Thursday, 19 September 2013

How to implement Daily Indexing in Venezuela - Part 1

How to implement Daily Indexing in Venezuela - Part 1

extorres Says:

From The Devil´s Excrement in response to 

"Thank you so much for such a detailed reply. I see now that your suggestion is to make a change external to the politics, which, though much more interesting and impressive, brings up a different issue. You seem to imply that no one loses, but those who are currently taking advantage of the seigniorage would stop reaping its benefits, which is tantamount to their losing. What actions do you think they could take to counter this loss? Even if these people decided not to fight it and instead help stabilize the system, the economy then effectively becomes dollarized, which brings a whole branch of other ramifications, including salaries going down…
I hear what you are saying about Brazil, but that is not the only way to bring down inflation, nor do I think Brazil’s story has reached an end, nor was the indexation the only factor helping Brazil those years. One big difference, for example, is the percentage that the oil industry represents of Venezuela’s economy. Contrast your suggestion against distributing all income from oil directly, daily, and equally to all citizens. Since the oil is sold in dollars, that is another form of indexation, while not excluding the non earners, as your suggestion seems to do. It would also achieve a healthy incentive structure of getting the government to focus on the success of the people so that it would reap greater income from taxes."

Nicolaas Smith