Sira has long been a proud “Chavista,” convinced that government spending could create a more equal society. Chavez’s government, flush with oil money and billions of dollars in foreign loans, gave her theMadre de Barrio subsidy for mothers in extreme poverty. Another program helped residents to finish houses under construction. Youths from her community received scholarships.So the article goes on to describe the riots at the trough, the rising crime, and the political backlash. Low oil prices are blamed, but this is absurd. How do low oil prices cause the failure of toothpaste to appear on the shelves? Only if oil paid for everything, and there was no organic economy, and in fact, that is what occurred. The number of people in Venezuela who accept the free ride is far more than lower oil prices can support. Ever widening claims on an ever narrowing productive base.
“I always lived for the revolution,” she said.
But many of the welfare programs started by Chavez have dried up, and the nearest store has little more than two-liter bottles of Pepsi and packs of Pall Mall cigarettes. Under Chavez, the government established anetwork of government-run supermarkets that sold basic foods at subsidized prices. But inflation has put even these bargains out of reach for many people. A single kilogram of yucca — about two pounds — now costs about one-third of the weekly minimum wage.
Exactly what we have in USA.
Lower prices of any commodity normally means little to an overall economy, unless the entire economy is based, foolishly, on the commodity. The small business productive, organic economy was wiped out when the Hegemon buried the economy in below-cost subsidized everything. The organic economy died out. Now people, according to the article, travel a half-day to grab rice from the road, upon a rumor that turns out to be untrue. If you feel you have claim on assets, and entitlement due you, this is your future.
Venezuela cannot recover because those who would lead the recovery, the small business person is wiped out. Those who suffer most are the ones who expect the small business person to lose money for the privilege of serving the customers. It is difficult to reason with the entitled.
Now comes China, accused of holding talks with Venezuela's opposition party, to explain their actions:
With Venezuela facing a deep economic crisis and political stalemate, Beijing's loans to Caracas have become a heated topic of discussion at home and abroad, especially after the Western media reported that China recently sent an "unofficial envoy" to meet with Venezuela's opposition party. Such reports are not confirmed by Chinese Foreign Ministry.As to China loans to Venezuela, well, Venezuela is "good for it."
The debt problem Venezuela faces is a result of its liquidity crisis, not solvency crisis. This means the huge loans China has given to Venezuela, contrary to what some claim, are retrievable. Besides, Venezuela's abundant resources and China's comprehensive national strength are enough to ensure the long-term safety of these loans.Well, yes, to get repaid, Venezuela needs to sell oil, and that requires infrastructure.
Indeed, Venezuela now lacks the capability to repay foreign loans. By the end of September 2015, its foreign debt had reached $148.83 billion, of which $65 billion were loans it had taken from China since 2005. Compounding the problem is the fact that Venezuela has only $15.6 billion in foreign exchange reserves.
But China has to specify that some of its loans to Venezuela are meant for the latter to maintain oil and gas production and exports, and promote the formulation of some corresponding management methods. Under pressure to repay the principal and interest amounts for its imports and matured debts, Venezuela has used a very small part of its oil export revenue to maintain oil production and transport facilities. So, to ensure Venezuela's largest source of fiscal revenue is not interrupted and prevent a lose-lose scenario for both creditor and debtor, it is necessary for China to specify that some of its loans are meant for Venezuela's oil production and export.O dear, the government took the loans meant to maintain oil export infrastructure and spent it on keeping the false economy alive a bit longer. Fiesta! So China is finding socialists yet again unreliable, and is working with the opposition party with a view to protecting Chinese accounts receivable.
So it is in USA, we have wiped out our organic market, and let rot our infrastructure to produce. From Boeing to the military Google to the welfare mom and the disability scammer, the claim on the asset base far exceeds the capacity of the asset base to satisfy those claims.
Steer clear of the entitled poor and suffering, their lot is self-inflicted. Don't work for Boeing or Google or take money from the Hegemon, start up your own business and work with the others who will organically sell toothpaste when there is none to be found at Safeway or other Hegemon run entities.
With the deepening of its economic and social crisis, Venezuela is likely to grant foreign capital, including Chinese capital, access its oil and gas production and transport to help create favorable conditions for possible debt-to-equity deals with China, its largest creditor.Yes, China needs oil. Venezuela owes on loans it never needed to take. But there you have it. Asset prices fall, the loan principals and interest stay fixed. Precisely the fix into which most Americans have put themselves. Get your debt to zero. WE are in deflationary times.
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