How Venezuela Reached the Edge of Chaos, by , 1/25/19.
We are living in an Era of
Busted Dreams. The Bolivarian Revolution is just one of them. When we left you
yesterday, it looked like the government of Venezuela was in a fight for its
life. The Venezuelan economy is falling apart, with 1,300,000% inflation and a
mass exodus of the population. And a political rival of President Nicolás
Maduro has proclaimed himself the legitimate president and gotten almost
immediate recognition from the U.S.
This provoked a
countermove by Maduro, who gave U.S. diplomats 72 hours to get out of town. It
also led to a show of force and solidarity by the country’s military – who
stood shoulder to shoulder proclaiming their everlasting loyalty to Maduro. They
will stand by him until the end… or until they change their minds, whichever
comes first.
The top brass has gotten
rich from Maduro’s government; they get first dibs on oil revenues… and, some
say, the illegal drug money, too.
Bloodsuckers, dictators,
and the Deep State do not give up easily. They owe their power, money, and
status to the incompetents currently running the country. They’re not about to
stand aside and let another bunch of incompetents take it away.
But we’ll come back to that
in a moment… and try to connect a few sordid dots…First, a quick update on our
travel schedule. Our delightful sojourn in the USA amongst kith and kin is
coming to a rapid end. On Sunday, we take off for Florida and Nicaragua.
The latter has its own busted
dream, with the Ortega government holding on to power against widespread
opposition. What the country doesn’t have is runaway inflation.
Curiously, it was an
effort to protect the currency and the economy that touched off the current
cycle of discontent. The Nicaraguan feds raised taxes!
Or, to be more precise,
they upped contributions to the Social Security system in order to protect it
from insolvency. Which goes to show
something. We’re just not sure what.
But we’ll give you a
report from Nicaragua when we get there. The country has the most beautiful
coast, and some of the friendliest people, in the world.
We’ve invested millions… and
nearly a quarter of a century… developing a coastal enclave there, helping to
make it a comfortable, modern, and agreeable place to live. Here was a rich
country… the fourth-richest in the world in 1950. Now, it is on the edge of
chaos, civil war, and starvation. How did that happen?
Are the Venezuelans
stupid? Are they shiftless? Why did they allow a crackpot politician to ruin
the country?
As for Mr. Chávez
himself, now deceased, he was lively, intelligent, and charming, with a few
quirky ideas… such as his belief that the moon landing never happened… and that
9/11 was an inside job (a view shared by many, both north and south of the Rio
Grande). But he was neither crazy nor dim.
As for the rest of the
Venezuelans, the few we’ve known personally were among the smartest,
best-educated, and most industrious people we’ve ever met. Now, they are living
in Spain or Miami… forced to flee Caracas to avoid either the politics of it or
the poverty.
So what gives? And what
can we learn from it?
Rushing ahead: Watch out
for fake money. First, it distorts prices, misleads investors, and lowers
output.
Second, sharing it out
among themselves and their cronies, the insiders use it to transfer wealth from
those who earn it to those who steal it.
Third, fake money funds
the expansion of government itself – bending more and more real resources
towards unproductive government activities.
Finally, when the crisis
comes, property remains… corporations may or may not survive… and real money is
still valuable. But fake money becomes worthless.
It would be a shame to
see it blow up. But we don’t pretend to control events. We just watch… wait…
and try to understand. Which is why we’re watching the action in Venezuela with
keen interest. It’s not every day that we see a fake money system get what it
deserves!
Almost all Latin
American countries have similar demographics; typically, they have a wide gap
between rich and poor. The chasm is not merely financial. It is racial and
social.
The upper classes are
usually more “European” than the masses. This is a source of tension, of
course. And mischief.
“Populist” leaders, such
as Cuba’s Fidel Castro, Bolivia’s Evo Morales, Nicaragua’s Daniel Ortega… and
even Argentina’s Juan Perón… go for the gap.
They speak to the poor
and middle classes and use them to get control of their governments. Then, they
reward the little guys with free housing, free food, free education, free
medical care, or subsidized fuel. The big guys get contracts, bribes, and
payoffs.
First, the populist
leader comes into office promising to rob the rich. But after a few years, he
and his friends are the rich. And the rest of the wealthy have
either cozied up to them or fled the country.
Then, they turn to
credit. But who would lend to a Latin American, socialist government? Most
countries are protected, most of the time, by their own poverty. They just
can’t afford too many giveaways.
But Venezuela had
something the rest of them didn’t: collateral. Venezuela floats on a sea of
oil. It was the world’s fifth-largest oil exporter in 2000. The price was only
$30 a barrel, but oil made up 85% of the country’s exports. And over the next
seven years, the country was to enjoy a bonanza, as the price of oil rose
nearly five times.
Then, in one especially
knuckleheaded move, Chávez put a leftist professor in charge of the oil
industry. And then, in 2015, the price of oil collapsed.
Now, the dream is
busted. Chávez is gone. Maduro may be gone soon, too. It may not be the end of
the Bolivarian Revolution. But the end can’t be too long in coming.
Norb Leahy, Dunwoody
GA Tea Party Leader
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