Venezuela Superthread- Merged

[Journeyman]

Ya, that's what I was getting at -- except you fleshed it out a bit.....and I had more of a sneer.  ;D



A derisive sneer, actually.   :nod:

 

[Brad Sallows]

Socialism cannot, in my opinion work ...

...because of an underlying reality that is highlighted by two disciplines: the military profession knows it as "decision cycle", and the economics profession refers to it as an information problem.

No number of eggheads schooled in the best academies devoted to preparing a governing class can get inside the decision cycle of millions of people.

 

[a_majoor]

While Venezuela crumbles, other South American states band together in a real free market alliance:

http://www.the-american-interest.com/blog/2014/02/17/lefty-meltdown-leads-latin-revival/

Lefty Meltdown Leads Latin Revival
Are we about to witness a big power shift in Latin America?

Venezuela, Brazil and Argentina are languishing in differing shades of turmoil, steadily losing ground to regional underdogs. The Pacific Alliance, an historic trade agreement between Mexico, Peru, Chile, and Colombia (and coming soon: Costa Rica), has the potential to recolor Latin America’s economic map and introduce some new regional powerhouses to the world stage. As The Atlantic points out, not all the credit goes to the underdogs:

One reason the Pacific Alliance may succeed is the increasingly urgent need to transcend the chronic failure to link Latin America’s economies.

The Alliance would never have become a priority for its four members if Brazil had offered a credible plan to further economic integration with its most trade-oriented Latin American neighbors. Or if Hugo Chávez had been less successful in making free trade a bad word. The late Venezuelan president prioritized political over economic integration, and he was not shy about using his country’s oil to scuttle “neoliberal free trade agreements.” The United States, meanwhile, was too distracted by emergencies abroad and hobbled by gridlocked politics at home to launch initiatives capable of inspiring Latin American leaders.

The newly formed bloc is made up of Latin America’s fastest growing economies. These states boast the region’s most competitive, business-friendly economies and the lowest inflation rates. Current transactions between these countries  represent a mere 4 percent of their total trade; the potential for increased financial cooperation is immense. They have already eliminated 92 percent of trade tariffs.

The Latin Lefties are none too pleased with the new arrangement. Bolivian President Evo Morales called the alliance a Washington-led conspiracy. Brazil’s Lula and Ecuadorian President Rafael Correa decried the Alliance as a neoliberal takeover.

But while these leaders sulk, their countries continue to disintegrate. Mass unrest continues to roil Venezuela; protestors are fed up with government corruption, media censorship, and a failing economy. An Argentinian inflation crisis threatens economic disaster. Brazil, which the WSJ called a “wilting giant”, faces yet another year of economic contraction. On top of that, the country’s 2014 World Cup preparations are foundering and civil unrest is growing more belligerent (and then there’s Brazil’s upcoming summer Olympics preparation to worry about).

The Pacific Alliance offers a glimmer of hope for a Latin revival. For all their leaders’ buoyant rhetoric and revolutionary zeal, the region’s past powerhouses have failed to deliver in many ways. If the Pacific Alliance is the start of something fruitful, it would be another nail in the Bolivarians’s coffin.

 

[Kirkhill]

There is one aspect of the socialist project that resonates with Western Europe's Social Democrats and that is exemplified in one line from one of their favourite poets:

It's coming yet for a' that,
That Man to Man, the world o'er,
Shall brothers be for a' that.

This is the common thread that connects the EU to the Socialist International (and the Comintern) as well as various empires and the Ultra-Montanist Church.

It is not important what one believes.  It is only important that everyone believes one thing.  When that day happens peace will break out and there will be a New Jerusalem "In England's green and pleasant land" - and Rome, Constantinople and Moscow.

They must create consensus.  Where they can't create a natural consensus they marginalize the non-consenting.  If that fails and the margins become too fat then there has been an established tradition of active measures to thin the ranks of the those other than the consenting.

 

[CougarKing]

Seems Venezuela's President Maduro just pre-empted a coup by 3 Venezuela Air Force generals against him:

From Reuters:

Venezuela arrests three air force generals 'plotting coup'

By:  Daniel Wallis and Eyanir Chinea, Reuters
March 26, 2014 3:34 AM

CARACAS - Venezuela has arrested three air force generals accused of plotting a coup in league with opposition politicians during the country's rumbling civil unrest, the president said on Tuesday.

The move follows weeks of violence around anti-government protests that have killed 36 people in the nation's worst unrest for a decade.

In recent years, Venezuela's socialist government has routinely accused its rivals of scheming to seize power by force and assassinate its leaders, although it has rarely followed up with concrete proof of such headline-grabbing claims.

"Last night we captured three generals ... who tried to raise the air force against the legitimate, constitutional government," President Nicolas Maduro said on state TV during a meeting with South American foreign ministers in Caracas.

He did not name the officers, but said the plot was revealed by colleagues of the generals who were "alarmed" when they heard of the conspiracy. The three were now in custody of military courts

(...EDITED)

 

[a_majoor]

Venezuela does a swan dive, as Socialist economics works its magic:

http://www.bloombergview.com/articles/2014-04-01/venezuela-wants-to-spread-the-suffering

Venezuela Wants to Spread the Suffering
3 APR 1, 2014 4:52 PM EDT
By Megan McArdle

Venezuela’s economy is starting to remind me of the old woman who swallowed a fly. Those who attended kindergarten in the U.S. will well remember her saga:

There was an old woman who swallowed a bird,
How absurd! to swallow a bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don't know why she swallowed the fly,
Perhaps she'll die.
. . . and on up through dogs and goats and cows, each one intended to deal with the animal that had preceded it down her gullet.

And why does this remind me of Venezuela’s economy? Well, first the late President Hugo Chavez diverted money from capital investment in the oil industry to “social investment” in the poor. Unlike the old lady with the fly, I do understand why he did that. And for a while, it worked -- oil production fell, and the decline was more than offset by rising oil prices. After a while, however, oil prices stopped rising, and Venezuela got into a spot of trouble. As the trouble got deeper, the government started having trouble laying its hands on ready cash.

“As the price tag of the Chavez/Maduro regime has grown, the country has dipped more and more into the coffers of its state-owned oil company, PDVSA, and (increasingly) the country’s central bank," Steve Hanke of Johns Hopkins recently explained.

This created a little problem with Venezuela’s currency, the bolivar. Venezuela now has runaway inflation. Naturally, it needed to do something about that, so -- price controls. And currency restrictions. Hanke’s data show that the gap between the official exchange rate and the black-market rate for the bolivar has dramatically widened:

Any economist -- or, for that matter, anyone who slept through one semester of microeconomics -- can tell you what came next: shortages. It became regularly impossible to buy toilet paper, flour or anything else at controlled rates; when such items were available, lines were often hours long, and people started hoarding.

Sales of airline tickets boomed as people used trips abroad (which often took place only on paper) to get around currency restrictions. Then they plummeted when the government cracked down on this dodge and refused to let the airlines repatriate billions in ticket revenue. Some airlines have stopped selling tickets in the country; a couple of weeks ago, Air Canada suspended its flights to and from Venezuela entirely, citing civil unrest. Oh, dear, did I forget to mention the civil unrest? A lot of folks aren’t very happy about the chronic shortages and instability.

Now the government is setting up what appears to be a rationing system, although at the moment it’s still voluntary. It is shopping incentive cards that allow shoppers a slim chance of winning prizes -- and give the government a way to crack down on people who buy too much stuff at subsidized prices.

As with the old lady and the fly, Venezuela’s government may be running out of encores. It can crack down on black-market activity, but that won’t make the shortages go away. It might redistribute the suffering a bit, but that’s not all it will do. The black market is often a sort of release valve for bad policy; shut it down, and you turn the formerly annoying into the totally intolerable.

There is, as Adam Smith once observed, “a lot of ruin in a nation.” President Nicolas Maduro seems determined to find out exactly how much Venezuela has left.

To contact the writer of this article:
Megan McArdle at mmcardle3@bloomberg.net.

To contact the editor responsible for this article:
Brooke Sample at bsample1@bloomberg.net.

 

[tomahawk6]

Unsubstantiated at this point.Mods delete until more info is available.

 

[jollyjacktar]

There might be something to it as they are really being hurt by the price of oil according to news reports this week.

 

[The Bread Guy]

So far, calls for messiness while the boss is away, but no coup reports (yet) ....

A high-profile Venezuelan opposition leader is calling for protests while President Nicolas Maduro travels abroad seeking help for the financially struggling country.

Tensions have escalated in recent days as the socialist administration has deployed troops and implemented a rationing system to control lines for groceries.

Henrique Capriles, who nearly defeated Maduro in the 2013 presidential election, said Monday that it was time for public demonstrations.

"We are in a state of emergency," he said. "This is the time to mobilize in the streets"

Caprilies did not support the protests called by more radical opposition leaders last spring. Those protests wracked the country for months and left more than 40 people dead.

Maduro has been out of the country for more than a week, visiting China and members of the oil cartel OPEC to push for a cut in output. Oil prices have fallen by more than half since June, battering Venezuela's already staggering economy.

Oil accounts for more than 95 percent of the South American country's export earnings ....

 

[George Wallace]

Looks like quite a mess down there. 


Reproduced under the Fair Dealings provisions of the Copyright Act.

Venezuela Just Had A 'Let Them Eat Cake' Moment
LINETTE LOPEZ
JAN. 12, 2015, 1:46 PM

In Venezuela, a plunge in oil prices, the country's main export, has turned a goods shortage problem into an unmitigated national disaster, but the tragedy seems lost on the country's food minister, Yván José Bello Rojas.
Venezuelans can wait in grocery-store lines for days to find products that may not even be on the shelves — this has been the case for over a year. But when a reporter asked Rojas if he ever waits in lines, he said:

"I've been in tons of lines. I went to my favorite sports team's game this weekend, and I had to get in line to get a parking space. I got in line to buy my ticket. And then ... I made a line to get into the stadium. And you know what, I made a line to find my seat. And then you know what," Bello finished with satisfaction, "I went to go buy an arepa [Venezuelan sandwich] ... and I had to wait in line there, too."

Reporter Ana Vanessa Herrero then asked him about a woman she'd recently interviewed who was looking for diapers for two days and couldn't find them.

"She's exaggerating," he said, "no one would wait in line for six days for anything," he added, interrupting the chorus of reporters throwing out anecdotes to the contrary.
Earlier in the seven-minute interview Bello explained the shortage problem was not due to an unbalanced Venezuelan economy manipulated by government price regulation and bloated by government spending, but due to issues with distribution.

"The same people can't just go and buy the same products every day," Rojas said matter-of-factly, adding that one person couldn't possibly buy one gallon of milk per day, for example, even if they had the money to do it. "More than anything [the shortage] is a distribution problem because if any government has done their homework on food, it's this Bolivaran government."

So if the people can't find food in government grocery stores, let them eat cake?

Ultimately, Bello refused to answer Herrero's questions, because she would not agree with the administration's prevailing idea that all this economic suffering — rampant inflation, dwindling central-bank coffers, and more — is the result of an economic war on the Venezuela.

Herrero said that since this interview was released, she has been blocked from government events and received threatening calls demanding that she take the video down. She took to Twitter to say that under no circumstance would she buckle to government pressure.

"Don't waste your time calling to threaten me," she said. "I'm not going to take down the video that hurt the minister of food."

Around this time last year, hundreds of thousands of Venezuelans took to the streets to protest inflation and corruption. After about a month, the leader of the opposition, Leopoldo Lopez, was taken into police custody and he still rots in jail awaiting trial. Other leaders, like Maria Corina Machado, have been designated traitors to the government. Unrest has, for the most part, been crushed.

The way things are, however, and with the government as tone-deaf as it has been, it's only a matter of time before Venezuelans take to the streets once again. The question traders are asking from New York City to Hong Kong is ... will the people break before the economy does?

Speaking on a visit to Doha on Monday, President Nicolas Maduro stuck to the party line, blaming oil's ruinous price plunge on the global capitalism "of the north."

"The capitalism of the world of the north is trying to destroy OPEC, to control sources of energy, to destroy the just prices that we need and have been assimilated by the entire world," said Maduro.

Apparently no one told him that prices change. If he needs a primer, he should ask the Venezuelan people. They've been learning that lesson the hardest way possible.

More on LINK.

 

[cupper]

Ex-general, soldiers arrested in coup plot

http://thechronicleherald.ca/world/1269143-ex-general-soldiers-arrested-in-coup-plot

CARACAS — Venezuelan officials say a retired air force general has been arrested and 13 other people are implicated in a plot to overthrow President Nicolas Maduro.

President Nicolas Maduro said the plan was to attack his presidential palace and other government buildings on Thursday.

Congress president Diosdado Cabello said in a television broadcast late Thursday evening that 11 soldiers were among those implicated, including a retired general, and he said several have been arrested.

He also named two opposition politicians and a businessman as plotters.

Cabello showed photos of weaponry and other items he said had been seized from those implicated.

Venezuela’s government has frequently alleged coup plots. Last year three air force officers were arrested, but there has been no word on developments in their case.

 

[Edward Campbell]

And, according to reports today, China has decided to rescue Venezuela from almost certain economic disaster (default) with a $5B loan. This is, I think, over and above the $4B loan China provided last year, which, Venezuela said it would put into its foreign reserves. It is also, I think again, different from the $20 B China agreed to invest in Venezuela just a few months ago.

OK, so how do you spell that word?

Oh, yeah, c o l o n y ...

 

[jollyjacktar]

And, according to reports today, China has decided to rescue Venezuela from almost certain economic disaster (default) with a $5B loan. This is, I think, over and above the $4B loan China provided last year, which, Venezuela said it would put into its foreign reserves. It is also, I think again, different from the $20 B China agreed to invest in Venezuela just a few months ago.

OK, so how do you spell that word?

Oh, yeah, c o l o n y  c o l o n ...

FTFY  ;D

 

[Colin Parkinson]

Since China just implied that the Philippines is the US "Submissive", I guess they felt a gap and needed their own plaything.  ;D

 

[a_majoor]

Venezuela is reaching the point of hyperinflation (if they have not done so already; data is notoriously corrupt and out of date). This article in Bloomberg suggests a rather strange reason for setting up this situation in the first place: the government is trying t raise extra money via "seigniorage", although they are in a pretty terrible position if they are resorting to seigniorage to raise revenues.

http://www.bloombergview.com/articles/2015-08-28/printing-money-goes-haywire-in-venezuela

Printing Money Goes Haywire in Venezuela
AUG 28, 2015 9:03 AM EDT
By Megan McArdle

Venezuela seems to be hovering on the edge of tipping into hyperinflation. Or perhaps it has already fallen into the abyss. Given the paucity of official data -- the none-too-believable official figures were last published in February -- it's a little hard to tell. The best guess we have at the value of a Venezuelan bolivar comes from the Colombian village of Cucuta, where people go to buy currency so they can smuggle subsidized fuel and other price-controlled goods out of Venezuela. As The Economist notes: "Transactions are few; the dollar rate is calculated indirectly, from the value of the Colombian peso. The result is erratic, but more realistic than the three official rates."

Using those rates, economist Steve Hanke recently told Bloomberg that annual cost-of-living increases are running at about 722 percent. To put that in some perspective, it means that a $400 monthly grocery bill would climb to $2,888 in a year. That may not approach the legendary status of Hungary's postwar inflation, which reached 41.9 quadrillion percent in a single month, but it's devastating for savers, or for people like pensioners whose incomes consist of fixed payments. It's also pretty bad for the economy.

It's a bit of a mystery why this is happening. No, right, don't tell me: The government is printing too much money! Indeed. As Milton Friedman famously said, "Inflation is always and everywhere a monetary phenomenon." When too much money is chasing too few goods, prices rise. And the most common source of "too much money" is government printing presses.

But I'm not asking for the mechanism; I'm asking for the reason. Why is the Venezuelan government resorting to the printing press?

I know you've got an answer to that, too. Seigniorage! That's the fancy name for the profit a government makes by printing bills and minting coins. If you can buy more goods and services with the cash you made than it cost you to make it, you have essentially collected a stealthy sort of tax on the people who take the money from you and give you valuable stuff in exchange.

In general, seigniorage revenue is trivial -- indeed, it costs the U.S. government more to make nickels and pennies than the coins themselves are worth. But even with higher-value bills, the revenues pale in comparison to, say, the income tax. Estimates are hard to come by, but a 1992 analysis by the Federal Reserve put the value of seigniorage to the Treasury at about 1.6 percent of real federal on-budget expenditure. It's not nothing, but it's not going to keep civil servants in pensions, either. And the U.S. enjoys an unusual amount of seigniorage revenue because dollars are in heavy demand among citizens of unstable countries and people who want to conduct illegal transactions in cash.

Governments can try to jack up the amount of seigniorage revenue by stealthily inflating the currency. Basically, they exploit an information asymmetry between them and the people they trade the money to: The government knows how much money there is, and its citizens don't. So they'll probably accept fewer units of currency than they would if they knew the government was going to print extra money and thus cause prices to rise again.

But this is a terrible way to make money, which is why governments normally don't resort to this one clever trick for raising government spending without raising taxes. The problem is that inflation expectations rise pretty rapidly to compensate, and then the government needs to print even more money to outrace its newly suspicious trading partners.

The core thing to understand about inflation as a policy tool is that in general, steady-state inflation doesn't do you any good; what you need is accelerating inflation. A little bit of inflation is actually OK -- it allows the economy to naturally cushion economic shocks that would otherwise lead to unemployment. In the dark ages of economics, some people got the idea that if a little bit of inflation was good, more must be even better: Set the printing presses to "full stun" and enjoy perpetually higher economic growth. (You still see this folk economics circulating on the Internet from time to time.) But this doesn't work. People start to expect the inflation, and the economy returns to its natural level of output, except that everyone's savings are now worth less. To get more growth, you have to inflate even faster than you did before.

Unfortunately, once inflation starts to accelerate, it's kind of hard to stop because people also start pricing the acceleration into their expectations. Hyperinflation has all sorts of bad knock-on effects: It hurts your capital base and makes people unwilling to plan for the future because they have no idea what their money will be worth. But the supreme irony is that after a certain point, the government actually starts losing money. You've probably heard of the much-maligned Laffer Curve, which was used to support unrealistically optimistic estimates of the revenue-generating effects of Reagan-era tax cuts. But it actually does a pretty good job describing what happens to government revenues during hyperinflation: First they go up, but then they go down, down, down, and the government stops being able to buy goods and services because people don't have any use for the money, except maybe to economize on the Kleenex they can no longer afford to buy.

These are not arcane secrets, known only to a select few in the economics community. I guarantee that there are sober analysts in the Venezuelan government who know exactly where this is headed. Why, then, have they let things get to a point where they are preparing to issue bigger bills so that people won't have to carry around a sack of money every time they want to run out for a quart of milk?

Part of the answer is that in the early days, inflating does make the government a little more money, and the point at which it starts to lose money is also the point at which the freight train is traveling 120 miles an hour, and it has a choice between slamming on the brakes and killing everyone instantly or waiting to hurtle over the cliff. Embezzlers and accounting frauds often start this way -- they fudge things just a little to cover a temporary shortfall. Only the underlying problem doesn't go away, and they need to fudge even more the next quarter to cover up both the gap they have now and the gap they covered up last quarter. They tend to be uncovered when the gap is so big that it can no longer be fudged. This is what happened to Bernie Madoff when the market collapsed.

The larger answer is that this is the end game of Chavismo. For about a decade, some sectors of the left hoped that Hugo Chavez represented an alternative to the neoliberal consensus on economic policy. Every time I wrote that Chavez was in fact direly mismanaging the economy, diverting investment funds that were needed to maintain oil output into social spending, I knew that I could look forward to receiving angry e-mails and comments accusing me of trying to sabotage his achievements for the benefit of my corporatist paymaster. And in fairness (though without minimizing his appalling authoritarianism), those policies undoubtedly did improve the lives of some incredibly poor people.

The problem was that the money he was using was, essentially, the nation's seed corn. Venezuelan crude oil is relatively expensive to extract and refine and required a high level of investment just to keep production level. As long as oil prices were booming, this policy wasn't too costly because the increase offset production losses. But this suffered from the same acceleration problem that we discussed earlier: The more production fell, the more the country needed prices to rise to offset it. Between 1996 and 2001, Venezuela was producing more than 3 million barrels a day. It is now producing about 2.7 million barrels a day. In real terms, the price of a barrel of oil is barely higher than it was in August 2000, but Venezuela is producing something like 700,000 fewer barrels each day. Policies that looked great on the way up -- more revenue and more social spending -- became disastrous on the way down as the population was hit with the double whammy of lower production and lower prices.

This was predictable. Indeed, many people predicted it, including me, though I was just channeling smarter and better-informed people, not displaying any particular sagacity. But the Venezuelan government either didn't listen to the predictions or didn't believe them. Now falling oil prices are crushing government revenues at exactly the time the country most needs money to help the people who are suffering great misery as the oil cash drains out of their economy. In the beginning, printing money may have looked like the best of a lot of bad options. By the time it became clear that the country was not fudging its way out of a temporary hole, but making a bad situation worse, it was committed to a course that is extremely painful to reverse.

Venezuela may be able to pull back from the edge, though it can only do so with great pain. Or it may end up in a hyperinflationary spiral, which will ultimately mean even greater pain. I don't envy the decisions it will have to make. Or the millions of Venezuelan people who will have to live with them.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Daniel Niemi at dniemi1@bloomberg.net

 

[CougarKing]

Chavez's successor again up to no good:

Reuters

Venezuela extends Colombia border closure, sends 3,000 more troops
Tue Sep 8, 2015 3:09pm EDT
By Diego Ore

CARACAS (Reuters) - Venezuela has extended a partial border shutdown with Colombia and sent another 3,000 troops to the area in a crime crackdown that has sent thousands of Colombians fleeing their adopted homeland and led to accusations of rights abuses.

The dispute has also created a diplomatic blow-up between President Nicolas Maduro's socialist government and the conservative administration of Juan Manuel Santos in Colombia.

Critics say Maduro is creating a distraction and playing the nationalist card before a December parliamentary election in which polls show his ruling Socialist Party in trouble.

(...SNIPPED)

 

[a_majoor]

Even after losing the4 election, Venezuela's Socialists appear to be digging in. The article suggests they may have to be removed by force, which would be a disaster in our own back yard (relatively speaking).

http://www.the-american-interest.com/2016/01/13/after-election-venezuela-paralyzed/

After Election, Venezuela Paralyzed

Even as its economy implodes as oil prices tank, Venezuela’s government is paralyzed. The Wall Street Journal reports:

On Tuesday, the president of the assembly and an opposition leader, Henry Ramos, said the day’s session failed to reach a quorum, with neither side showing up, as a battle between the branches of the badly splintered government heats up.

A day earlier, the Supreme Court—packed with government allies—declared all acts by the assembly null and void because the opposition-dominated legislature had defied an order by the magistrates barring three opposition lawmakers from being sworn in. President Nicolás Maduro’s United Socialist Party had asked the court for a review of the results, asserting that there was vote-buying on the part of the opposition in the remote state of Amazonas, a claim the opposition denies.

As the two sides maneuvered, it appeared that ruling party lawmakers would stay away from the assembly as Mr. Maduro tried to mute its role in governance. Indeed, the government is now trying to decide where the president would give his state-of-the-union address on Friday, a speech that until now has always been delivered in the assembly.

“We’re not going to make the quorum for the opposition,” Diosdado Cabello, a ruling party lawmaker and the former president of the assembly, told reporters.

As to the court rulings against the opposition, the opposition itself rejects its legitimacy:

The government’s critics say the Supreme Court lacks legitimacy because the lame-duck parliament last month violated constitutional norms by packing it with 13 Socialist-allied judges. The governor of Amazonas, Liborio Guarulla, who is opposed to Mr. Maduro, said the evidence presented by the government of irregularities on election day was bogus.

“We’re going to show how this has all just been a setup, that they are illegal recordings, editing, fake names and all of that,” he told reporters. “The situation of repression and lies has continued.”

This paralysis may be designed to give the National Communal Parliament, an extra-legal body convened by Cabello after the election loss and housed in the same building as the normal Congress, some legitimacy—or at least to make it the only legislature in town that can actually meet under its own rules.

The reality is that Venezuela’s socialist government will not yield to anything but force. Even then the country is so divided that some people seem to be ready for civil war to defend the Chavez project. It is hard to see a peaceful and smooth way forward.

The U.S. has long enjoyed the luxury of not having major crisis spots in its immediate neighborhood. That could be changing as Venezuela continues the slide toward catastrophe. Policymakers in Washington should probably start boning up on their Spanish.

 

[Old Sweat]

I remember listening to a third world army officer argue quite convincingly, or perhaps sincerely, that the military was the legitimate political opposition that prevented one party dictatorships from prevailing.

 

[a_majoor]

Looks like the end game is finally coming into view:

https://www.washingtonpost.com/news/wonk/wp/2016/01/29/venezuela-is-on-the-brink-of-a-complete-collapse/

Venezuela is on the brink of a complete economic collapse
By Matt O'Brien January 29 

Customers line up to get in for shopping at a state-run Bicentenario supermarket in Caracas May 2, 2014. President Nicolas Maduro is introducing a controversial shopping card intended to combat Venezuela's food shortages but decried by critics as a Cuban-style policy illustrating the failure of his socialist policies. Maduro, the 51-year-old successor to Hugo Chavez, trumpets the new "Secure Food Supply" card, which will set limits on purchases, as a way to stop unscrupulous shoppers stocking up on subsidized groceries and reselling them. REUTERS/Jorge Silva (VENEZUELA - Tags: POLITICS BUSINESS SOCIETY TPX IMAGES OF THE DAY)
Customers line up to enter a state-run Bicentenario supermarket in Caracas, Venezuela. (Jorge Silva/Reuters)

The only question now is whether Venezuela's government or economy will completely collapse first.

The key word there is "completely." Both are well into their death throes. Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon — or ever. Incumbents, after all, don't tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It's no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

That's not an easy thing to do when you have the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez's socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing. Now, there's nothing wrong with that — in fact, it's a good idea in general — but only as long as you actually, well, have the money to spend. And by 2005 or so, Venezuela didn't.

Why not? The answer is that Chávez turned the state-owned oil company from being professionally run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in. That last part was particularly bad, because Venezuela's extra-heavy crude needs to be blended or refined — neither of which is cheap — before it can be sold. So Venezuela just hasn't been able to churn out as much oil as it used to without upgraded or even maintained infrastructure. Specifically, oil production fell 25 percent between 1999 and 2013.

The rest is a familiar tale of fiscal woe. Even triple-digit oil prices, as Justin Fox points out, weren't enough to keep Venezuela out of the red when it was spending more on its people but producing less crude. So it did what all poorly run states do when the money runs out: It printed some more. And by "some," I mean a lot, a lot more. That, in turn, became more "a lots" than you can count once oil started collapsing in mid-2014. The result of all this money-printing, as you can see below, is that Venezuela's currency has, by black market rates, lost 93 percent of its value in the past two years.

It turns out Lenin was wrong. Debauching the currency is actually the best way to destroy the socialist, not the capitalist, system.

Now you might have noticed that I talked about Venezuela's black market exchange rate. There's a good reason for that. Venezuela's government has tried to deny economic reality with price and currency controls. The idea was that it could stop inflation without having to stop printing money by telling businesses what they were allowed to charge, and then giving them dollars on cheap enough terms that they could actually afford to sell at those prices. The problem with that idea is that it's not profitable for unsubsidized companies to stock their shelves, and not profitable enough for subsidized ones to do so either when they can just sell their dollars in the black market instead of using them to import things. That's left Venezuela's supermarkets without enough food, its breweries without enough hops to make beer, and its factories without enough pulp to produce toilet paper. The only thing Venezuela is well-supplied with are lines.

Although the government has even started rationing those, kicking people out of line based on the last digit of their national ID card.

And it's only going to get worse. That's because Socialist president Nicolás Maduro has changed the law so the opposition-controlled National Assembly can't remove the central bank governor or appoint a new one. Not only that, but Maduro has picked someone who doesn't even believe there's such a thing as inflation to be the country's economic czar. "When a person goes to a shop and finds that prices have gone up," the new minister wrote, "they are not in the presence of 'inflation,' " but rather "parasitic" businesses that are trying to push up profits as much as possible. According to this — let me be clear — "theory," printing too much money never causes inflation. And so Venezuela will continue to do so. If past hyperinflations are any guide, this will keep going until Venezuela can't even afford to run its printing presses anymore — unless Maduro gets kicked out first.

But for now, at least, a specter is haunting Venezuela — the specter of failed economic policies.

 

[CougarKing]

A Swiss company halts the transfer of Dornier aircraft to Venezuela: signs that Caracas' financial situation is worse than commonly known outside the country?

Tages Anzeiger

RUAG pulled the emergency brake

The Swiss arms company has stopped the delivery of ten ordered Dornier aircraft to Venezuela.03/31/2016

The third machine has not fully paid the state. Therefore Ruag stopped the delivery of the remaining seven aircraft, such as the corporate headquarters in Bern confirmed. Whether Venezuela can provide the necessary foreign exchange for the remaining seven aircraft still to be seen. The RUAG would lose sales in the tens of millions, but at least Venezuela has paid a deposit on all ten machines. ...

There are several indicators that the country is on the verge of insolvency. Thus registered, the Federal Customs Administration in January record high gold imports from Venezuela to Switzerland: almost 40 tons with a total value of 1.3 billion Swiss francs at the time were flown to Switzerland. Industry experts suggest that the state had to liquefy a portion of its gold reserves to pay for an outgoing government bond.

(...SNIPPED)