Venezuela’s Rock-Bottom Getting Closer and Closer
Not too far in the future Venezuelans will look back on these days with nostalgia. If Venezuela was an airplane, impending crash signals would be lighting up like a Christmas tree in the cockpit, while back in the cabin, passengers might be ordering a second cocktail to blank out the worrisome bumps they feel. But when the plane crashes, it takes everyone aboard on a trip to hell that they didn't know they paid for. Here's a look at the cockpit signals:
Oil production has been falling while the much-touted natural gas resources are not being produced at all. Agricultural and manufacturing production is virtually gone. The wealth creation capacity of the nation has been disemboweled. This has caused massive importation of goods with no dollars to pay for them, driving the currency to 42/$ in Cucuta and emptying miles of store shelves, protected from view only by electricity blackouts. Printing more devalued currency has driven the implied annual inflation rate to 249.3% according to the economist Steve Hanke, not the 35.2% officials propagate, which is still the highest in the Americas.
As if the slide toward hyperinflation were not enough, Venezuela's streets are plagued by one of the highest murder, kidnapping, and extortion rates in the world, which are under-reported and rarely investigated, no less prosecuted. Corruption romps merrily through fields of cocaine, government procurement contracts, and money laundering. A 660% profit can be made by selling dollars in Cucuta. The newly super-rich and well-connected Boligarchs pop up in the same places where children go hungry and the poor get poorer. This is a revolution, all right, but not the one that was advertised.
Meanwhile, Venezuela has turned to China for USD 20 billion in social and oil projects in Venezuela, so they got that going for them. (Soon China will own the U.S. and Venezuela.) They are also considering using gold to boost liquid reserves.