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We’re about to find out what happens when Socialism meets crypto

Petro, Venezuela: Who knows what will happen. President Nicolas Maduro, the socialist autocrat who managed to take Venezuela from a prosperous democracy to a nation on the brink of collapse, launched a cryptocurrency this week, designed – he claims – to solve the country’s economic woes.

Those are not woes that most of us would be familiar with: extreme currency regulation (part of a programme of centralising power with the United Socialist Party) saw prices soar more than 2,616 percent last year, which prolonged shortages of every consumable, including food. Closed hospitals, no medicine, no banknotes, abandoned children whose parents hope leaving them will mean they have access to a meal. Last year, it was reported that three-quarters of the population lost an average of 19lbs between 2015 and 2016.

Anyway, Maduro’s latest wheeze is to install a – wait for it – centrally-controlled cryptocurrency that’s back by some of the country’s oil reserves, but the Petro can’t be exchanged for tangible assets. The Petro, Maduro has claimed across his daily appearances on state telly, will be used “in pension funds for all state workers, for our youth, our middle class, and all national tourism.” The President is also studying ways to incorporate it into the “card of the fatherland” ID 15m Venezuelans use to claim government subsidies and regulated food. So far, government claims the presale has raised $735m.

Given that falling oil prices and Venezuela’s reliance on oil have served only to highlight what a disaster socialism is, one is left asking where on earth the value of the Petro – a government-issued IOU – could possibly come from. Economist Steve Hanke (worth a follow on Twitter) summed the situation up well: “Anyone who would waste money on such an obvious sham is a fool. Maduro’s “Petro” is just another elaborate pump-and-dump scheme.”

 

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