Welp folks, here it is…
Why am I doomsaying?
ZeroHedge has the roundup…
- 28% Inflation Rate
- Blackouts lasting weeks at a time
- Foreign reserves down 44% to $29.5 Billion
- Concern over default of $50 Billion in Securities
- President Kirchner is MIA, and has been since November
- Peso has dropped 12.7% to 1:7.99 as of 0746 CST (1346 UTC) 2014-01-2
Oil exports, which make up 95% of Venezuela’s exports (there is a reason Venezuela is in OPEC), are down due to the mismanagement by the government. While this is not much of a concern due to new exploitation of oil reserves in Texas and North Dakota, Venezuela still supplies ~8% of US Crude. They also have to import ~2/3 of the food needed to feed their people, which relies on the sale of oil to obtain the foreign currency they need to make the purchases in.
After ordering prices slashed for all consumer goods and nationalizing at least one national electronics chain, there has been widespread looting and rioting. Maduro ordered troops into the streets not to suppress the violence, but rather to force those who still have consumer goods to sell to do so at prices well below any profit margin. With retailers forced to take a loss to operate, many have stopped importing new goods and are just waiting to go out of business.
Although Venezuela still – technically – has elections, the legislature has given Maduro sweeping powers to deal with the crisis by executive order. Maduro has even gone so far as to create parallel government functions to prevent opposition members who get elected in spite of political intimidation and violence from having any say in the government.
Remember what I said about the troops being placed on the streets to enforce Maduro’s executive orders? As they become increasingly unpopular, the military is becoming the face of that unpopularity. And because the armed forces have a habit of not taking part in oppressing their countrymen and even less of a stomach for it, Maduro has created his own version of the Ukrainian Berkut and the Iranian Basij in a new Pro-Maduro militia with civilian gangs known as “colectivos” for an auxiliary force.
And how is Maduro paying for all this? The same way Argentina and the United States are paying for their spending. He’s printing it out of thin air. The Bolivar (and trust me on this, Simon Bolivar is spinning in his grave right now) has been devalued 44% by the government. Food and toilet paper shortages are expected to get worse as a result.
Fears about an Argentine collapse are contributing to shaky investor confidence in Brazil. Brazil already has problems with inflation and a shrinking trade surplus (hey, maybe they could send some of that Oil POTUS gave them $2 Billion to drill for!), so they do not need the “emerging market contagion” problem right now. But, as one of Argentina’s few partners right now, any problem in Argentina is going to have a ripple effect in Brazil.
I refuse on general principles to link to dedicated government propaganda websites, so I will not be including the link to the Kremlin’s English language propaganda mill. Want my opinion on what is coming in Ukraine? Check here.
Remember this post? It appears the bank runs have begun, and banks are shutting their doors. This is what happens when you don’t allow the market to correct itself, Beijing. With $23 Trillion in the credit bubble, China is looking at serious trouble. It is believed this is the reason China pulled 321,500 ounces of gold out of JP Morgan Chase the other day. That is worth ~$407,983,500.00 if you were wondering. Not quite enough, is it. At least they have manufacturing to keep them afloat. Oh, wait, that’s contracting too.
Well, at least Japan is doing well. Wait, what’s that? The Nisei just saw its largest drop in 7 months?
I’m not even going to pretend here. Turkey’s Lira is in a race with the Argentine Peso and the Venezuelan Bolivar for worst legitimate currency to hold.
European unemployment is a serious problem. French unemployment is up for the 9th straight quarter to a 16 year high. Italy has hit a historical high of 12.7% (wonder how many games they play with their numbers…). And Spain has hit 26.7%. Greece, which isn’t mentioned in the ZeroHedge round up, seriously considering enslaving and possibly exporting their youth. Meanwhile, the Baltic Dry Index – a measure of the wealth being shipped around the world – has hit the lowest post-holiday start in its history.
9. United States.
Intel has announced plans to cut 5000 jobs. Retailers saw the worst holiday season since 2008 this year. To make matters worse, we have yet ANOTHER debt ceiling fight due in the coming month and the DOW dropped 470 points combined between Thursday and Friday.
Maybe we should have been listening to Rick Santelli all along…