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Inside, confidential and off the record

 

Venezuela in chaos - Gartman

A LOOK AT THE CHAOS THAT IS VENEZUELA: Venezuela should be the shining light of South America. Given its relatively high levels of education of its people compared to the education levels of most other South American nations Venezuela should be South Korea compared to the North. Given the wealth it has regarding agriculture; it should be what was once fecund, abundant Rhodesia compared to the now desolate and desperate Zimbabwe. Given the wealth regarding its huge supplies of crude oil and coal, it should be the US or Canada compared to Angola or Sao Tome & Principe. Instead, because of corruption and political lunacy, Venezuela is a laughing stock and that laughter that was once focused upon its lunacy is now turning to utter and complete dismay and sadness.

Things have gone so badly awry under the lunacy of the currency regime in place that everything related to the economy is distorted. Because the currency is now traded in three different regimes, we’ve the Bolivar trading at 6:1 “officially,” while in the black market it is trading 100x’s or more “worse” for on the black market we are told that the Bolivar is trading 750 vs. the US dollar! As a result of this disparity, although the officials in Caracas live comfortable lives because they have access to Bolivar’s at the “official” rate and can use them in the markets there at the black-market rate they are becoming wealthy as Croesus and doing so swiftly, the citizenry is reduced to penury and “pauper-dom.” Scarcities of goods and services are the norms these
days for the broad swath of the public without access to Bolivars at the official rate.

As Francisco Toro… the founder of the blog CaracasChronicles… and as Dorothy Kronick, a doctoral candidate in Economics at Stanford, recently wrote regarding Venezuela

Alongside scarcity, a new spectre… has
emerged [as] the bolivar has been in free fall,
evoking fear of devastating hyperinflation,
rarely seen in South America since the turn of
the century. Venezuela is no longer an
economy marked by distortions. Rather it is
one big distortion, marked by pockets of
economic activity… [and] what is strange is
that Venezuela’s chaos entirely self-inflicted.

President Maduro is the reason for what has happened to Venezuela. He continues to create a multi-tiered currency regime that gives succor to the rich and well connected, but which inflicts damage upon the broad citizenry, blaming America and even Europe for the country’s problems. He hasn’t a single economist in his Cabinet. He has no education in business and/or economics. He was a labour union organizer before he was taken into government by former President Chavez and neither he nor anyone in his Administration understands what they are doing and what damage they have inflicted upon the populace.

This will end very badly, for as the great Herb Stein once said, “That which cannot continue, won’t.” Venezuela in its current incarnation cannot continue; it won’t. It can’t and it is but a matter of time until very real revolution breaks out in Caracas. This simply cannot continue.

 

 

Dennis Gartman / The Gartman Letter / 08 27 2015

 

ISSUES....08/24/2015 - Send Us Your Issues

ISSUES.... Inside, confidential and off the record
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