Rescue Venezuela
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Since the demise of the popular and charismatic Hugo Chavez, the once wealthy South American country of Venezuela has seen its economy sour, deteriorating to the point that it is now on the verge of becoming a humanitarian crisis
“Venezuela, by the numbers, resembles a country hit by civil war” — The New York Times, May 2017
According to a NY Times article in May of this year, the currency is spiraling down at an inflation rate of 1,600%¹. Food has grown so scarce that the incidence of children suffering from severe malnutrition has risen dramatically (cf. the Guardian’s August 26 article), girls as young as 12 years of age are forced to prostitute themselves to stave off starvation, and hospital patients are dying due to the collapse of the medical services infrastructure in the country (cf. CNN’s October 25 article)
The nature of the beast
At its core, the unfolding tragedy owes to the corruption of the Venezuelan government, and to the monetary policies of the country’s central bank, which is currently managing a theft of massive proportions, of the nation’s wealth, via its currency devaluation programme. Since Nicolás Maduro’s 2013 election, the currency’s value has fallen by 99%
By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens — John Maynard Keynes
The hyper-inflation caused by the Venezuelan government is tantamount to the destruction of its physical economy and spells a death warrant for its peoples. As the currency devalues, markets shrink owing to the inelasticity of wages, factories close, retail outlets die, brokers are squeezed to extinction and the whole apparatus of commerce crumbles
“Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky…” Milton Friedman — The Optimum Quantity of Money, 1969
Economic collapse was the predicament contemplated by Ben Bernanke, former chairman of the U.S. Federal Reserve, as he assumed the leadership of American monetary policy in 2006. As a scholar studied in the Great Depression, it was his thesis that had sufficient liquidity been produced in the years after the stock market collapse of 1932, the depth of the depression would not have been as great, nor its reach as severe. “Chopper Ben”, as he became affectionately known after referencing Friedman’s famous conjecture, thus proceeded to create a veritable tidal wave of money, 25% of US GDP to be precise
At first, the Fed’s soi-disant “quantitative easing” programme saw success in its operations: liquidity injections produced upticks in economic activity. However, across time it became evident that this was a game of diminishing returns i.e. to produce the same amount of economic activity required larger and larger injections, ultimately proving unsustainable. But the reason owed to the distribution mechanism: the banking system
“Since the financial crisis, American banks have increased their excess reserves…” — Excess Reserves: Oceans of Cash, Federal Reserve Bank of Cleveland
If you give a rich man money, he’ll put it in his pocket and smile — he will hold the money because he already has everything he needs. On the other hand, if you give a poor man money, he’ll spend it — on rent, food or other things he needs — producing consumption, which ultimately creates economic activity. Banks, upon receipt of Bernanke’s largesse, recapitalised their balance sheets (held the money), soaking up as much liquidity as the Fed could produce. This helped the banks continue to be irresponsible with other people’s money in the form of abhorrently risky loans, but didn’t help the economy
In other words, Bernanke would have been better off literally dropping greenbacks from a helicopter, since he would have achieved what he actually wanted id est circulation, not just liquidity
A solution emerges
If the Venezuelan nightmare owes to a hyper-inflating currency, the solution is quite simple: replace the Bolívar with a deflationary currency
Thanks to Satoshi Nakamoto, today we have exactly that: a currency with a finite supply that increases in value with circulation. So…
to help the Venezuelan people we need to pull a Bernanke: get on a chopper and drop crypto onto the streets
The problem, of course, is that whereas the Fed can print money out of thin air, we can’t — which is the whole point of crypto currency. This means we need to raise the funds, a task that, fortunately, has become significantly easier in our new era of Initial Coin Offerings (ICOs)
Capitalism & humanitarian relief
As Chief Strategist for the Givit Foundation, it is my responsibility to identify ways to increase token value and, as economists know, a currency’s value is directly related to its circulation, to the number of use-cases the coin can facilitate i.e. the more people use it, the greater the foreign exchange rate that can be expected
Thus to increase the value of Givit tokens, I must find new markets — and what better market than one in desperate need of a currency that doesn’t depreciate?
The fit is perfect, but leaves open the question of funding and distribution: how exactly do we put the coin in the pockets of those in need?
Given the urgency of the situation, having Venezuelans earn the currency is out of the question. Selling it to them is also unfeasible, as they can, presently, barely afford food. So, the only open avenue to get the currency into circulation is by donating it to them
Having distributed the coin within the country, we then mount a world-wide public relations campaign, encouraging everyone to purchase the coin i.e. increasing demand — in essence, we pump the price such that a distribution of $1 million (small) within the country becomes $1 billion (large) as the currency rises 1,000x. In other words, we leverage public attention to increase the value of our donation. The message is simple:
Rescue Venezuela. Buy Givit tokens
Human beings have charitable tendencies — for the Christian world, the notion of the good Samaritan remains a beacon of goodness and a path to heaven — and whilst we can raise funds by appealing to the kindness of others, we can decidedly increase the raise by captivating the interest of those with less philanthropic views i.e. the purchase of a coin whose value is rising is in anyone’s self-interest
Of course, donations are also welcome and will play an important part
To kickstart the process, the Givit Foundation has made a full commitment to the project, spearheading an effort to conduct an ICO (an initial currency offering)
It is our view that if bitcoin achieved 100,000x over a five year period (a rise from $0.05 to $5,000 per coin) with 15 million users, it is not unreasonable to expect a similar rise for the Givit token, given the 30 million strong Venezuelan population. However, instead of achieving this level in five years, our efforts will likely accomplish it in five months, maybe five weeks
Geo-political consequences
As much as the effort represents a humanitarian relief operation, its geo-political consequences are vast and must be considered carefully. If we pull this off, at the end of the process we’ll have cryptonized the first nation in the world, and as I’ve previously stated, its effects will be of planetary magnitude
“Repressive regimes do not endure change willingly, and Venezuela is no exception” — Leopoldo Lopez
Of course, the Maduro regime will not take kindly to any venture that may deprive it of its primary tool in robbing the nation, and with its 30,000 men army, will undoubtedly resort to violence, as it already has
From a security perspective, on the other hand, government, being as deeply cloven as it is, will be slow to react and our actions too difficult to address. Additionally, appealing to both sides may prove a valuable strategy as each side may have the interest to get an upper hand over the other in supporting the project
Finally, Venezuela being the nexus of American and Russian interests in South America, we must also contend with the agenda of the powerful Central Intelligence Agency. From our perspective, no operation there is feasible without their support, let alone consent
From the Agency’s perspective, a coup d’état in Venezuela may well be desirable, particularly given the recent Russian economic aid package. Already President Trump has hinted at military intervention but, realistically, boots on the ground is a long and costly process and black-ops assassinations too risky to warrant
Our effort may thus prove appealing: by removing the Maduro regime’s primary tool of control (money) we weaken its already troubled position. As adoption of Givit tokens grows within the country, independence from government handouts will increase, ultimately leaving violence as the only tool in Maduro’s arsenal — a tool too costly to employ. Eventually soldiers will demand payment in Givit, forcing government to capitulate
So the plan is simple: replace the currency and the regime topples on its own
Distribution channels
To deliver the currency to the man on the street, we plan an alliance with the Roman Catholic Church, which, according to the CIA WorldFact database, ministers to 96% of the population
Politically powerful, the Church has historically been well respected in Latin America, even by the harshest of dictatorships
“Nor does the light of faith make us forget the sufferings of this world” — Lumen Fidei (“Light of Faith”), Pope Francis I
Additionally, from a moral perspective the Church serves as the world’s largest charitable organisation, making it a natural fit for our endeavour
We are also investigating contacts within the country’s universities, seeking to address the younger population (almost 17% of the nation is currently aged between 15 and 24 years of age), which is more nimble with technology and likely more energetic in implementing change and introducing the currency to elders (41% aged 25–40 years)
At first, the coin will be distributed in the form of cards featuring a denomination on their face that may be traded in the same manner as fiat currency. The cards, however, will comprise a scratch-off area in the back for scanning into a mobile device, which means said funds can now be transmitted both within the country, as well as to recipients outside the country (key to international trade — see the section Arbitrage & trading operations below)
The plan is therefore to do an airdrop, literally.
To fly drones overnight across the five major cities in the nation and drop bundles of paper wallets so that in the morning the citizens of Venezuela will find their streets littered with money
Because smart-phone penetration in the country is relatively low, as an ancillary effort, we will also distribute free phones to serve as wallets (project members are connected with an Indian enterprise currently retailing smartphones for $4 each). This will empower the project to distribute additional rounds of funding directly, without the need for a physical presence — which reduces risk and increases the speed of the money flow; additionally, these phones will serve other purposes that are key to the project (cf. section A public relations campaign below)
Arbitrage & trading operations
As no nation is self-sufficient, the ability to conduct trade — for which a viable currency is required — is of paramount importance to the rebuilding of the Venezuelan economy
“As we learned after President Herbert Hoover signed the Smoot-Hawley tariff at the outset of the Great Depression, vibrant international trade is a key component to economic recovery; hindering trade is a recipe for disaster” — Asa Hutchinson
The distribution of crypto to the Venezuelan population will accomplish a number of goals:
- provide the hungry with food and the ill with medicine
- allow bakers to buy sugar and flour from their trading partners abroad, therefore both halting the deterioration of and kickstarting a new cycle of economic activity
- set a price for the crypto-currency internal to Venezuela that differs from that on the international markets, creating an arbitrage opportunity
The ability, currently under severe duress, for traders in the US and other countries to send much-needed product into Venezuela, depends heavily on their ability to receive payment. At present, given the practically inexistent liquidity for Bolívars within the banking sector, even if traders were willing to receive a currency that’s rapidly disintegrating, they cannot because exchanging the VEF for USD is unpracticable
To restart the business cycle then, a group of commodities traders aligned with this effort have agreed to accept Givit tokens in payment, which means their customers (the bakers) will accept the coin from the public. As trade restarts and the coin rises in value, the project will capture profits from currency appreciation, plunging this excess value right back into the Venezuelan economy. This arrangement will permit the effort to bootstrap imports and economic velocity until a time that it is no longer needed
Exports, on the other hand, will result from the arbitrage opportunity naturally created as the nation prices its appreciation of the Givit token
To make matters clear, a pound of bread sells on the wholesale market for $1.32 and generally contains 16 slices. If a Venezuela baker is willing to take 1/4 of a Givit token (presently valued at $0.05) for a slice of bread, an arbitrage opportunity of 660% exists (8.25¢ / 1.25¢)
This means that Venezuela values Givit 6 times more than the rest of the world, which makes perfect sense as their alternative is the collapsing Bolívar. Any trader can thus profit from the price differential across these two markets by buying products from Venezuela and paying in Givit tokens
The arbitrage thus generates foreign direct investment, which is greatly needed for recovery
The public relations campaign
Having distributed a substantial amount of crypto within the country, our next step is to mount a publicity campaign, calling for support. Our campaign will, in effect, counteract the ongoing PR campaign being conducted by the Maduro regime, which propounds the notion that any anecdotal evidence of the nation’s suffering is greatly exaggerated and that, in fact, everything is just fine
The first step in this journey will be managed by the Givit Foundation, whose platform is capable of hosting short videos germane to charitable causes and monetising them for the benefit of the charity in question, as well as for the video author
The vision is that by distributing 4 million smartphones across the country, we create as many journalists, each capable of producing stories of events on the ground. The torrent of imagery depicting the financial devastation becomes in itself a target for fund-raising. In the words of Sandra Galindez, mother of 14 year-old Deivis who suffered for 3 weeks before dying of respiratory shock due to lack of medical attention:
“I want everyone to see what’s happening with us here. It’s not just what you’re seeing on TV: the protests, the clashes. We are in the hospital suffering”
It is our aim to make Sandra’s wish come true
The role of the Bolivarian diaspora
Venezuelans living abroad are numerous (estimated at over 1.2M), retain strong ties to their country and represent a valuable community to activate in the effort to reverse the nation’s trajectory
“Being born in Cuba, a country where freedom of speech is non-existent, it’s startling to observe how Venezuela, where I was happily raised, is fast becoming Cuba’s mirror image: Dismantling of fundamental democratic rights deserved by its people and citizens of the world “ — Maria Conchita Alonso
The project has established ties to the well known actress, Maria Conchita Alonso, the popular Venezuelan soap-star Fernando Carrillo, and will seek to widen ties with the community in preparation for launch and as a means of disseminating the message world-wide
Funding the project
Though raising of capital will be an open-ended effort, the initial endeavour will consist of an initial currency offering by the Givit Foundation, aimed to provide our initial distribution base. The Givit Foundation, as previously mentioned, will also make a contribution to this effort
Subsequently, the project will collaborate with humanitarian relief organisations, charities and various United Nations bodies and NGOs, with which we have already established contact
Finally, through Givit’s efforts, funds will be raised from the public directly for specific causes, around the concept of video uploads
Looking ahead
If we can pull this off, and bring Venezuela back from the brink of disaster to a place of financial stability and greater democracy, we can do the same for other nations: Myanmar, El Salvador, Zimbabwe et cetera
Across time we’ll discover that three of the Four Horsemen of the Apocalypse (Famine, War, and Pestilence) are all creatures of monetary policy and no longer feasible in a world operated in crypto
As for Death, that will be the subject of another project
A call to arms
I’m publishing this manifesto with the intent of garnering support for the project. If you understand and share my vision, and…
if you feel you can help or want to be involved in any way, please tweet me at @ekkis
Over the next few days I’ll be open-sourcing the roadmap for this endeavour, a document that anyone can contribute to in order to clarify what needs to be done and to assemble the resources to do it
I look forward to hearing from you
Organisations of interest
Footnotes
[1] http://www.businessinsider.com/statistics-about-venezuelas-economic-collapse-2017-8
