What happens when you mix poor
governance, collapsing oil prices, and drought? You get a nation in
crisis. I am not talking about the Middle East, but a country closer
to home. At least for us here in the United States. That country is Venezuela. What seems to be happening is a perfect storm
of consequences resulting from policies put in place years ago, mixed
with an ill conceived revolution.
Venezuela, with its large oil reserves,
chose to rely on hydroelectric power for domestic energy while it
exported its oil. It seemed like a good idea at the time. However,
now they are facing a drought which has resulted in lower electricity
production and power outages. The price of oil collapsed below $40
a barrel resulting in a decrease in income from exports. And a
socialist revolution started by Hugo Chavez has left the country with
shortages of just about everything.
I thought it might be time to take a
peek at a situation that may be a lesson to us all. Here are a couple short news clips.
This piece is the first part of a debate aired on France 24 about the crisis. It's somewhat informative on the political situation regarding President Maduro, the current President, and people's feelings. Of course, there are those who try to blame the United States for some of this. The interviewer for France 24 and at least one of the panelists seem intent on putting that spin on the story anyway.
If you would like to see the rest, here is the second part of that show. I don't think that the United States is at fault line is working for others.
41 comments:
I just finished watching the Fareed Zakaria special "Why They Hate Us". It was interesting and there were some good points made. He seems to think a lot of it has to do with the political situation and the economic stagnation in the ME. That has also given the radicals an opening in their fight against modernity.
The link to Sayyid Qtub was with regard to his writing about American life and culture, which Osama bin Laden read.
One of the people interviewed was the radical Imam Anjem Choudary and Fareed managed to hold his own against him. But there is no reasoning with Choudary.
I will check to see if I can find a link to a copy of it online, but since it just aired it might not be right away. I would recommend watching it. But I am not sure that Fareed got to the bottom of the cause yet, though.
Interesting videos. I'm currently only on My iPad so excuse bad writings from me. Microsoft decided to auto install Windows 10 on My PC and IT crashed as a result.
I would lay the blame with regards to Venezuelas problems on their corrupt commie regime first and foremost. Then it's a fact that the US dislikes that regime and does nothing to help IT and maybe something to oppose it, but all in all it's their own leaders WHO got them into the real mess in the first place.
"The problem with socialism is that Sooner or later you run out of other peoples money" -Thatcher.
Clinton's left wing is preparing to abandon Bernie and sidle up to Hillary.
It's true that the US doesn't particularly care for the government in Venezuela, but you are right Marcus, it seems to me that the policies put in place by Hugo Chavez in nationalizing industry is a critical factor in this mess. The collapse in oil prices doesn't help. On top of that you apparently have corruption infecting the whole process. In the one video where they talk about oil smuggling by forces of the government itself kind of reminded me of some countries in the Middle East.
I heard somewhere that 1 in 5 Bernie supports are talking about voting for Trump if Hillary wins the nomination.
But Trump has a little problem.
Michael K. Vlock, a Connecticut investor who has given nearly $5 million to Republicans at the federal level since 2014, said he considered Mr. Trump a dangerous person.
“He’s an ignorant, amoral, dishonest and manipulative, misogynistic, philandering, hyper-litigious, isolationist, protectionist blowhard,” Mr. Vlock said.
Mr. Vlock said he might give to Hillary Clinton instead, describing her as “the devil we know.”
“I really believe our republic will survive Hillary,” he said.
"supports" should be "supporters"
"I heard somewhere that 1 in 5 Bernie supports are talking about
voting for Trump if Hillary wins the nomination."
In 2008 Hillary had a contingent of die-hard supporters, who called themselves "PUMAS" for reasons I've forgotten, who were way more committed to bringing down Obama than are Bernie's supporters today committed to Bernie. They insisted that Obama "stole" the nomination because he got it on the first round on the basis of the Superdelegate votes (he didn't have enough voted delegates to get the nomination; neither did Hillary; I think Obama had more than she did, but they contested that too on account of Obama out-organized Hillary in several caucus states, which they didn't think oughta count on account of they'd lost ‘em) They came ‘round before it was time to vote in the general. Bernie's supporters ain't nearly as virulent as were Hillary's supporters in 2008.
Trump will be lucky if he gets the customary 10% of Democratic voters to defect. He'll be lucky if he gets 10% of the Bernie voters to defect.
What I will be curious to see is if Republicans defect and vote for Hillary in significant numbers.
I'm expecting a reduced Republican turnout instead. They've been working hard for ten solid years to rile up the Hillary hate. It'll be hard to just shut it off in a couple of months.
Lynnette: " it seems to me that the policies put in place by Hugo Chavez in nationalizing industry is a critical factor in this mess. The collapse in oil prices doesn't help."
The high oil prices were the only reason Chavez could deliver his promises to the people and retain their support. Now they are pissed at Maduro but he could have continued to deliver if he had had the same purse as Chavez.
It's basically the same in Saudi, relating to your last blog post here. If the Sauds can continue to deliver what the populace in KSA wants they'll probably stay in charge. If not they would face revolution and supression of that revolution - a violent spiral.
Saudi (well the rulers) are in a better place because they have larger oil output (eve if Venezuela by some have larger reserves), way more financial reserves to draw on in times of low oil prices, and better repression tools against dissidents. Also there are (as of yet) no outside powers who favour audi dissidents - which there are in Venezuela - namely the US.
So, what happened at this military base?
Russia is denying reports that ISIS struck and destroyed a significant amount of its military equipment at an important military base in Syria.
A media outlet affiliated with the terror group claimed on May 15 that ISIS hit the strategic T4 base in central Syria between the cities of Homs and Palmyra.
The global intelligence firm Stratfor also released a series of images that purport to show damaged aircraft and supply depots at the base, which the group calls one of the "most important" in the country.
It's basically the same in Saudi, relating to your last blog post here.
It reminded me of Iraq and Iran as well.
I just saw in my paper the other day that Bridgestone is pulling out of Venezuela, selling out to a local company. They follow others who have done the same.
When the multi-nationals start pulling out you have to start to worry that there is nothing being put in place to rectify the problems.
Saudi (well the rulers) are in a better place because they have larger oil output (eve if Venezuela by some have larger reserves), way more financial reserves to draw on in times of low oil prices, and better repression tools against dissidents.
KSA perhaps have enough to weather the low oil prices longer than Venezuela, but they too will start to hurt if the prices stay too low too long. They already are tightening purse strings, which may prove problematic for the current rulers.
I'm expecting a reduced Republican turnout instead.
I can see that happening too.
The meaning of jihadist silence on EgyptAir crash
The more sinister but less likely explanation is that a terrorist group has figured out a novel way to attack aircraft and is concealing its involvement in order to replicate the attack elsewhere. We saw this kind of covert activity in the 1995 Bojinka plot. The bombing of Philippines Airlines Flight 434 in December 1994 was not claimed because the planners hoped to use an improved version of the same device in a larger attack targeting 10 trans-Pacific airliners.
Actually, this never occurred to me as so many groups seem intent on publicizing their "work".
The State Department's Inspector General has issued his report on the Clinton e-mails. He's pretty hard on her with the adjectives, but ain't so much eloquent in the way of nouns. Invective without facts; outrage for its own sake. She may have made a mistake in earlier suggesting that the IG was less than impartial in the matter; now it's turned into what's been elsewhere described as 'a bureaucratic pissing match'
Now Hillary just needs to get past the FBI investigation.
Lynnette: "I just saw in my paper the other day that Bridgestone is pulling out of Venezuela, selling out to a local company. They follow others who have done the same."
I read that Coca Cola has been forced to stop producing Coke in Venezuela due to the fact they can't get hold of (enough) sugar. For the moment they continue to produce drinks with no sugar in them.
I feel this crisis is at its core a result of political mismanagement. What they should have done in the heydays of high oil prices was save (some), pay off debt and invest in the future. What they did was launch popular entitelment schemes to buy the support of the majority. When oil tanked they got into trouble quick. The only excuse I can think off is they couldn't foresee a drop in oil prices as severe andd quick as the one that took place.
From what I'm reading on the right-winger sites, they really like adjectives, one describing the IG report as ‘extraordinarily damaging’. So, ‘pears there's some difference of opinion there as to how important adjectives might be, and whether they can carry ‘nuff weight on their own.
Here in Sweden the main problem is debt. Huge volumes of debt, especially in the private sector and not so much among companies (real estate companies excepted) but in households.
Our former finance minister said just the other day it was not a question of if but when our debt bubble implodes. He was lauded as the best finance minister in Europe just a few years ago. Our "finance department" who have been worried for quite some time but lack the autority to do much more than raise the alarm today gathered the 4 major banks and the 4 major housing mortage companies for a crisis meeting.
Would you believe me if I said the total debt in our housing market just hit a short snag in the 2008-2009 financial crisis but since then continued to grow at 8% PA, when salaries grew only 2%? It's true. And 8% PA for several years is a HUGE increase.
The levels of debt to GDP and more importantly debt to earnings are way worse in Sweden today than they were in the US in -08, much worse even than they were in the UK at that time.
The politicians have been doing zilch for a long time, because it was beneficial when they were in office not to try to adress the problem. Much like in Venezuela they pushed the risk of economic crisis down the road. Now we are probably close to a reckoning.
Sweden is also, surprisingly to most, a nation with one of the higest percentages of GDP rooted in the financial sector. Our banks are huge compared to most countries when factored by GDP. So a crisis in that sector will hit really, really hard.
My best guess is you will read in iternational news about the collapse of the swedish economy within a few years time. The timing is the hardest thing to predict. But the real problems could start to happen in just a few months time and once it starts it will gather momentum and grow like a snowball going downhill. Or it will take a few years more before the iinevitable happens - I don't know.
Myself I have taken what precations I feel I can. Paid off all debt, even the student loans I had, in order to be completely sheltered from any spikes in interest rates. I own my home, have low living costs, and feel pretty sure I will retain my job.
Now if I were to speculate and only look at money I might be even better off selling my home right about now and finding a place to rent. Then buy back when the market has crashed. But not everything in life is money and I really like my home, so I stick with it even knowing the market value of my home is bound to tank with the rest of assets.
Lee: "Now Hillary just needs to get past the FBI investigation."
Well, she will also have to get past all allegations and unsubstantiated rumors and trash talk.
The aim from opponents isn't to get a conviction of Hillary for any illegality (even if that would be the icing on the cake) but to portray her in a bad way. That can still be done even if she's formally excused from any wrong doings.
Marcus,
Does Sweden have anything like our FDIC (federal deposit insurance)? Here the federal government insures depositors for, it used to be $100,000 but I think it's now $200,000, in deposits in a bank. So if a bank goes under you will still get your money out if it is under that limit. If your banks have serious problems it would be wise to keep your money in one that is insured in such a way, if it exists there, or move it to a multi-national bank with deeper pockets.
I know, a house is more than just the monetary value put on it. If you are confident in your job I see no reason to sell for the ready cash. Having a reliable job is far more critical, unless you are worried about other factors in your location, such as crime.
Venezuela is a scary reminder of what can happen when you have poor governance. It doesn't just happen in the Middle East.
I do worry about the direction my country is taking with this flirtation with a candidate like Trump. That quote from Micheal Vlock in my earlier comment puts it quite eloquently. As a woman I truly don't trust or like the man at all. He harks back to an era I would prefer not to relive in my lifetime. As much as I don't like some of the things in Hillary's past I tend to agree with Mr. Vlock that we can survive her. I'm not so sure about Trump.
Quick drive-by ...
Re: Venezuela vs. Saudi...
Venezuelan oil is quite different from Saudi oil. It is more expensive to get out of the ground, difficult to transport by pipeline, and a lot more expensive to process. It is heavy sour oil, high in sulfur and vanadium, and has to be diluted with naphtha or other diluents. As such, there are raw inputs other than the crude oil itself, which Venezuela has to buy. And therein lies a problem, because Chavez shitted on his own doorstep by appropriating assets of foreign companies a number of years back, and now the currency is shot to shit there aren't many people queuing up to trade for Venezulan oil. That means the infrastructure continues to deteriorate and the problems multiply. Earlier this year PDVSA literally went to foreign joint venture partners with begging bowl in hand. Don't be surprised to see Venezuela's socialist elite have a sudden change of heart in the next couple of years, and open its oil up to IOCs on significantly more attractive terms.
That's not to say Saudi doesn't have major problems too. Its oil is cheaper to access, and they have a vastly bigger financial cushion. But they are burning through it at a frightening rate, so major changes are afoot in the economy. Will be interesting to see how that pans out. Some are talking about opening the country up to tourism in a major way. Right now it's hard to see golf enthusiasts flocking to a country where there are still public floggings and executions. There's no easy option for King Salman whether he turns out to be a reformer or a hardliner -- he's caught between real world economics and domestic conservatives. However, the privatisation of parts of Aramco suggest the Saudis may be deadly serious about a fundamental reorganisation of the economy.
Marcus -- did anyone ever doubt that the Swedish bubble has to burst some time? I think low interest rates are likely to drag on for quite some time, so there may be plenty more air in the bubble by the time it pops, but that'll just makes things worse in the long run. I'm sure there are plenty of circumstances particular to Sweden that I don't understand, but all bubbles end up the same eventually.
I've been following the Australian bubble for some time, and it is scary how identical the noises being made by the various vested interests are to those heard in Ireland in 2006 just before the bubble popped: the fundamentals are sound, the demographics guarantee continuing demand, there is a housing supply shortage, loan-to-income multiples aren't really batshit insane because blah blah blah. In fact, the evidence is mounting that some segments are vastly oversupplied and there are swathes of new apartments sitting empty. The problem with a bubble is that it only takes one obscure factor (which may be an internal or external shock) to turn sentiment bearish, and then it's curtains. The first thing to watch for is a dramatic reduction in sales volumes and increase in time-to-sell. There may not be any noticeable decrease in prices initially, in fact that can take years. But the slowdown is the sign that the roadrunner has overshot the cliff edge and is scrabbling for traction in empty space.
P.S. If it's any consolation, the USA looks like it's inflating bubble 2.0 also. According to some, there has even been a return of subprime. In theory the risk of contagion from US banks is more contained this time round, but I also wouldn't underestimate the incompetence of the powers that be. In any case, it's still true that "when the US sneezes the world catches a cold" so the threats to international bubbles can come by routes other than the banking sector.
And finally ...
I see Trump is now a practical certainty for an uncontested Republican nomination. How did that happen? Just a few weeks ago we were speculating that he almost certainly couldn't make it, and that he'd be deposed at the convention in any case. Now he's a shoo-in with five primaries still to go!
I'm still in no doubt that he's the next president. Up until now Hillary has still had to fight a rearguard action against Bernie. Meanwhile The Donald has had time to sharpen his weapons against "Crooked Hillary". Will be interesting to see how ugly it gets.
P.S. In case anyone is interested ... here's an Australian TV production about their housing boom and how the slowdown may already be under way. Like all bubbles where the writing is on the wall, the remaining hope is for a "soft landing" -- a forlorn hope since it is practically unknown in property bubbles. We had an uncannily similar programme aired in Ireland in 2007 just as the prospect of a crash was beginning to dawn on people. Just like then, most of the popular reaction has been to scoff at the bearish attitude.
Trump now has enough delegates to be declared the presumptive nominee for the Republican party. It will become official at the convention.
How did that happen?
Very good question. It seems that American voters, like so many before them, are still susceptible to a snake oil salesman.
Trump has now offered to debate Bernie Sanders for $10 million. He says it would garner huge ratings. I am afraid he is probably right
P.S. In case anyone is interested ... here's an Australian TV production about their housing boom and how the slowdown may already be under way.
I just finished watching that. Very interesting. It's amazing how many things in that show reminded me of the US.
If it's any consolation, the USA looks like it's inflating bubble 2.0 also.
Maybe for Marcus, but not for me! Right now the market is still not quite right. You have many people who would like to move but are afraid to put their house on the market because they have not been able to find a new home to move into. They are snapped up quite quickly. Because of that there is a seeming shortage of starter homes for people to buy.
But what's happening in Australia is truly scary.
However, the privatisation of parts of Aramco suggest the Saudis may be deadly serious about a fundamental reorganisation of the economy.
One thing I will have to give the House of Saud credit for is their ability to land on their feet. Whether or not it will work this time, only time will tell.
Greetings from Prague. I'm on a short holiday in this great city. Just had a sampler platter of 10 different beers in a beer hall for about $10. Nice.
Yes Lynnette our deposits in most Banks are insured by the government up to €100k.
Pete: "Marcus -- did anyone ever doubt that the Swedish bubble has to burst some time? I think low interest rates are likely to drag on for quite some time, so there may be plenty more air in the bubble by the time it pops, but that'll just makes things worse in the long run. I'm sure there are plenty of circumstances particular to Sweden that I don't understand, but all bubbles end up the same eventually."
In fact i think the vast majority outside sweden and a plurality in sweden have no idea about the collapse thats coming. And I disagree theres much, if any, more air to blow into the bubble. It's probably blown up as much as it can get right now. The only question is when it pops.
‘has an idea’ ≠ ‘has no idea’
Seems like a yes/no proposition. I'm wondering how one gets a plurality off of that? What's the third option?
I don't know if any of you remember the story of the Iraqi boy who was burned and subsequently came to the States with the help of CNN. But here is an update of what has happened with him since then.
"Russia is denying reports that ISIS struck and destroyed a signi-
ficant amount of its military equipment at an important military base in
Syria."
Afghanistan in the west.
For the Russians Afghanistan 2.0.
Greetings from Prague. I'm on a short holiday in this great city.
I've never been. Are they having problems with migrants as well? If so how are they handling them?
Just had a sampler platter of 10 different beers in a beer hall for about $10. Nice.
I'll say. That's cheap.
Say what?!
The leader of a Pakistani Islamic council has proposed a bill that allows husbands to "lightly beat" their wives as a form of discipline.
In the 75-page proposal, Mohammad Khan Sheerani suggests a light beating is acceptable should the need arise to punish a woman. The proposal bans forceful beating, saying only a small stick is necessary to instill fear.
Here wife beating is a crime. I would run, rather than walk, far far away from someone who held those beliefs.
Lynnette
"I've never been. Are they having problems with migrants as well? If so how are they handling them?"
No they don't get them to begin with because they secure their borders and most importantly do not hand out social wellfare to just about anyone. There arent even any begging Roma here even though The Chech Republic is much closer to where they come from. Because the Chechs put em on a bus and drive em to the border and then thats it.
"I'll say. That's cheap."
I region that even in the grand square where all tourists go the prices are about half of those in Sweden. If you get away from the tourist areas and look up the spots locals go to it's really cheap.
I like Prague, but the touristy areas get really seedy at night. Prostitution seems to be the major industry, perhaps not surprisingly given its reputation as a cheap destination for stag parties and the like. Fortunately I was at a wedding there, so didn't have to hang around the centre of Prague too much. The old town (Staré Město) and the other side of Charles Bridge (Karlův Most) are very pretty. Have some friends from the countryside too, and one of my siblings spends every August there. The Irish and Czechs seem to get on very well, probably something to do with a shared melancholy coupled with a fondness for staring into the bottom of a beer glass ;-)
Another article on Venezuela's electricity supply fiasco.
They blame the drought on El Nino, which may very well be the case now, but in the future it may be due to climate change. As the article said, it is wise to diversify the power supply.
Well I'm in Prague with My uncle whos 76 yo so were back at the hotel before thingsbturn seedy. I did notice an abundance of stag parties but have seen no signs of prostitution. That said Prague is from what ive read something of a sex tourism destination. So is Thailand that i also have visited many times but if it's not on ones agenda it's Easley avoided.
Swedes and the Irish also seem to blend very well. Probably for much the same reasons you Menton Pete..
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