Friday, January 29, 2016

Venezuela is on the brink of a complete economic collapse

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.

Read the rest here.


lannes said...

After it collapses let's hope we'll be able to get Citgo gas again in this country.

Chris said...

I'm sure the geniuses at the WaPo were weeping having to write this piece.

rabidgandhi said...

Chris your comment piqued my curiosity.

The Washington Post has been one of the most vocal critics of the Chávez/Maduro regimes in Venezuela (as they are consistently critics of all official US government enemies). The WaPo editorial board was the first to applaud when Hugo Chávez was overthrown in a US-backed coup. Since then they have unleashed one anti-Venezuela article after another, as any simple search of their website shows.

So with this in mind, could you please expand on what you mean by the "geniuses at the WaPo weeping"?