, and I know you know this given the working life. But while local clearing does exist there are still those in the US who claim that, ultimately, everything clears through NY. Therefore jurisdiction even over local clearing transactions.

      • Pendantical, maybe, but i can confirm through hard-won experience it’s not 100%. local/local transactions just don’t. But every visa, mastercard or cross-border banking dollar transaction touches New York sometime, and that’s 99% of everything.

        • Ahh…OK, local/local doesn’t, anything cross border does, that’s the bit I was missing. For can’t you cross border clear $ in London, but that’s the bit they’re still claiming touches the US?

          • Not certain about London, but once you’re in London a lot of the entities doing the clearing will be US, and so the sanctions bite even if the pipes don’t go through NY.

  6. I wonder if we could pay more Leftists to live in such socialist wonderlands? Perhaps we could insist that every second semester at any Former Poly had to be taken in country in Venezuela. I am sure they would love it. Or at least they would love the idea.

  7. Alternative view is that Trump is saving American institutions and individuals from what is evidently a poisonous and doomed instrument. And really, you may be right about the blame but that blame thing has lasted for over a century and this one more thing isn’t going to make any difference.

  8. Yes, any time X here wants to transact with Y there, Trump vetoing the transaction in pursuit of some Higher Goal (even the idyllic Trade Surplus) is a stupid idea. No, Rhoda (11:15 am), we can take care of ourselves without central intervention. Even a total boycott against a small foreign tyranny, which harms the American market a little and the tyranny a lot, is a stupid idea. If we have a defense issue with a foreign country, the proper course is to use the military. If Maduro is raising funds with a national lottery with dishonest odds, let American suckers play it. If Trump thinks there is a casus belli for armed overthrow of Maduro, let him make his case in Congress.

    However, Tim writes that the American initiative feeds the dictator’s rhetoric that his nation’s poverty is the fault of the Yanqui. That is a perennial and mindless argument against any initiative at all. The desire to go so passive that your adversary will not blame you unfairly is a failing strategy. The Republicans will play it again today by surrendering in the budget debate.

  9. Matt Damon is moving to Australia, but now insists it is not because of Trump. It seems impossible to make actors and athletes relocate, not to the most idyllic countries, but to the countries that best put into practice what they seem to favor.

    PS – I hate to nitpick, but I am trying to form a mental picture of a shotgnu.

    • PS – I hate to nitpick, but I am trying to form a mental picture of a shotgnu.

      It is what dyslexics use to protect their homes.

      Matt Damon is moving from Vibrant California to a country with a long history of racial discrimination in its immigration policies. And an immigration policy just like Trump wants to introduce.

      But then Matt Damon, the son of a state school teacher and a strong defender of state schooling, sends his children to private schools. I wonder what sort of state schools Australia has?