Saturday, January 30, 2016

Venezuela is on the Brink of a Complete Economic Collapse

WaPo even gets it:
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.
How did this happen? Typical nutjob socialist policies. WaPo again:
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.

This has been followed by crazed central bank money printing:
 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 that Venezuela's currency has, by black market rates, lost 93 percent of its value in the past two years...
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.



  1. And of course no interference by the West using their financial weapons???

  2. The U.S. isn't responsible for their bad policies.

  3. Wags ^ needs to learn what The Economic Hitman ~ John Perkins ~ has to say