Currencies, Emerging Markets, Frontier Markets

Venezuela Vs Reality

By Gorge Selgin

41st Special General Assembly

Over a month ago — when Venezuelan’s were still living under the heel of Nicolás Maduro’s United Socialist party — Ilya Shapiro and I had a very interesting meeting with the folks behind DolarToday. As the Wikipedia article concerning it explains, DolarToday  “is an American [nota bene] website that focuses on Latin American politics and finance.  The company is more known for being an exchange rate reference to the Venezuelan bolívar, a currency which is not freely convertible.”

My reason for attending the meeting was obvious enough: Venezuela has recently been suffering from the world’s highest inflation rate, making the Banco Central de Venezuela, Venezuela’s government-owned central bank, the current poster-child for government abuse of fiat money.  Ilya, on the other hand, was there because, besides being a senior fellow in Constitutional Studies at Cato and editor-in-chief of the Cato Supreme Court Review, he’s a lawyer.

You see, the Banco Central de Venezuela decided to sue DolarToday for “destabilizing” Venezuela’s currency.  That is, it claimed that the website, far from merely reporting the bolívar’s deterioration, was to blame for that deterioration and also for Venezuela’s general economic decline.

But hold on: doesn’t Wikipedia call DolarToday an “American” website?  It does indeed, and quite correctly.  The site is both Delaware-based and owned by U.S. citizens, who started it back in 2010.  But that hasn’t stopped the Venezuelan authorities from trying to shut it down, by filing their suit in Delaware’s U.S. District Court.

The lawsuit itself offers a remarkable glimpse at the twisted logic of totalitarian regimes.  The prologue to the plaintiff’s description of the action’s gravamen will give you the general idea:

How far will some go to enrich themselves (and their friends) and to regain the political power they crave to enrich themselves further?  Would they go so far as to hurt their own countrymen by making their already challenging lives even harder?  Defendants would.  And they have.

The 32-page suit goes on to accuse DolarToday’s owners of everything from racketeering and cyber-terrorism to attempting to overthrow Venezuela’s government.  Really you have got to read it to believe it.  If I hadn’t been told otherwise I’d have thought it a spoof.

Except there’s nothing funny about it.  Ludicrous as the suit is, the Venezuelan government isn’t laughing, which means that, although the odds of it making it to trial, much less of its ending with a decision for the plaintiff, are infinitely smaller than those of the Phillies winning the next three World Series, the defendants have got to…well, defend themselves.  That costs money.  And, despite what the Venezuelan suit alleges, the defendants aren’t rich — at least, they haven’t gotten so at Venezuela’s expense, through their website or otherwise.

But that’s not all.  The lawsuit is just one of several hardball tactics that the Venezuelan government employed in its effort to shut down DolarToday.  Back in July then-president Maduro accused the site’s owners of cyber-terrorism on national TV, threatening to have them extradited and given a dose of Venezuelan justice.  The Banco Central has also tried to take advantage of the “discovery process” connected to its suit to determine the identity of DolarToday’s anonymous Venezuelan owners and supporters, so as to be able to persecute them and their family members.

In case you are short of lawyers to hate, you will be delighted to know that Squire Patton Boggs, a U.S. law firm, is assisting the Banco Central in this noble undertaking.  So far it has pursued the case with great zeal, even going so far as to publish press releases repeating the cyber-terrorism charge along with the alleged terrorists photographs.  If that’s not enough to make you want to want to add the firm’s partners to your Valentine’s-card mailing list, consider that the same  firm also happens to be representing Campo Flores,  Maduro’s stepson, who has been indicted on drug trafficking charges by the U.S. Justice Department.

Just how much, I wonder, do top U.S. law firms charge these days per billable hour spent intimidating U.S. citizens and their friends, for the purpose of suppressing freedom of information?  Whatever it is, I’m sure the Central Bank of Venezuela can afford it.  After all, what’s a few more bolívars to them?

Alas, Cato’s Center for Monetary and Financial Alternatives can’t print its own money, yet.  But that doesn’t mean that we’re taking this lying down.  In fact, we are doing something just by drawing attention to what the Banco Central is up to.  But we are also making sure that, if anything should happen to DolarToday, it won’t do that bank or any other enemy of freedom a lick of good, because people will still be able to get all the information they want about the true state of Venezuela’s currency by looking it up on our own Troubled Currencies Project.  There they will find all the information that DolarToday itself supplies, and much more besides, all of it thanks to Cato Senior Fellow and FX-expert extraordinaire Steve Hanke.  Indeed, DolarToday just recently announced that it now relies entirely on Steve’s own estimates of Venezuela’s inflation rate.

So, if the Central Bank of Venezuela really wants to snuff-out information concerning its mismanagement of the bolívar, shutting down DolarToday just won’t cut it:  it’s going to have to shut us down as well.  So how ‘bout it, guys?  Our lawyers can’t wait!

Gorge Selgin is a senior fellow and director of the Center for Monetary and Financial Alternatives at the Cato Institute and Professor Emeritus of Economics at the University of Georgia.


Courtesy of The CATO Institute

Discussion

One thought on “Venezuela Vs Reality

  1. Reblogged this on World Peace Forum.

    Like

    Posted by daveyone1 | December 18, 2015, 5:29 pm

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