OH HERE IT COMES: Venezuela Is Heading for a Soviet-Style Collapse 

Remember last time an oil economy crashed catastrophically?

Anders Aslund writes: Venezuela is not the first developed country to put itself on track to fall into a catastrophic economic crisis. But it is in the relatively unusual situation of having done so while in possession of enormous oil assets. There aren’t many precedents to help understand how this could have happened and what is likely to happen next.

There is, however, at least one — the Soviet Union’s similar devastation in the late 1980s. Its fate may be instructive for Venezuela — which is not to suggest Venezuelans, least of all the regime of Nicolás Maduro, will like what it portends.

Venezuela has been ailing ever since the decline in oil prices that started in June 2014, and there is no reason to think this trend will shift anytime soon. Energy prices move in long quarter-century circles of one decade of high prices and one decade of low prices, so another decade of low prices is likely. Similarly, the biggest economic blow to the Soviet Union was the fall in oil prices that started in 1981 and got worse from there.

“Maduro seems intent on printing money like crazy, so the next step will be hyperinflation.”

But the deeper problem for the Soviet Union wasn’t the oil price collapse; it’s what came before. In his book Collapse of an Empire, Russia’s great post-Soviet reformer Yegor Gaidar pointed out that during the long preceding oil boom, Soviet policymakers thought that they could walk on water and that the usual laws of economic gravity did not apply to them. Soviet policymakers didn’t bother developing a theory to make sense of their spending. They didn’t even bother paying attention to their results. The math seemed to work out, so they just assumed there was a good reason.

This is as true of the current Venezuelan leaders as it was of the Soviet leaders. The Venezuelan government, though it doesn’t claim to be full-fledged in its devotion to Marxism-Leninism, has been pursuing as absurd an economic policy mix as its Soviet predecessor. It has insisted for years on maintaining drastic price controls on a wide range of basic goods, including food staples such as meat and bread, for which it pays enormous subsidies. Nonetheless the Venezuelan government, like the Soviet Union’s, has always felt it could afford these subsidies because of its oil revenues.

TOPSHOT - Demonstrators clash with the riot police during a protest against Venezuelan President Nicolas Maduro, in Caracas on April 20, 2017. Venezuelan riot police fired tear gas Thursday at groups of protesters seeking to oust President Nicolas Maduro, who have vowed new mass marches after a day of deadly unrest. Police in western Caracas broke up scores of opposition protesters trying to join a larger march, though there was no immediate repeat of Wednesday's violent clashes, which left three people dead. / AFP PHOTO / JUAN BARRETO (Photo credit should read JUAN BARRETO/AFP/Getty Images)

But as the oil price has fallen by slightly more than half since mid-2014, oil incomes have fallen accordingly. And rather than increase oil production, the Venezuelan government has been forced to watch it decline because of its mismanagement of the dominant state-owned oil company, PDVSA.

And now Venezuela seems intent on repeating the Soviet folly of the late 1980s by refusing to change course. This is allowing the budget deficit to swell and putting the country on track toward ultimate devastation.

The Soviet Union in its latter years had a skyrocketing budget deficit, too. In 1986 it exceeded 6 percent of GDP, and by 1991 it reached an extraordinary one-third of GDP. Venezuela is now following suit. The Soviet Union used its currency reserves to pay for imports, but when those reserves shrank, the government financed the budget deficit by printing money. The inevitable result was skyrocketing inflation.

It seems as if President Nicolás Maduro has adopted this tried-and-failed combination of fiscal and monetary policy. Venezuela already is dealing with massive shortages as a result of its controlled prices, because the government can no longer afford its own subsidies. But it will get worse from here.

Maduro seems intent on printing money like crazy, so the next step will be hyperinflation. Inflation is already believed to have reached 700 percent a year, and it is heading toward official hyperinflation, that is, an inflation rate of at least 50 percent a month. Read the rest of this entry »


President Maduro Dances Salsa While Venezuela Suffers

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With hunger and violent crime gripping the country and the opposition calling for his head, this is Maduro’s new strategy for winning hearts and minds. That is an uphill battle; most Venezuelans would like him to leave power.

Caracas (AFP) – Venezuelans are running short of food, medicine and patience, but fear not: President Nicolas Maduro is here to cheer them up — by dancing salsa.

“People say I’m crazy for dancing salsa.” 

— President Nicolas Maduro

Grinning under his black mustache, the burly, towering socialist swivels his hips and twirls his wife Cilia Flores in front of the cameras.

“Hands up everybody who dances salsa! Admit it, we’re all crazy!”

“People say I’m crazy for dancing salsa,” he said on one recent broadcast.

“Hands up everybody who dances salsa! Admit it, we’re all crazy!”

With hunger and violent crime gripping the country and the opposition calling for his head, this is Maduro’s new strategy for winning hearts and minds. That is an uphill battle; most Venezuelans would like him to leave power.

“He is ridiculous. It’s offensive. He is laughing at the people. Instead of spending money on television programs, he should be bringing us medicine.”

— Euro Bermudez, 62, coming out of a bank in Caracas after collecting his pension

Wednesday was a case in point as Maduro celebrated his 54th birthday with a live performance by old-school salsa greats El Gran Combo de Puerto Rico.

“What a surprise!” the president exclaimed before taking the first lady for a spin, dancing to the classic “Me libere.”

A former bus driver, Maduro has often sung and danced at campaign rallies.

But his continued capering amid the crisis, and his recent launch of a dedicated salsa radio show, seem like bad taste to some weary citizens.

“He is ridiculous. It’s offensive. He is laughing at the people,” said Euro Bermudez, 62, coming out of a bank in Caracas after collecting his pension.

“Instead of spending money on television programs, he should be bringing us medicine.”

Spoof photo “memes” of Maduro online have shown him dancing in various inappropriate settings: at the scene of a crime or in a long queue for food. Read the rest of this entry »


[VIDEO] Democratic Socialism is Still Socialism

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Democratic socialism. It’s not the same as socialism socialism, because it’s democratic. Right? Or something, right? People are buying that; people buy that now, right? Apparently. As though adding the word “democratic” in front of a word changes what it means. Just because we toss something to a vote doesn’t change what that something is, nor does it alter whether that something is inherently good or bad.

A couple of examples, because I know you’ll ask: Hamas was democratically elected as the government in Gaza – despite the fact that the destruction of not only Israel, but the eradication of all Jews, is in their official charter. Robert Mugabe, or Bobby Mugabe if you prefer, was democratically elected by a loving majority in Zimbabwe. Zimbabwe! How’s that working out?

Venezuela? Well, Hugo Chavez, noted personal favorite friend of Sean Penn, to whom he constantly pointed as being unfairly characterized as a dictator when, in fact, he was blackbookofcommunismdropdemocratically elected as a socialist.

[Order the book “The Black Book of Communism: Crimes, Terror, Repression” from Amazon.com]

Well, how’d that workout for Venezuela? Well, it’s now on the brink of collapse despite it being one of the most resource rich nations in the entire world. Basic things like eggs, milk, flour, and toilet paper are either too expensive for the average Venezuelan or simply out of stock… out of stock, mind you… democratically. I know, some of you will say, “Well that’s not fair, because really we knew all along it technically was a dictatorship.” Ok – that’s fair; let’s move on to example number two.

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Denmark? Ok, here’s the time where you point to an entirely homogenous population about one sixtieth the size of America’s, and you point to that as the blueprint? Ok – let’s go there. This is a place where the middle class can’t even afford a car because of the 180% new-car tax. And the Prime Minister was so fed up with Americans pointing to it as a beacon for socialist success that he felt compelled to clarify, “I would like to make one thing clear: Denmark is far from a socialist planned economy; Denmark is a market economy.”

Sweden? I love Sweden! Ok, great bikini team, and thanks to that country my armoire now doubles as a bookcase. Speaking of which, the founder of IKEA – let’s be honest, the only real cool export from Sweden aside from a few good hockey players – left Sweden because of the stifling high tax rate. So, Sweden – good place, not bad people – but a successful model for a viable economy in today’s global market? Incorrect.

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The fact is that, over time, the greatest enemy of socialism is reality. The reality that human nature will invariably pull certain people toward individualism and success and others toward laziness and collectivism. The tension between the makers and the takers always –  always! – leads to socialism’s inevitable collapse. But I know that I can give you examples of failed socialist economies until I’m blue in the face, and you won’t care. Because at least socialism is inherently more morally altruistic than the evil, greedy capitalistic war mongering seen in the West.

Greed? What’s more greedy than wanting to take from someone else something that you haven’t earned? Unlike capitalism – free enterprise, which can only occur truly through voluntary transaction – socialism can only occur at gunpoint. That’s what it comes down to. If you don’t pay your taxes, once you get through the IRS and the auditing and the lawyers and the PR stunts, people make you give the government your money, increasing amount of your money the more successful you are, or they send in scary men with guns to take you away.

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Now, so long as the people having their stuff taken away at gunpoint are in the minority, and the majority feels that they’ll get to benefit from more said taken stuff, you’ll always be able to win that decision through a popular vote and claim the moral high ground through democracy. Read the rest of this entry »


Nicolás Maduro es Encantador y Persuasivo! Venezuelan President Nicolás Maduro Threatens to Jail Opponents

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Caracas (AFP) – Venezuela‘s President Nicolas Maduro threatened on Friday to jail his political opponents if they follow through on their vow of launching a legislative trial to remove him from power.

Shrugging off a partially-observed strike which the opposition called to raise pressure on him, the socialist president went on the counterattack.

Maduro sharpened the tone in a volatile political and economic crisis that has sparked food shortages and riots in the South American oil producer.

“If they launch a supposed political trial, which is not in our constitution, the state prosecution service must bring legal action in the courts and put in jail anyone who violates the constitution, even if they are members of Congress,” Maduro said in a speech Friday.

Friday’s strike was called after authorities blocked a bid by the center right-dominated MUD coalition to hold a referendum on removing Maduro from power.

After that move, the crisis heated up this week. Opposition lawmakers vowed to put Maduro on trial and exchanged accusations of coup-mongering with the mustachioed president.

Friday’s strike seemed to be only partially observed.

In the capital Caracas and cities such as Maracaibo and San Cristobal, the streets were quieter than normal but public transport was running and banks and some schools opened as usual.

Clashes broke out in recent days between riot police and pro- and anti-government protesters around the country.

Maduro earlier threatened to break the strike by sending the army to take over firms that took part in it.

The center-right coalition’s latest move to pressure the unpopular leftist leader came after anti-government protests drew hundreds of thousands of people on Wednesday.

Maduro vowed to respond forcefully. Read the rest of this entry »


Socialists Enjoying Exercise: Venezuelan President Chased by Angry Protesters 

The confrontation occurred at a routine political event just days after thousands of Venezuelans took to the streets to call for Nicolás Maduro’s ouster.

President Nicolás Maduro was chased at a routine political event by angry protesters banging on pots and yelling that they were hungry.

[Watch in Times Video »]

CARACAS, Venezuela — Nicholas Casey reports: President Nicolás Maduro was chased at a routine political event by a crowd of angry protesters banging on pots and yelling that they were hungry, just days after thousands of Venezuelans took to the streets to call for his ouster, local news media reported on Saturday.

[Read the full story here, at The New York Times]

Scenes from the confrontation late Friday, which also appeared in videos uploaded to social media, captured the attention of Venezuelans, many of whom blame the unpopular president for the country’s food shortages.

In one video, Mr. Maduro tries to calm the pot-bangers by walking among them, only to be surrounded as the furious crowd yells obscenities.

“What is this?” an astounded voice behind the camera asks in one of the video clips.

Mr. Maduro had traveled from the capital, Caracas, to Margarita Island off Venezuela’s northern coast to inaugurate a number of new public housing units and give a televised address.

During the speech, he denounced his opponents’ calls for his removal from office, calling them “vampires” and saying they were preparing for violence.

Foro Penal, a Venezuelan human rights group, said 20 people had been arrested after the protest in the island town of Villa Rosa. Mr. Maduro’s office made no statement about the episode.

Venezuelan politicians wasted little time on Saturday in using the confrontation to advance their agendas. Read the rest of this entry »


As Hunger Mounts, Venezuelans Turn to Trash for Food

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CARACAS, Venezuela (AP) — Until recently, Julio Noguera worked at a bakery. Now he spends his evenings searching through the garbage for food.

“I come here looking for food because if I didn’t, I’d starve to death,” Noguera said as he sorted through a pile of moldy potatoes. “With things like they are, no one helps anyone and no one gives away meals.”

“We’re seeing terrible sacrifices across many sections of society. A few years ago, Venezuela didn’t have the kind of extreme poverty that would drive people to eat garbage.”

— Carlos Aponte, a sociology professor at the Central University of Venezuela.

Across town, unemployed people converge every dusk at a trash heap on a downtown Caracas sidewalk to pick through rotten fruit and vegetables tossed out by nearby shops. They are frequently joined by small business owners, college students and pensioners — people who consider themselves middle class even though their living standards have long ago been pulverized by triple-digit inflation, food shortages and a collapsing currency.

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Venezuela’s poverty had eased during the administration of the late President Hugo Chavez. But a study by three leading Caracas universities found that 76 percent of Venezuelans are now under the poverty line, compared with 52 percent in 2014.

Staples such as corn flour and cooking oil are subsidized, costing pennies at the strongest of two official exchange rates. But fruit and vegetables have become an unaffordable luxury for many Venezuelan families.

“We’re seeing terrible sacrifices across many sections of society,” said Carlos Aponte, a sociology professor at the Central University of Venezuela. “A few years ago, Venezuela didn’t have the kind of extreme poverty that would drive people to eat garbage.”

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While some search through the garbage piles for food they can eat, many more are drawn by the opportunity to fetch a few bolivar bills by rescuing and reselling bruised produce.

On a recent evening, Noguera managed to retrieve a dozen potatoes.

“I’m a trained baker, but right now there’s no work anywhere here. So I make do with this,” he said. Read the rest of this entry »


Venezuelan secret service erased our data, claims journalist

Argentina’s top TV journalist Jorge Lanata has alleged that he was held in the basement of Caracas airport for nearly two hours while Venezuela’s secret service erased his team’s camera, computer and cellphone memories. Only then, he says, were they allowed to leave the country…

via guardian.co.uk.