Financial advice in a socialist country

One of the greatest problems of any civilization is forgetting about the past.  We can’t learn from history’s mistakes if we don’t read up on it, or as is more often the case with our education system these days, if we’re not taught about it in the first place (or taught an alternate version).  Enter socialism, a system that no matter how many times it proves to be a total trainwreck, rears its ugly head over and over again.  And we’re promised that “last time it didn’t work, but this time it totally will”.  This article from The Economist explains some of the pains many in Venezuela have to go through because of socialism.

ASK the chief investment officer of a fund-management firm how to spread your investments and you will be told to put so much in stocks, so much in bonds and something in hedge funds or private equity. Chances are that white-elephant buildings, eggs and long-life milk will not feature. But in Venezuela, where the inflation rate is in the tens of thousands, things that people elsewhere would shun for fear they will lose value have become stores of real wealth.

That is why you can see scaffolding and other signs of a building boom dotted around Caracas, the capital of a country that has endured an economic collapse. Businesses need to park their earnings where they will not be wiped out by inflation. A smaller-scale response to galloping prices is the emerging “egg economy”. Eggs hold their value better than cash, for a while at least. They make for a convenient currency, too. It is easier to carry around a half-dozen eggs than a trunkful of banknotes. And many tradespeople would be happier to receive the eggs.

Is that the kind of place we want to live?  Where eggs are the currency and hold more value?  Or where a car is a better investment vehicle (har har) than a mutual fund?  The nation that has the largest oil reserves by country in the world should never in any circumstances be in the kind of financial trouble that they are in.  Socialism has the ability to destroy even the richest of natural resources.

Let this serve as a reminder to us.  Socialism, not now, not ever.

socialism

One response

  1. Pingback: Venezuela’s prez admits socialism failure « The Western Front

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