by Ramin Mazaheri for The Saker Blog
The simplest way to answer that question is: The Petro is a bond sale for foreign investors, with the proceeds going to pay the infrastructure costs required to implement the first-ever mass national adoption of crypto-currency.
Now that is a government taking on “good debt”, unlike the West’s banker bailouts….
It should be no surprise that Venezuela will be the first to unleash the democratic, anti-capitalist and anti-imperialist capabilities of bitcoins: it’s not as if 25-year old California capitalists ever saw bitcoins as anything other than a way to make untaxed profits and to retire early.
The difference between Venezuela and other socialist-inspired countries – Cuba, Iran, China, etc. – is that Venezuela never had a revolution to sweep out the feudal-inspired aristocrats and their limited, bourgeois/West-European democracy. That’s why the creation of the Petro appears like the most revolutionary, progressive and combative move that Venezuela has ever made.
On February 20 they will begin the pre-sale of what has potential to be the largest ICO (Initial Coin Offering) ever, multiplied by 10. It has the potential to raise $6 billion, which would almost equal these sum of all ICOs in 2017. It would instantly make it a top 10 crypto.
Newsworthy? Oh yes, and on far more than just the business page.
Ponzi scheme untethered from reality? Not hardly: A total of 100 million Petros will be created, which will be tied to the price of oil (currently around $60 per barrel). This will keep the price stable.
If it works, the results are quite serious: Venezuela, shut out from the bond market due to immoral American sanctions and international compliance with the blockade, will have a way to raise funds…and thus stop starving.
Not quite as important as avoiding starvation – which the ancient Greeks called the cruelest death – Venezuela could potentially wind up with 5% of the world’s supply of Ethereum: that’s not just the best long-term investment currently available, probably, but they would help secure the overall crypto market by becoming one of the most powerful controllers of Ethereum’s price.
Wow, that’s big for Venezuela…and we haven’t yet discussed the global implications.
The Petro is specifically backed by 5 billion barrels of the Ayacucho block in the Orinoco reserve. Venezuela has 300 billion known reserves, so this is a drop in the bucket; also, acquiring $6 billion, in a country which owes $140 billion in foreign debt, is another drop in the bucket. So the Petro will not “save” or “break” anything (let’s try to hear the word “bitcoin” and not immediately begin thinking so over-dramatically…). Looking at the cash and the oil totals misses the reason why the Petro is so important.
It’s not that the Petro is the first crypto-currency to be backed by a resource (other than gold), but that is interesting, it’s true.
The key is that the Petro is the first crypto which has all the power of being backed by a sovereign state. Venezuela is legitimising crypto currency.
Government backing is worth more than oil, surely, at least domestically. Any government can issue a crypto just based on that, alone. If a government slaps “In Crypto we trust” on a piece of paper and you can pay your taxes with it? Voila, you have a legal currency.
Cryptos are valued on what’s backing them: usually it’s technology, sometimes it’s just functionality. For the very first time – it’s the state.
It’s my opinion that Caracas is backing the Petro with oil to allay the fears of investors (as well as price stability). Are you holding stock in oil with the Petro? Yes, technically, but you are also holding stock in the 30-million strong Venezuelan nation, and the backing of the People is – by definition – revolutionary and progressive.
Crypto-currency has a love-hate relationship with governments: simultaneously hating their regulations and taxes but also greedily craving their acceptance (which would also confirm their fortunes).
What the Petro shows – to the near-complete befuddlement of the average capitalist/libertarian bitcoiner and bitcoin media – is that only capitalist governments should be feared; and also that the root of bitcoin is leftist: bitcoin should exist to help the People, and not just the individual. And it will…starting with Venezuela.
One can easily see how a successful government backing will give mucho legitimacy to the entire crypto assets market – crypto clearly works. Yes, the Jamie Dimons of the world look down on the Venezuelas, but he forgets that we’re not all rich White men: most of us in the world actually side with the Venezuelas because we’re aware of a little dynamic called “class”.
All of the above is really rather incredibly important, no? It clearly marks a major shift in crypto, in finance, in the use of money, in politics, in history.
Venezuela is going full-crypto…as a domestic currency
That’s actually the biggest bang here, which is being ignored by most bitcoin media: Venezuela is not simply creating a new type of bond, it is going to foster a new, complementary monetary system based around crypto-currency.
Petro’s White Paper – the intellectual foundation provided by every crypto – was just released on January 30, and it has gotten mostly-admiring reviews (what, hard-working civil servants aren’t so much dumber than greedy 20-year old capitalists?). All it lacks is a “road map” to contain everything a good white paper needs. Here’s the main thing to take away from it….
The white paper says, and these are the magic words: “You’ll be able to pay taxes and state fees with Petros….The Venezuelan government will pay you in Petros….You can maintain your books in Petros….If you accept Petros, you will get tax credits and/or rebates.
That, right there, is the creation of a currency. Not a fake one you can use with your gamer-nerd friends, but a true, national, sovereign currency.
Venezuela will thus undoubtedly be the first closely-watched test case for the use of cryto-money as a daily currency.
Supremely intelligently, Caracas is spurning the free market in favor of socialist central planning: they are going to encourage and subsidise the use of the Petro as a domestic currency in order to promote mass adoption.
This is also hugely important: 45% of the ICO will go towards building the “Petro Project”, its “Ecosystem Development” and “Technological Development” (with “special emphasis on applications of the blockchains to improve productivity and transparency in companies and state agencies”).
So we are talking about potentially $3 billion of foreign investment going to create the infrastructure Venezuela needs to establish a permanent, government-backed crypto-currency. No other nation can claim that. The other 55% will go the national sovereign fund.
Creating and fostering crypto as a sovereign national currency as well as massive crypto ecosystem development on a national scare….that sound you are now hearing is the Doppler Effect produced by these two enormous velocity surges on the theoretical “mass adoption of crypto” timeline.
It is also revolutionary progress, because crypto will free Venezuelans from the feudal bonds of neo-imperialism. (If you are interested enough to read this article I assume you already know that Bitcoin was specifically created to declare war on high finance…is the pin for all their different bubbles…crypto aims to unbank the (usuriously) banked…to force central banks to break with neoliberalism and re-institute pro-99%, socialist-influenced economic policies…to end the US dollar’s imperial dominance, etc. (and it’ll give you fresh breath, too!))
On a philosophical level, the Petro is the first crypto which is not just a way to make money or transact money: The Petro is a way to safeguard the money of the Venezuelan people.
Finally, a country is using their head with crypto: This is not something to be primarily used in China or Poland or to buy sushi in Japan – it’s to be used in Venezuela as a safe, controlled, anti-inflationary currency. It is not trying to change the world – it’s trying to change Venezuela for the better…and Venezuelans can thank the far-sightedness of the Maduro government.
For those who write absolute nonsense about the Petro in order to demonise Maduro, Venezuela and Chavismo – “dictator”, “totalitarian”, etc. – I include this key line in the white paper: “The payment of extraordinary labor commitments and benefits in Petro will be encouraged, as well as accumulated social benefits, provided they have the expressed individual approval of the benefitted worker.” (bold mine)
You’re a government worker who still wants to get paid in good old bolivars? LOL, really? Well, it’s your right to be a luddite….
All in all…the first state-backed crypto-currency is an amazing development, and one which arrived much faster than most expected. Wartime conditions will do that….
What benefits will mass domestic adoption bring Venezuelans?
Because, again, the Petro is primarily for the benefit of the Venezuelan People.
First of all – for all those rigid, absolutist thinkers – this is not “mass adoption” in then sense of “Venezuela has no paper money anymore”. That’s ludicrous – 85% of global transactions are done in cash. Hard-headed bitcoin-naysayers don’t realize that if crypto takes just 3% of all global transactions in the future…wow, that’s a great investment in 2018.
But I can actually make a nearly-perfect estimate of what “mass adoption” means in the Petro’s case: 3% of Venezuela’s population.
That’s because the only way to access or use the Petro was to have signed up with the The Registry of Cryptocurrency Miners, and nearly 1 million people did (registration is now closed). Therefore, in a country of 31 million people there will be 3% of the population who are authorised to use Venezuelan crypto (and who will be monitored, thus preventing illegal activity (sorry, anti-social libertarian bitcoiners)).
Let’s estimate that all of Venezuela’s government transactions and spending – taxes, wages, subsidies and credits, etc. – take up one-third of all GDP. One-third of 3% (the population authorised to use the Petro) – is 1% of all GDP.
Venezuela’s GPD is roughly $350 billion. Therefore we can guess that the Petro will handle 1% of that – which comes out to about $3.5 billion in its first year.
This passes the common sense test, at least: you can’t go fully-crypto overnight. It has to be rolled out slowly, tested, etc.
What’s $3.5 billion worth in hyper-inflationary Venezuela, though? Well, duh – that’s exactly the point of the Petro! To fight their inflation!
The Petro is immune to inflation, because like all good cryptos it has a fixed total: 100 million petros. Inflation is thus impossible. LOL, there will be no massive printing of Petros and called “Quantitative Easing”…and thus find yourself paying 4 euros for a can of orange juice on a privatised (French) toll road. You cannot mine Petro: it is “pre-mined” and totally controlled by the government. In the modern age of high finance, price inflation and the value of the national currency is something which governments no longer have sovereign control over – thus the Petro.
The Venezuelan government is essentially creating a new, secondary currency which only they control. You don’t have to be a government worker to use it, but you do have to work with the government on this radical initiative.
So the Petro is the best of both crypto arguments: it is both a store of value and a currency. Case closed.
The only way to destabilise the Petro would be to destroy the price of oil; even then, this only ruins the foreign investors, because as long as the government accepts the Petro as taxes it has a definite, immutable use inside Venezuela. This is called “economic sovereignty”, which has become a foreign concept in the post-Soviet world of Anglobalization.
Inflation has been artificially stimulated in Venezuela by US-based websites such as DolarToday, which is accused by even Venezuela’s right-wingers of lying about the value of the Venezuelan bolivar in relation to the US dollar, thus increasing inflation, fomenting instability and discrediting the government. Speculators launch attacks on the bolivar in order to send the price up or down, profiting from volatility – that’s all traders want, after all – while simultaneously discrediting the government, Chavismo and socialism in general.
Financial speculators have obviously wreaked havoc on governments for centuries in numerous countries; illegal black market supporters like Miami-based (the heart of reactionary thought for the Spanish-speaking world) DolarToday criminally leech away the power of the Venezuelan People – to control their very own currency via their government and the authority of their central bank. With the Petro, the government obviously regains control over exchange rates on the crypto currency, at least. They determine what is worth, because they control it all. Thus the Petro.
So this new currency will likely be limited to something like 1% of the economy at first, but this is an amazing development which will allow the Venezuelan people to regain democratic control over the economy – neoliberalism is the enemy of such control, of course.
In short…the Petro is an obvious solution, and is a guaranteed success. The government says it’s a currency…therefore it is. It cannot be manipulated. It’s only weak spot is poor management. How could it possibly fail?
And that’s why it is being attacked, and why people are saying that Maduro, LOL, is going to use this as a way to line his own pockets. Yeah, it’s the socialists who are the biggest crooks to fear, not the capitalists…. And I hardly think Venezuelans care what CNBC thinks of the Petro, either.
I’m not aware of what private goods can be bought with the Petro, but the government obviously needs to create “Petro supermarkets” so government workers can buy goods at controlled prices. This is stealing a page from capitalism – the “company store”. But instead of rampant inflation, high prices and being an object of detestation, there should be low, subsidised prices, stability and control for the benefit of the workers. This is obviously temporarily elitist in a sense, as it is not open to all, but such concerns have to be temporarily disregarded: it is certainly the most cost-effective use of the People’s taxes, and its success will inspire more demand for adoption of the Petro.
Venezuela has had a massive advertising campaign to support the Petro, so their people are ready and waiting. We know they are needy, after a 2017 with Ukraine-level foreign destabilization which was courageously fought off by die-hard Chavistas, who are never going away. Given their hyper-inflation, the certain success will the Petro will mean mass adoption – at a pace controlled by the government (i.e. the People), of course.
So, beyond the “test case” aspect of interest to the entire world, the Petro is an obvious solution to Venezuela’s inflation problems. At just 1% of all transactions this is not an immediate savior, but it’s a start….
How does this affect Venezuela in a foreign policy sense?
As I have described, the immediate use of the Petro is to raise money foreign money in order to create the world’s first crypto ecosystem, and then also to provide an alternative to its hyper-inflated currency.
So international trade with the Petro – when they are the only country with a national crypto – is obviously down the line, no?
But just to examine that question: Just like Iran and other bold, proud nations, Venezuela is subject to banking sanctions which aim to cripple their economy. ANY solution which aids Venezuela in avoiding US banks and the SWIFT monetary system is a Godsend. Thus the Petro.
Venezuela wants this to be an international project: Maduro has called on all the 10 countries of ALBA (Bolivarian Alliance for the Peoples of Our America) to “…assume the Petro as the integration currency of our peoples.” These countries include Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Nicaragua, Saint Lucia, Saint Vincent and the Grenadines, Saint Kitts and Nevis, and Grenada. Nevis is a tax haven – they steadfastly refuse to sign any taxation treaties with other countries.
Why is that important? Because the weak point in bitcoin remains the point of interface between the bitcoin world and the real world: i.e., when you cash out. A government can ban cashing out…but ALL governments, LOL, will not. Nevis is a place where capitalism has created a situation where anything goes – if they undo places like Nevis, they necessarily have to also undo the non-crypto accounts…and that is not going to happen. It’s a fantasy to talk a of “invading” such places – another one will simply sprout up to meet demand, and they cannot invade them all. I bring this up to say: one day Nicaragua and Venezuela can exchange Petro back and forth, exchanging goods and services without being controlled by the Americans, and then when they need to “wash” it for use outside of the ALBA Petro-zone they can send it to places like Nevis…or Luxembourg, Isle of Man, and probably Delaware, shortly.
But imagine the Petro tied to not just ALBA, but a Russian crypto-ruble?
Russia literally sold out to the Americans in the 1990s, and it was a social catastrophe. They want to keep their sovereignty now, so they are supporting bitcoins, which is why Prime Minister Dmitry Medvedev just called on the Eurasian Economic Union countries to jointly develop a common approach to cryptocurrencies – and it’s not going to be to ban it. The EEU will certainly have their multinational version of ALBA’s Petro, because why on earth would a country under Western financial sanctions eliminate this unthinkable miracle to get around them? Russia is superpower and a democracy (and with a true leftist force in politics) — they are not some weak US/French/UK puppet politically, culturally, militarily, financially, etc..
The EU cannot stop trading with Russia…unless they want to ruin their own economies, and also freeze in the winter. So Venezuela is a big stepping stone, as would be Iran, but a Russia or China makes national cryptos unstoppable. Heck, I’m excluding Japan and South Korea simply due to their political alliances…but those change, and those two nations are 2 and 3 in commitment to bitcoins (behind Venezuela). But Japan and South Korea are under US military occupation, after all….
Again, we are not talking about hundreds of billions of dollars in Venezuela’s crypto market in 2018, but, long-term, increased crypto usage will obviously allow Venezuela to evade the murderous blockade/sanctions against their foreign trade.
I proved the (mostly ignored) leftist utility of bitcoin in the very first sentence of this article: evading Western sanctions means sanctioned nations can buy medicine. It’s that simple, and it’s as real and immediate as a heart attack. Supporting the Petro is thus a moral issue.
I certainly hope Iran is watching closely and is ready to follow up with an Iranian Petro. Safety in numbers…. The vast amount of news from Iran is positive, and a policy should be issued in a few months.
The Petro is not a ‘true’ Crypto
Libertarian-style, voluntarism-espousing, tax-avoiding bitcoiners – the ones who despise all government (which must include me, as I am a civil servant, and paid by taxes) – say that any bitcoin which is backed by the government is “not a true bitcoin”.
Well, that’s just, like, your opinion, man.
What a dumb, ivory-tower conversation to have?! For countries like Venezuela, under literal attack, such conversations can remain confined to the imaginary cyber-realm. What is the Petro, and what can it do for the Venezuelan people now, that’s a practical, tangible question. Why do cyber-geeks who got into bitcoin because they played video games 6 hours a day get to decide what is “real crypto” and what isn’t?
But fine, on a theoretical level I’ll agree: The Petro is essentially fiat, theoretically.
Well…printing money is what governments are supposed to do. Why can’t they print crypto, too?
My problem – everyone’s problem – is not with the printing of money, it’s that Western central banks have used their fiscal policy in a neoliberal capitalist way to enrich the 1%, instead of in a socialist way.
On a practical level – stable store of value, daily use, local control, deflationary, tool against high finance – the Petro is most definitely crypto. It doesn’t tick all your boxes, though? Go complain to someone who cares, nerd, Venezuelan socialism rolls on!
What’s undeniable is that socialist-supporting Venezuelan citizens have been targeted with an international campaign of destabilization to create economic turmoil and foment regime change: if they want to retain their sovereign right to pursue Chavismo – or, socialism with Venezuelan characteristics – they need both radical steps and innovative solutions, and they remain unconcerned with your labels. Venezuelans want to win, not just debate.
Still oppose the Petro? Well, you’re standing alongside the 1% of Venezuela. Their Senate voted to stop the creation of a crypto. It’s not as if those in the Senate are suffering, so why not prolong it? Without a vanguard party supported by a modern popular revolution…these rich, status quo-maintaining sellouts are your leaders, wherever you are reading this.
What if the Petro works, I mean really?
LOL, mass adoption in your own country ASAP.
A way to regain control away from high finance’s speculators? Fuggetaboutit. Refusal to do so would prove that your country’s politicians are working solely for the 1%, and thus undemocratically. What populace wouldn’t demand their own crypto, if it brings down the price of a can of orange juice?
Sweden, Estonia, Singapore – all are studying national cryptos, but Venezuela is forced to move fast. Sweden can take their time – that’s the luxury you gain by making your fortune by aiding the Nazis….
Sweden has the money to pay $2 billion for crypto infrastructure, but Venezuela does not – it needs some foreign investment. Sorry, communists who are misguided: the tools of capitalism are to be used to create socialism, and the key is controlled foreign investment. Get money into the country is simply a must (on the People’s terms as much as possible) – and what’s more effective to raise money in 2018 than a crypto? Thus the Petro.
I don’t see any risk for the Venezuelan people: after all, they can’t buy it. The ICO will only be open to foreign investors, so if anyone “gets robbed” it will only be foreigners. After the initial sale the Petro could be sold in exchange for local bolivars, but definitely not before. That’s why this is best termed as a “foreign bond sale” (usually in socialist countries it’s the opposite).
Can you redeem your Petro for a barrel of oil? LOL, why would you? But this lack of easy convertibility has some people uneasy. I guess they also cash in their securities for bushels of soybeans? As I stated, the Petro is in reality backed by the authority of the Venezuelan people more than oil, so be clear on what you are investing in: humanity.
There’s another issue: The price of the Petro is tied to a reference price of the Venezuelan barrel price of the previous day. What their white paper didn’t make clear is: so what determines the price of oil? Is it dollars, bolivars, or the price of ethereum, which they’ll be accepting for the ICO of the Petro, because all three of those fluctuate as well? My bet is that it will ultimately be the US dollar. I don’t think this is that big a deal – the government will choose the most stable price tie possible.
Will the Petro make you money as an investment? You and your crass concerns! Me, I live on high-minded thoughts….
The ICO will, as always, give discounts to the early investors. I can’t say what it is, but that means it will be less than $60 per Petro, obviously. When the ICO is over and it goes public, you’ll see an instant valuation upwards to $60, the price of oil, thus you make money.
When the ICO is over, and you can use cash to buy a Petro, then you are partially investing in oil futures. But a bet on the price of oil increasing or remaining stable, as opposed to your inflating currency (which is gaining almost zero interest in a private bank, which is charging you fees while they invest your money)…is still a much better bet, both financially and ethically.
However, you are also investing in the Venezuelan People in the sense that you are betting that the Petro will be used, and thus can be exchanged for goods and services in Veneuzela, and thus has a steady store of value…once again, unlike your inflating Western currency sitting in a private bank. It seems to me that the stability provided by the use of the Petro in Venezuela would, theoretically, give it some value-added above the price of oil, no?
Domestic opposition exists: “I remind President Maduro that the hydrocarbons law prevents him from using the country’s oil reserves without parliamentary approval,” wrote opposition legislator Angel Alvarado on Twitter earlier this month.
Lousy bourgeois/West European aristocrats givin’ democracy a bad name…I say, “Roll on, Chavistas!” Time to cut ties with bourgeois/West European democracy!
The biggest threat obviously comes from the US. Ghadaffi’s “gold dinar” and other efforts to break free of dollar domination are not met with lightly, history proves. But what does Venezuela – and Cuba, Iran, Russia and others – have to lose? They are already at war with the US, or rather, the US and their Western allies are at war with them. Venezuela, as 2017 proves, cannot dither – they must implement radical changes to survive an imperialist attack.
Buying the Petro is a way to support not just socialism, but also anti-imperialism and the right to local sovereignty. Indeed, the Petro is the first chance provided by a bitcoin to clearly support a leftist government.
In the US you might be subject to prosecution for breaking US sanctions on Venezuela if you buy Petro. That alone will inspire many people worldwide to buy a Petro or two.
Bitcoin’s history has not been all right-wing capitalism – not hardly – but that has been the phase it has been stuck in since August 2017: the Petro inaugurates a new phase.
Crypto-currencies can be used for private benefit, ok, but they must be used for pubic benefit. The public comes first.
That is what the Petro is doing, and why socialism is fulfilling the true promise of bitcoins: liberating the People from the bonds of capitalism. Thanks goes to Venezuela for leading the way.
Ramin Mazaheri is the chief correspondent in Paris for PressTV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. His work has appeared in various journals, magazines and websites, as well as on radio and television. He can be reached on Facebook.
I’m very interested to see how this works out in Venezuela, because it is the first test case for the use and backing of crypto by a government. I think there’s little doubt that cryptos are here to stay and will be used as a currency one way or another in the future. And there are other applications besides currency that can also be employed in the crypto-sphere. Ethereum is a prime example of that.
However, there are a lot of potential concerns with the new Venezuela Petro.
First, who will put up the money? Ramin offhandedly says, in essence, that if things don’t work out, who cares, since it was just outsiders that got screwed? Well, I guess nobody cares except for those greedy capitalist pigs that I’m guessing don’t want to get screwed…I’ll be interested to see how well the ICO goes, because it seems like to me that attitude might accurately reflect government policy as well. If so, it doesn’t bode well for foreign investors in the ICO. And in reality, there’s nothing to say that the Venezuelan government might just not take the ICO money and spend it on hookers and blow. Stranger things have happened in Latin America.
Second, to say that the Petro is guaranteed to work is absurd. Sure, the very limited sense that the government can force 1% of the dogs to eat the dog food whether they want to or not, it is indeed guaranteed to work. But whether it is a store of value? Not so much. The oil backing means nothing, really. As the author points out, you can’t really ask for your barrel in exchange for your Petro.
Third, you can’t say the Petro is deflationary unless you can see into the future. But what we know from the past is that every government in history eventually inflates their currency. Crypto will be no exception. The way you do this on a pre-mined crypto like the Petro is simple: you just create a new crypto down the line called the Petro II and declare that the old Petros will no longer be considered the coin of the realm from that point on. IOW, you simply default on the Petro debt. End of story.
In short, governments of all stripes will always find a way to defraud and debase the currency. That is not to say that the Petro won’t work. It might. However, there are a lot of hurdles on the way to that happening, and no guarantees of anything, either now or down the road. But even if the experiment is successful, there are mixed blessings to a currency that allows for no financial privacy.
I hold out hope that a world crypto currency existing outside of the realm of government issuance offers the best possibility for real financial freedom from tyranny for all people everywhere, be they Venezuelans, Chinamen, Europeans, or Americans. The technology is truly revolutionary in that sense.
Jon, you likely don’t mean it, but this objection is rather racist:
“the Venezuelan government might just not take the ICO money and spend it on hookers and blow. Stranger things have happened in Latin America.”
You are saying that Latin Americans are especially prone to…I don’t know, debauchery and mismanagement. Richo below you is also criticising Venezuela’s management skills…but perhaps he’s talking about general human frailty. This is the type of FUD which will be used that I discussed in my comment below: “Venezuelans aren’t smart enough/moral enough to pull this off” or “socialist Chavistas aren’t smart enough/ethical enough to pull this off”. I don’t buy it.
The idea that the Venezuelan gov’t isn’t going to watch this – their possible public relations-saving grace – like a hawk to ensure its success, seems ludicrous given the (sad) strength of the opposition. The idea that these dedicated Chavistas will take their money and…leave the country, I guess, is what non-socialists do, from what I’ve seen.
Lastly, investing is never a sure thing, and it isn’t with the Petro – buyer beware. My point in “only foreigners lose money” resonates with the Venezuelan readers, I assume, and I expressly wrote this article with a focus on how the Petro will affect them – they have truly suffered, mainly thanks to foreigners. The Petro, I can’t stress enough, is FOR the Venezuelan people – not investors. If investors lose but the Petro works as a secondary domestic currency to fight inflation – I say God bless.
I will simply ask you how much of your own money (or Ethereum) are you investing in the Petro?
My take-away from the article (I read about 2/3) is not that the Petro is an investment opportunity but that it is a way to gradually remove currency from being an investment and speculation target. And ensure that it is used only as a true means of exchange.
Maybe I read the article wrong.
Katherine
In order for the Petro to be established, investors will have to cough up at least $3BUSD. It’s a pretty big fly in the ointment if that doesn’t happen. In point of fact, it will not happen without that investment. So at some point somebody needs to be convinced that putting money into a Venezuelan crypto scheme is a smart investment or it doesn’t happen at all. That is part of my point (among many).
My final question was quite simply: if Ramin believes so strongly in the Venezuelan socialist government and their crypto experiment, is he putting his money where his mouth is? If not, why not, if it is “guaranteed” as he says it is, to succeed? It’s always easy to spend somebody else’s money…every politician is good at that. But when you’re talking about your own money you’re usually a bit more careful. How much is Ramin putting up? If the answer is zero, I think we found the real value of the Petro in his mind.
Constantly saying “Put your money where your mouth is” sounds kind of trollish to me.
First of all, analysts write about all kinds of things **without** having a direct financial interest.
Having one could be construed as compromising credibility. That seems obvious.
Like doctors who recommend meds they are paid by Big Pharma to prescribe.
Furthermore, we don’t know whether RM has invested some money in the Petro.
Maybe RM is “long Petro”!!
This “put money where mouth is” is not a credible intellectual challenge to the arguments made in the article.
Katherine
Financial analysts do not write about products that are “guaranteed” to work.
As for any conflict of interest, that is easily handled by a simple full disclosure statement. If Ramin is indeed long Petro as you suggest it is extremely unethical behavior for him to endorse the product without full disclosure.
I can see he has a lot of fans here. It’s instructive that step one in your rebuttal is a personal attack rather than one based on logic and doesn’t represent a credible intellectual rebuttal rebuttal to my post. Good day.
BTW, Katherine, if you wish to remain anonymous, perhaps it would be best if you didn’t sign your post. :)
” It’s instructive that step one in your rebuttal is a personal attack rather than one based on logic and doesn’t represent a credible intellectual rebuttal rebuttal to my post. Good day.”
I do not believe my comments can be construed as “personal attack.”
I questioned your statement about “investment” in the Petro.
It is your own comments that seem personal, directed against RM.
RM stated why he thought the Petro scheme is “guaranteed.” I took that to mean that he thinks it is a very strong plan with few downsides for Venezuela and he explained why—and why the plan consequently would be attacked. It is one thing to disagree with that view and another to say “no analyst guarantees” as if RM were a Wall Street analyst.
I introduced the idea of “long Petro” as a bit of a joke but I guess my humor missed.
Re “BTW, Katherine, if you wish to remain anonymous, perhaps it would be best if you didn’t sign your post. :)”
Now you are getting personal, patronizingly implying that I am stupid.
Signing my post but neglecting to add name to box is, obviously, not “wishing to remain anonymous.” It is caused by haste because I am actually working on a job on deadline.
As you should know from my posts on multiple threads of this blog for years and years.
So what is your point?
This is getting really stupid but Jon your comments sound increasing snarky and trollish and going purposefully off topic to derail discussion and insult those who are posting honestly.
Katherine
mod-to note: With this the personal jabs will end. Please stick to content rather than personality. All further personal discourse will be banned.
If they sell 100 million coins and only raise 100 million, then you think they’ll just quit? Probably instead the coins are worth $1 each and they have a tight budget for network development. Maybe that’s not obvious.
How much of an investment by Ramin would make you believe he’s for real? If its US$100, would you laugh him off?
I see what you did there
Kudos
LOL, RM
The pindo right think of themselves God’s gift to humanity, their sense of exceptionalism is based on that and the view foreigners are inferior. But when it comes to corruption, unbeknownst to the majority of these chauvinists, they actually are correct, the usa is the banana republic’s banana republic.
Switzerland & United States are the world’s most corrupt nations – report
https://www.rt.com/business/417874-switzerland-us-most-corrupt/
if you believe RT that is…
” It’s only weak spot is poor management. How could it possibly fail?”
Management can always be a poor weak spot. The whole point of socialism is to give us the real freedom to create quality management. Socialism is, appropriately, a construction challenge.
LOL. A poorly managed government? Where have we ever seen that before?
To say myself and others will be watching closely is an understatement. When Russia introduces its Cryptoruble and China its Cryptoyuan, the Dollar Hegemony Carrier will begin listing and the tragedy of the Titanic will be somewhat repeated as there aren’t enough lifeboats for all the passengers holding dollars.
Crypto-currencies had a historically bad January and we are currently in the midst of a bloodbath: Bitcoin at $6,700, LOL.
This is actually good for Venezuela: The lower the price of Ethereum = the more tokens they get in their pre-sale = more profit for Venezuela when the price rebounds.
And it will. None of the fundamentals have changed. This crash – history shows that crashes have been guaranteed in bitcoin, but never fatal, and crypto always bounces back higher – is sparked purely by FUD (fear, uncertainty & doubt): China “banned” bitcoin (for the 4th time, LOL), the credit card companies do a coordinated attack against allowing their users to buy crypto, India is unclear on their stance, etc. Those guys are all buying low, I would bet.
FUD is also what they will use against the Petro: Maduro is a dictator, Venezuela is unstable, Venezuela is not a democracy, Venezuela violates human rights, etc.
But this uncertainty only shows just how GREAT the Petro will be. The Petro is tied to the price of oil – which is relatively stable – and is also backed by a sovereign state. No other crypto is like that whatsoever.
The only comparison we can make with it in the bitcoin-sphere is a coin called Tether: 1 Tether is designed to always equal $1. In 3.5 years it has been historically rock-solid at $1, with only short-term variations between $0.92 and $1.04. The Petro will be just that stable, but its fundamentals are night and day with Tether.
Tether WANTS to be what the Petro will be: A stable holder of value AND a stable currency. But Tether is being investigated by the US government, while the Venezuelan government is not just backing but encouraging the Petro. Tether claims it has $1 to back every Tether…but there are many, many doubts about that because their numbers stopped adding up months ago; the Petro is backed by definite oil reserves we know can and will be extracted and the guarantee of a government encouraging its use and stability. Tether is the only comparison available for Petro…and it is no comparison at all: the Petro is hugely, hugely, hugely more stable, attractive, ready for use, will get use, etc.
The current market unrest does not show why the Petro can’t work – it shows why it WILL work. Socialism is going to centrally-plan bitcoins to success. Why? Because that’s how long-term economic success happens. Check out my previous article on growth rates: a (never admitted) Lost Decade for the Eurozone, while Cuba & Iran averaged 3% per year despite horrific sanctions campaigns, and China was over 7%. Central planning!
Or you can keep relying on competition, invisible hand, the ‘animal spirits’ of the market, creative destruction, innovation (i.e. miracles, LOL), deregulation, not to mention the totally anti-social models of trickle-down economics, neoliberalism, etc.
Regardless of what you choose to support: Hodl! And go Petro!
(PS – My article purposely uses the terms “bitcoins” and “crypto” interchangeably because I feel that’s how the average person views it…and it’s a free “B”itcoin plug – it deserves it, after all!)
Ramin:
Do you think cryptocurrencies could play any role in actually keeping oil and other fossil fuels in the ground?
Kind of like gold in a vault?
I am asking this from an ecological/environmental perspective.
Katherine
I can answer your question and clear up some confusion for others as well.
First of all bitcoins and the like are not money, but instead are mostly commodity. Underlying value of bitcoin is it’s infrastructure, ability to avoid taxes, and to exit to dollar or other national currencies. Bitcoins have a price derived by supply and demand, and bitcoin supply is limited. Extra national money units chase bitcoin driving its price high. Bitcoin price is what it fetches as other national currencies chase it. Bitcoin does not have an exchange rate.
The Petro is money. Money’s true nature is law. Money is not metal, and is not debt instruments, despite hypnosis promulgated by private banking sector. Petro was made legal though government action, and further it is prevented from expanding its volume. Volume of Petros in money supply are limited to its anchor to oil stored in the ground. In other words, Petro’s are not going to expand to large volume in its money supply, nor contract quickly, thus avoiding both inflation and deflation. An advanced money unit would follow goods and services production, but being anchored to oil is a good start.
With regards to keeping oil in the ground that is a use/sell question. Venezuala needs to trade her oil for things she cannot produce domestically. It is not possible to have an autarky economy (where you make all things domestically). Venezuala is not a first world country producing high technology.
The way to keep oil in the ground, is to become as self sufficient as possible in making things, and then trading your oil (and export your goods) for things you cannot make yourself.
Keep in mind that green revolution is now becoming self sustaining. The price of large solar projects are self financing, so this means that solar/wind electricity will continue to supplant oil consumption. Actually green energy supplants natural gas power plants first, and then oil from transportation sector use next through electric cars.
Viva El Petro!
I have come to depend on Ramin Mazaheri for common sense, socialism, and monetary sanity, all rolled into excellent articles. With this one, the author has outdone himself. Bravo!
I would actually argue that Petro is NOT fiat currency. I’m not going to check definitions, but simply say that my understanding of fiat was that government decree declares it legal tender – i.e. you must accept it. But this article states that no one is compelled to use the Petro. In my book that means it’s not fiat.
People think fiat means that a currency is not backed by a tangible resource such as gold, but I don’t think this is the most core element, or even a necessary attribute of fiat. I think it’s the designation by, uhm, fiat of being legal tender that makes it so.
And Mazaheri is exactly correct that inflation of any quantity of units is impossible when that quantity is fixed. That’s all that inflation is, and to make it work you need to make your currency compulsory legal tender – i.e. fiat – or people will simply stop using it when the quantity changes too fast to keep it useful as a measure of values. In fact, as the only stable monetary thing in Veneuela, the Petro will come to be the ultimate measure of the value of other currencies and all goods.
I loved the entire article, every word had the ring of great triumph – and then I came upon the final part that said if I reside in the US i can’t buy the Petro, because of sanctions. Oh that’s right, I live in a banana republic now. What a bummer.
Live long and prosper, Venezuela, and show the way to sovereign currency.
As soon as money gets a legal stamp, it became fiat. 2000 years of gold coin history is Fiat.
97% of today’s money supply is sourced as bank credit. This happens when YOU or the Government go hat in hand to a bank and hypothecate yourself. Hypothecation is a fancy word for signing a new debt instrument.
Upon hypothecation, new bank credit is created. Both the debt instrument and its credit are inverses of each other. When the former bank credit returns to the ledger to draw principle of loan down, then former credit disappears.
Petro is money and is also fiat. Petro is a legal money, not sourced as Bank Credit. It will be a permanent money not disappearing into a ledger. If you take out a loan in Petro, somebody will have to give up “their” Petros for you to have the loan – Petro’s will not pop into existence as they already exist.
My guess is Venezuala will create more Petro’s as more of them get adopted, to then keep exchange value in alignment with a basket of goods.
Also, Petro due to its blockchain means it can serve as a moral type of money, and not channel against crime. Russia’s new crypto Ruble has punishment against crime. For example, converting bitcoin to cryptoruble requires bitcoin holder to show his bitcoins are not crime sourced. If the transmission channel of bitcoin is clean, it can convert to cryptorubles without tax.
The word “fiat” is being abused, it is better to use the term “bank credit.” Private banking corporations have hosted governments, and made their bank credit bankster coin of the realm. Bank notes in your wallet likely say “Federal Reserve Notes” not U.S. Dollars.
The Petro is an excellent idea and from what I can tell it should work out fine. A country is not sovereign unless they have their own sovereign money power. Mammon may attack Venezuala to prevent her having sovereignty, so that is the biggest concern. Venezuala is being attacked anyway “Economic Hitman Style,” so there is nothing to lose and everything to gain. Venezuala is in an undeclared war.
RM
Thanks for explaining the Petro.
Maduro takes it to the international level.
Maduro to Propose to Oil Producing States to Work Out Cryptocurrency Mechanism
https://sputniknews.com/latam/201802061061386768-maduro-proposes-cryptocurrency/
“I will make an official proposal to all OPEC members and non-OPEC states to work out a joint cryptocurrency mechanism backed by oil,” Maduro told reporters in Caracas on Monday after a meeting with the OPEC secretary general.
Maduro also said that the regime of oil production cuts, which operates within the deal between the members and non-members of OPEC, must remain in place for at least five more years.
“I want the Joint OPEC-Non-OPEC Monitoring Committee to operate for at least five more years as we have already had great achievements,” Maduro told reporters.”
Good stuff, I recon that few other related cryptoC could be made of that Petro.
What about crypto Bolivar concept:
You are last socialist born in former Yugoslavia(lost generation) and you want to donate few evros which you have somehow collected from filthy capitalistic regimes black market. You buy few Petros and Bolivars each year to support your comrades in Latin America…but you dont want to make profit of it…you are now comrade-friend of Petro or Bolivar crypto system.
When Latin America is free from capitalism and $ domination, you decide to visit Bolivar states and goverment agency enables you to spend your invested assets in Bolivar as tourist or azil seeker ;)
I have always thought ( naively, since my student-in-engineering days) that money will ultimately be expressed in the units of energy, just like food (cal or Cal), or mechanical work. In this way, money is symbolic expression of energy credits one is awarded for the material/work/time spent. Of course, situation happens to be much more complicated, but for most people in the world and their labor, this definition still holds largely true.
The main problem with the varieties of energy flow and its transformations through society and the environment is inevitable existence of entropy and its various expressions, a topic much ignored, and sometimes abused, by economists, politicians, bankers and so on.
Regards, Spiral
“The design of the network includes the possibility of generating an incentive for proof of stake (PoS). This feature will be initially disabled…” (p 13, petro white paper)
Proof of stake is a means to inflate the total volume, no? It means that if they double the volume, everyone’s stake increases proportionately, or if you hold 1% of the total prior, then after the feature is activated, you’d still hold 1%. Really its a means to reward wealth because a doubling of the volume rarely actually produces the coins value to halve. Usually after an 2x expansion the price bounces above the 50% mark giving a larger total market cap than before. It benefits whales, like steemit does. Its probably meant as an emergency means to unthrottle an overwhelmed network, yet it leaves the petro potentially inflationary, if I understand, albeit not into the hands of government only. If it splits, then savers win together while debtors only get a price spike.
This ECR20 coin is like the rest, except with government (and potentially future russian military) support. Much of the fear regarding crypto is that governments will undermine an otherwise fair and open market. My general experience with government is them ripping of my stuff, but this may be different this time. I don’t know.
May throw a grand at the petro, which would be about half my crypto holdings, to answer an expected question. On this blog I suggested people buy-in initially just before the fork in July when btc was around $1500. Also keep your eye on eos. I was trying to get into that at $2 but blew it and missed. If there is one to explore, its probably that, unless btc announces a hashgraph fork, then actually drop everything.
Love your posts Ramin. I think you’re a much needed addition to this blog.
Computer gamers working for a good cause?
Crypto-charity? UNICEF urges gamers to mine Ethereum for Syrian children
https://www.rt.com/news/418066-unicef-humanitarian-cryptocurrency-fundraising/
“The United Nations International Children’s Emergency Fund has launched “the first ever blockchain fundraising” project, urging gamers to “turn graphics cards into a humanitarian tool” and mine Ethereum to help Syrian children.
Over 500 people have already joined the unusual initiative to support Syrian children. UNICEF’s ‘Game Chaingers’ charity project has raised more than 1,500 euros in five days since its launch last Friday.
In its promotional video UNICEF appealed to video game fans, who have the largest number of graphics cards. The powerful devices are necessary for cryptocurrency mining, which lies at the heart of the project and distinguishes it from other existing initiatives.
“Through the use of mining we create an opportunity for those who cannot give or have never had the opportunity to do so,” UNICEF said.
‘Game Chaingers’ uses graphic cards as a humanitarian tool, instead of traditional cash donations. However, donations using a credit card or Paypal are also welcomed.
The organization urges everyone to engage in the ‘mining’ process, using the computing power of their PCs (and graphic cards in particular) to operate transactions of a certain cryptocurrency. They are given tokens as a reward. For its project the non-governmental organization has chosen Ethereum – second highest valued cryptocurrency after Bitcoin.
‘Game Chaingers’ aims to ease the suffering of more than nine million children in Syria. According to UNICEF estimates, more than 13 million people in the war torn nation need “vital emergency help.”