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January 24, 2019 | Venezuela’s Great Dream Was Always a Scam…

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

BALTIMORE, MARYLAND – “Soldiers revolt…”

“Millions on verge of starvation…”

“Biggest mass exodus in history of the Americas…”

What a glorious show! Right before our eyes… a real-life, real-time experiment…

…all the conceits… the pretensions… the balderdash… the claptrap…

…all laid out for the world to see. And now, stretched out in front of us like a drug dealer in the morgue, is a Great Dream busted up so thoroughly that there can be no doubt – it was a scam from the get-go.

You put a pot on the burner. Eventually, it boils. And Caracas was boiling last night. Earlier in the day, a direct challenge to Nicolás Maduro’s presidency. Juan Guaidó – president of Venezuela’s National Assembly – declared himself the legitimate president of the country.

 

Larcenous Programs

Government is always a way for the few to exploit the many. But it’s not always the same few.

The background: Hugo Chávez won the popular vote in 1998. Venezuela was a rich country then, buoyed by what seemed to be an inexhaustible inflow of oil revenues.

Mr. Chávez combined some of the worst features of AOC and DJT. He was a “strongman” know-it-all claiming to represent the little guy. And he had all the popular delusions – that deficits don’t matter… that the feds should give free education and free medical care… and that you can “stimulate” the economy and “grow your way out of debt” by spending money you don’t have.

Mr. Chávez realized, like Mr. Trump, that there were a lot more poor voters, than rich voters and that they were fed up with corrupt, crony capitalism.

He proposed, like Ms. Ocasio-Cortez, various larcenous programs of the socialist genre, designed to shore up his support among the masses. Among the programs: land seizures, price controls, and nationalizing major industries.

These were a big hit. His approval rating rose to 80%. But inevitably, there were some who were jealous of his power… others who were afraid of it… and a few who saw that his policies would destroy the country.

They rose up against Chávez in 2002. But the revolt fizzled and Chávez was soon back in power.

In 2006, he won a third term, again with a substantial majority, and further consolidated his power until he died in 2013. From there, Nicolás Maduro, an ally of Chávez, took control and continued in the same doomed direction as his predecessor.

Then, oil was still trading over $100 a barrel. But no amount of money is so great that it can’t be wasted and stolen. And when the price of a barrel of oil fell under $50 in 2015, the EZ money wasn’t so EZ anymore and the country pitched over and headed for the rocks.

 

Familiar Refuge

Would the zombies give up their rich loot? Would the cronies return their ill-gotten cash? Would the Venezuelan government cut spending in order to protect the bolívar?

Of course not. That’s not the way it works… neither in Caracas nor in Washington.

Instead, those in charge resorted to the familiar refuge of scoundrels – borrowing… and printing.

Government debt rose from 25% of GDP in 2009 to an estimated 160% for 2018. (By comparison, the U.S. debt-to-GDP ratio is 105%.)

Inflation grew steadily worse. The bolívar, like the dollar, is fake money (with no gold backing). This year, the inflation rate is expected to hit 1.3 million percent. Which is where most people stop counting and pack their bags. And that’s what many are doing.

They’re taking to the highway… making their way to the border as best they can. Fortunately for them, their neighbors have erected no walls to keep them out, so they make their escape to Colombia, Brazil, or Guyana… and do their best to survive.

 

Typical Disaster

Yes, it is a rather typical financial disaster… caused by the usual promises and hallucinations… and enforced by the usual cops and criminals.

And now it seems to be coming upon a denouement… a climax… wherein the rulers who have bled the country dry must now move on… and allow a new set of rulers to do their work.

A Reuters report out yesterday:

Demonstrators clogged avenues in eastern Caracas, chanting “Get out, Maduro” and “Guaido, Presidente,” while waving national flags. Police fired tear gas to disperse protesters in several areas, after a rally on Tuesday evening left a reported four people dead.

The 35-year-old Guaido has energized the opposition with a campaign to declare Maduro a usurper after elections last year widely regarded as fraudulent, and has promised a transition to a new government in a nation suffering a hyperinflationary economic collapse.

“I swear to assume all the powers of the presidency to secure an end to the usurpation [by Nicolás Maduro],” said Guaido, recently elected head of congress, before an exuberant crowd.

Almost immediately, the U.S. threw its lot in with the new government. Mr. Trump said he would recognize Mr. Guaido as the legitimate ruler. His VP, Mike Pence, made the remarkable claim that the Venezuelans were funding the refugee caravan headed to the U.S. border…

Piling on, gratuitously and comically, Senator Rick Scott of Florida, says Venezuela should be designated a terrorist state and its president, Nicolás Maduro, “is clearly a terrorist.”

Consensual Democracy

What makes consensual democracy tolerable – barely – is the consensual part, not the democracy.

Even the most incompetent, ignorant jackass can get himself elected, as proven often and illustrated widely. Then, the aspiring, ambitious leader tries to dump the “consensual” part as soon as possible.

Hitler did it with his Enabling Act of 1933. Chávez began a series of enabling acts and constitutional reforms soon after he was elected.

By 2010, the nationalizations, price controls, and deficits were already battering the little guys.

But by then, the need for consensus was gone. Chávez and his successor, Maduro, could do pretty much whatever they wanted… up to a point.

That point may have been reached yesterday.

Regards,

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Bill

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January 24th, 2019

Posted In: Bill Bonner's Diary

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