GLOBAL ECONOMIC MELTDOWN: Precursors To A Global Financial Collapse - Venezuela On The Verge Of Default As Oil Prices Fall!

© Isaac Urrutia / Reuters

February 12, 2016 - VENEZUELA - The country with the world’s biggest crude reserves could default on its $122.9 billion external debt as early as this month. The plunge in oil prices puts Venezuela’s ability to pay creditors in doubt.

Caracas is scheduled to make a $1.5 billion external bond repayment on February 26.

Despite the crisis the country has managed to pay bondholders on time so far. But with 96 percent of the Venezuela’s export earnings coming from crude sales, the drop in price from over $100 per barrel in mid-2014 to the current $30 per barrel has wreaked havoc on the country's economy.

 

"“The question is not if Venezuela will default, but when they will default.”https://t.co/f6faBHPqOa pic.twitter.com/UQ1Ah044z6

— Ian Talley (@IanTalley) February 8, 2016

In January Venezuelan President Nicholas Maduro claimed the country will be able to service its debt obligations despite low oil prices.

“Venezuela has ethics, morals and commitments, first with the people and the fatherland, but also has the commitments that the republic has honored and will continue honoring,” he told the Wall Street Journal.

 

#Venezuela Petroleos de Venezuela bonds due May 16, 2024 now trading below 40 pic.twitter.com/htC90JyXMT

— Kamakura Corporation (@KamakuraCo) January 21, 2016

Venezuela currently holds a CCC credit rating from Standard & Poor with its foreign-currency assets at $35.5 billion in the third quarter of 2015. The country’s ability to pay is increasingly in doubt as foreign exchange reserves are rapidly running out.

Venezuela’s economy contracted by 10 percent last year, inflation reached 141 percent between September 2015 and the year-end, according to government statistics. The International Monetary Fund (IMF) predicts further recession. - RT.

GLOBAL ECONOMIC MELTDOWN: Precursors To A Global Financial Collapse - The ENDGAME Begins In Venezuela; The Country Is On The Brinks Of A SOCIAL EXPLOSION That Only A Negotiated Transition Can Prevent!

February 6, 2016 - VENEZUELA - At 9.30am on a Thursday six Venezuelans wait for a guided tour of the former military museum that is now the mausoleum of Hugo Chávez, the country’s populist president of 1999-2013. Across the road around 120 people are queuing for food at government-controlled prices from a state-run supermarket. The food queue starts at 3am. “Sometimes there’s food and sometimes there isn’t,” one would-be shopper says.

In this district of Caracas, once a Chávez stronghold, his aura is fading amid the struggle for daily survival. Long gone are the days when he used a massive oil windfall triumphantly to impose his “Bolivarian revolution”, a mishmash of indiscriminate subsidies, price and exchange controls, social programmes, expropriations and grand larceny by officials. The collapse in the oil price has exposed the revolution as a monumental swindle.

The government has admitted that in the 12 months to September 2015 the economy contracted by 7.1% and inflation was 141.5%. Even Nicolás Maduro, Chávez’s hapless heir and successor, called these numbers “catastrophic”. The IMF thinks worse is in store: it reckons inflation will surge to 720% this year and that the economy will shrink by 8%, after contracting by 10% in 2015. The Central Bank is printing money to cover much of a fiscal deficit of around 20% of GDP.

The government has run out of dollars—liquid international reserves have fallen to just $1.5 billion, thinks José Manuel Puente, an economist at IESA, a business school in Caracas. While all oil-producing countries are suffering, Venezuela is almost alone in having made no provision for lower prices.

This spells misery for all but a handful of privileged officials and hangers-on. Real wages fell by 35% last year, calculates Asdrúbal Oliveros, a consultant. According to a survey by a group of universities, 76% of Venezuelans are now poor, up from 55% in 1998. Drugmakers warn that supplies of medicines have fallen to a fifth of their normal level. Many pills are unavailable; patients die as a result. In Caracas food queues at government stores grow longer by the week. Shortages will get even worse in March, worries a food-industry manager. Violent crime is out of control.

Rising discontent brought the opposition victory in an election for the National Assembly in December. Stalemate has followed. Chávez turned the institutions of state—including the Supreme Court and the electoral authority—into appendices of the presidency. The court, packed by the legally dubious naming of 13 new justices by the outgoing assembly, threw out four legislators, depriving the opposition of the two-thirds majority needed to change the constitution. Mr Maduro shows no sign of changing course. Last month he issued an “economic emergency” decree, rejected by the new assembly, that mainly offered more controls. His government seems paralysed by indecision and infighting.

Henry Ramos, the speaker of the assembly, has given the president six months to solve the economic crisis or face removal by constitutional means. On paper these include a recall referendum, an amendment to shorten his six-year term or a constituent assembly, which could rewrite the constitution. In practice, the rigged court and the chavista electoral authority can block or stall all of these. So the first step, says Mr Ramos, is for the new assembly to replace the 13 justices. That, too, would be vetoed by the court.

Stalemate is costly. Violent scuffles in food queues and localised looting are everyday occurrences. “We are seconds away from situations that the government can’t control. It’s a very thin line,” says Henrique Capriles, a moderate opposition leader who narrowly lost to Mr Maduro in the 2013 presidential election.

Most in the opposition and some chavistas believe a negotiated transition is the only way to prevent a descent into bloodshed. The outlines of such a deal are clear. The regime would concede an amnesty for political prisoners and agree to restore the independence of the judiciary, the electoral authority and other powers. In return the opposition would support essential, but doubtless unpopular, measures to stabilise the economy.

Mr Ramos says that there are “some conversations” but no formal dialogue. On the street, time is running out. Many in the opposition want Mr Maduro’s resignation as the price for such a deal, and either a fresh election or his replacement by Aristóbulo Istúriz, his new and moderate vice-president. But would Mr Maduro go along? He seems transfixed by the thought that resignation would be a betrayal of Chávez’s legacy. In fact, what remains of chavismo would be better off without him. - Economist.

GLOBAL ECONOMIC MELTDOWN: Precursors To A Global Financial Collapse - Venezuela Is On The Brink Of A COMPLETE ECONOMIC COLLAPSE!

Customers line up to enter a state-run Bicentenario supermarket in Caracas, Venezuela. (Jorge Silva/Reuters)

January 30, 2016 - VENEZUELA - The only question now is whether Venezuela's government or economy will completely collapse first.

The key word there is "completely." Both are well into their death throes.

Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon — or ever. Incumbents, after all, don't tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It's no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

That's not an easy thing to do when you have the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez's socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing. Now, there's nothing wrong with that — in fact, it's a good idea in general — but only as long as you actually, well, have the money to spend. And by 2005 or so, Venezuela didn't.

Why not? The answer is that Chávez turned the state-owned oil company from being professionally run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in. That last part was particularly bad, because Venezuela's extra-heavy crude needs to be blended or refined — neither of which is cheap — before it can be sold. So Venezuela just hasn't been able to churn out as much oil as it used to without upgraded or even maintained infrastructure. Specifically, oil production fell 25 percent between 1999 and 2013.

The rest is a familiar tale of fiscal woe. Even triple-digit oil prices, as Justin Fox points out, weren't enough to keep Venezuela out of the red when it was spending more on its people but producing less crude. So it did what all poorly run states do when the money runs out: It printed some more. And by "some," I mean a lot, a lot more. That, in turn, became more "a lots" than you can count once oil started collapsing in mid-2014. The result of all this money-printing, as you can see below, is that Venezuela's currency has, by black market rates, lost 93 percent of its value in the past two years.It turns out Lenin was wrong. Debauching the currency is actually the best way to destroy the socialist, not the capitalist, system.

Source: dolartoday.com

Now you might have noticed that I talked about Venezuela's black market exchange rate. There's a good reason for that. Venezuela's government has tried to deny economic reality with price and currency controls. The idea was that it could stop inflation without having to stop printing money by telling businesses what they were allowed to charge, and then giving them dollars on cheap enough terms that they could actually afford to sell at those prices. The problem with that idea is that it's not profitable for unsubsidized companies to stock their shelves, and not profitable enough for subsidized ones to do so either when they can just sell their dollars in the black market instead of using them to import things. That's left Venezuela's supermarkets without enough food, its breweries without enough hops to make beer, and its factories without enough pulp to produce toilet paper. The only thing Venezuela is well-supplied with are lines.

Although the government has even started rationing those, kicking people out of line based on the last digit of their national ID card.

And it's only going to get worse. That's because Socialist president Nicolás Maduro has changed the law so the opposition-controlled National Assembly can't remove the central bank governor or appoint a new one. Not only that, but Maduro has picked someone who doesn't even believe there's such a thing as inflation to be the country's economic czar. "When a person goes to a shop and finds that prices have gone up," the new minister wrote, "they are not in the presence of 'inflation,' " but rather "parasitic" businesses that are trying to push up profits as much as possible. According to this — let me be clear — "theory," printing too much money never causes inflation. And so Venezuela will continue to do so. If past hyperinflations are any guide, this will keep going until Venezuela can't even afford to run its printing presses anymore — unless Maduro gets kicked out first.

But for now, at least, a specter is haunting Venezuela — the specter of failed economic policies. - Washington Post.

GLOBAL ECONOMIC MELTDOWN: Precursors To A Global Financial Collapse - IMF Says Venezuela's Inflation Will Blow Past 700 PERCENT This Year!

The shortages reflect the deepening economic troubles in Venezuela, a country with the world’s biggest oil reserves— and the the most crippling oil dependency.
Shoppers waiting in line are often assigned a number, written on their arm or hand. Even once inside, store shelves can look like this.

January 22, 2016 - VENEZUELA - The International Monetary Fund says Venezuela inflation will blow past 700 percent this year.

In a note published Friday, IMF Western Hemisphere Director Alejandro Werner said inflation would more than double in the economically struggling South American country in 2016, reaching 720 percent.

Venezuela already suffers from the world's highest inflation rate.

The IMF estimates that inflation here was running at 275 percent last year.

In Caracas, the shortages have spawned a new profession: some people are actually getting paid for simply standing in line for others.

Last week, Venezuela's Central Bank published economic data for the first time in more than a year.

The bank said inflation reached 141.5 percent by September of last year.

Werner says Venezuela's economic troubles are leading to widespread shortages and "exacting a tragic toll."


WATCH: The shortages have even sometimes sparked stampedes when goods eventually arrive. Here’s what happened when word spread a store received a new stock of diapers.

- AP.