Sometimes Less is More
The Washington Post tells the interesting story of Trump secretary of state nominee Rex Tillerson and Hugo Chavez. "Rex Tillerson hadn't been CEO of ExxonMobil very long when the late president Hugo Chavez made foreign oil companies in Venezuela an offer they couldn't refuse. Give the government a bigger cut, or else."
Most of the companies took the deal. Tillerson refused.
Chavez responded in 2007 by nationalizing ExxonMobil's considerable assets in the country, which the company valued at $10 billion. The losses were a big blow to Tillerson, who reportedly took the seizure as a personal affront.
Only Tillerson didn't get mad, at least in public. He got even.
Threatened with a weaponized state Tillerson ceded Chavez the physical ExxonMobil assets and took his company to neighboring Guyana. There it developed one of the largest oil finds in the world. Now Guyana is sitting pretty while Venezuela is in abject misery.
GEORGETOWN, Guyana, Monday January 16, 2017 – A leading consultancy firm says Guyana is poised to join the world’s major oil producing countries on the heels of the latest oil find.
Last Thursday, international oil and gas company Exxon Mobil struck liquid gold a second time in its exploration efforts offshore Guyana. The company said it discovered oil from its Payara -1 well on the Stabroek Block after drilling for three months.
“It’s not often that a country goes from 0 to 60 so fast like this,” Matt Blomerth, head of Latin American Upstream Research for Wood Mackenzie, a consultancy firm, told the New York Times.
It's not often that a country goes from 60 to 0 as fast as Venezuela. But like many socialist strongmen Hugo Chavez thought riches consisted in physical things he could redistribute through state power. He did not realize that wealth came from human capital. When Exxon took their know-how to Guyana they left Chavez with the magnificent but declining Exxon asset base. The Bolivarians believed fervently in State power; what they failed to grasp was the lack of power was power too.
Chavez's misconception was understandable because socialism has always been a set of rules for spending money. No socialist theorist has ever figured out how to make it except through the literal mechanism of printing currency. Yet Venezuela's attempts to salvage its economy by printing gigantic bills have only resulted in crowds of paupers roaming the alleys with a millions of bolivars in worthless scrip.
People who actually want to buy something in Venezuela have to use a currency the opposite of the endlessly available bolivar: the mathematically limited Bitcoin. "Amid growing economic chaos, and the highest inflation rate in the world, some Venezuelans are swapping bolivars for bitcoins in order to buy basic necessities or pay their employees ...the number of users has increased from 450 in August 2014 to more than 85,000 in November 2016." The key virtue of Bitcoin value is scarcity. The State can't make it. Generating new Bitcoin requires real resources like as computing equipment and electricity to find the next block. God, or something like Him is the actual Chairman of the Cryptographic Reserve. This creates the scarcity which analysts at Bank of Canada point out allows it to potentially act like a Gold Standard.