Showing posts with label Hugo Chavez. Show all posts
Showing posts with label Hugo Chavez. Show all posts

Monday, November 14, 2016

A Chicken in Every Pot

By Jeff Thomas

That’s a pretty powerful statement. Is it historically supportable? Let’s visit a current example Venezuela to examine the overall process of collectivism, then look at a few other historical cases and see what we can learn.  Collectivism will always eventually destroy the economy of any nation, no matter how great it may be.

Venezuela – 17 Years of Collectivism
In 1980, Venezuela was deemed to be the fourteenth most economically free country in the world. Today, it’s a veritable train wreck, having failed in every conceivable way. How did this happen? Was it just bad luck? No, quite the contrary.

Venezuela’s prosperity was fueled primarily by the export of oil. The downward spiral began in the 1980s as a result of a drop in the world oil price. Until that time, there had been strong public support for the free market, but diminished oil receipts resulted in a decline in living standards for most all Venezuelans, which left them open to claims by collectivist political candidates that the whole problem was the free market. In 1999, they elected Hugo Chávez, who promised to solve the problem through collectivism – the promise of a chicken in every pot.

Mister Chávez began to take from the “haves” and provide largesse for the “have-nots.” Not surprisingly, he was highly praised by the have-nots. So, he went further. He nationalized many of Venezuela’s industries. Industry became less and less profitable, so less and less money flowed through the system each year. Eventually, the revenue to the government was insufficient to pay for the promised largesse. The leader then died and the new leader, Nicolás Maduro, inherited a zombie economy. In desperation, he introduced capital controls and increased nationalization and regulations, hoping to squeeze as much as possible from the economy before it went off the cliff. The result was a fully dysfunctional economy, replete with massive job losses, increasing shortages, and, finally, starvation.

Again, having once been number fourteen on the list of economically free countries, Venezuela is now at the very bottom – at number 152 – as a direct result of collectivism. As Margaret Thatcher once said, “The trouble with socialism is that, eventually, you run out of other people’s money.” Quite so. It does take a while, however. A newly collectivist state at first appears to be solving problems. What it’s really doing is feeding off of past profits. It gobbles up the economy’s store of nuts, but when these nuts are gone, that’s it – there’s no more, and the economy collapses. People starve.

Venezuela now has increasing shortages of food, hyperinflation has set in, the government is totally corrupt, the government is running out of funds for entitlements, and government healthcare is overburdened and failing. Like Cuba in the 1980s, there are no longer any dogs or cats on the streets of Caracas, and for the same reason as in Cuba – they’re being eaten by those with no other source of protein.

USSR – 74 Years
Vladimir Lenin introduced collectivism to Russia in 1917. He was able to do so because a revolution had just been completed by the people of Russia as a result of their dissatisfaction with a decline in the standard of living of most Russians. For decades thereafter, capitalism existed within the primarily communist system, but eventually, the parasite sucked the host dry. The USSR collapsed in 1991 for the same reason Venezuela is collapsing today.

China – 29 Years
Mao Tse-tung took over China in 1949 with a collectivist regime. But the 10,000-year rule he promised fell a bit short. It ended in 1978 in an economic dead-end. It followed the same path as the USSR, but the process was quicker.

Cuba – 57+ Years
Cuba lasted a bit longer. In the 1950s Cubans had become dissatisfied, due to the decline in the standard of living for the majority of Cubans, and were ripe targets for collectivist promises. They welcomed Fidel Castro in 1959. Cuba limped along for decades, but in recent years, the coffers of the state have dried up and the only hope to keep paying the salaries to government leaders lies in the grassroots cuentapropista movement – a rebirth of the free market. Collectivism in Cuba is nearing its end.

In each of the above countries, the pattern has been roughly the same.
  • A formerly prosperous country experiences a period in which the standard of living for the majority of citizens drops significantly.
  • The voters react by electing a new leader who promises a chicken in every pot (in essence, collectivism, although it is not always called that at the time of the election).
  • The new leader begins to rob the producers of wealth to provide largesse for those with less. This has a direct positive benefit for those with less, resulting in an increase in voters supporting collectivist promises over a period of years.
  • Over time, the free market experiences a permanent loss of wealth, resulting in diminished largesse for those who are now dependent upon it.
  • The government imposes increasing capital controls and other regulations, which deteriorate the free market more severely, causing inflation, shortages of goods, loss of jobs, and eventually starvation and systemic collapse.
  • The voters choose a new leader who promises fiscal responsibility.
  • With a return to a freer market, prosperity slowly reappears.
The pattern is a predictable one because it’s based on human nature. An economic downturn occurs. The voters become suckers for false promises. The new collectivist government appears successful at first, because it’s feeding off the remains of the free market. But, eventually, it destroys the free market and collectivism crashes and burns.

So what does the above review tell us? Has the world learned its lesson? Not at all. What we can surmise from the above is that, whenever the standard of living for the majority of citizens drops significantly in a jurisdiction, the voters will be ripe for empty promises. In every such case, collectivism will appear to be the best solution.

Collectivism is by its very nature a parasitical system that creates nothing. It therefore will always eventually destroy the economy of any nation where it’s implemented, no matter how great that nation may be. The only uncertainty is the number of years required for destruction.

Today we’re witnessing the collapse of the primary jurisdictions of the former “free” world. They’re operating on a quasi-capitalist system that has been eroded by repeated injections of collectivism (primarily socialism and fascism). Increasingly, voters in each of these jurisdictions are becoming convinced that the promises made by collectivist candidates “just make sense.” As the system continues to spiral downward, as it inevitably will, the scales are likely to tip, not in the direction of a return to the free market, but in the direction of full-on collectivism.

Editor’s Note: Socialism often leads to economic and societal collapse, hyperinflation, shortages, and shrinking personal freedom. This has happened most recently in Venezuela.

The truth is, it can happen anywhere. The U.S. is not immune. In fact, it’s extremely vulnerable.
Increasing socialism, bad financial decisions, and massive debt levels will cause another financial crisis sooner rather than later.

We believe the coming crash is going to be much worse, much longer, and very different than what we saw in 2008 and 2009. Unfortunately, most people have no idea what really happens when an economy collapses, let alone how to prepare….

That’s exactly why Doug Casey and his team just released an urgent video.


It also reveals how financial shock far greater than 2008 could strike America by the end of the year. And how it could either wipe out a big part of your savings... or be the fortune-building opportunity of a lifetime.


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The article A Chicken in Every Pot was originally published at caseyresearch.com.

Friday, March 29, 2013

The Chess Game of Capital Controls

From Jeff Clark, Senior Precious Metals Analyst

The best indicator of a chess player's form is his ability to sense the climax of the game.
–Boris Spassky, World Chess Champion, 1969-1972

You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany.


Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits?

You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on?

Pawn to A3

On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. Some observers note that since Russia isn't likely to be invading Germany anytime soon – one of the original reasons Germany had for storing its gold outside the country – the move is only natural and no big deal. But Germany's gold stash represents roughly 10% of the world's gold reserves, and the cost of moving it is not trivial, so we see greater import in the move.

The Bundesbank said the purpose of the move was to "build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold-trading centers abroad within a short space of time." It's just satisfying the worries of the commoners, in the mainstream view, as well as giving themselves the ability to complete transactions faster. As evidence that it's nothing more than this, Bundesbank points out that half of Germany's gold will remain in New York and London (the US portion of reserves will only be reduced from 45% to 37%).

Sounds reasonable. But these economists remind me of the analysts who every year claim the price of gold will fall – they can't see the bigger implications and frequently miss the forest for the trees.

Check

What your friendly government economist doesn't reveal and the mainstream journalist doesn't report (or doesn't understand) is that in the event of a US bankruptcy, euro implosion, or similar financial catastrophe, access to gold would almost certainly be limited. If Germany were to actually need its gold, regardless of the reason, any request for transfer or sale would be… difficult. There would be, at the very least, delays. At worst such requests could be denied, depending on the circumstances at the time. That's not just bad – it defeats the purpose of owning gold.

But this still doesn't capture the greater significance of this action. First, it reinforces the growing recognition that gold is money. Physical bullion isn't just a commodity, a day-trading vehicle, or even an investment. It's a store of value, a physical hedge against monetary dislocations. In the ultimate extreme, it's something you can use to pay for goods or services when all other means fail. It is precisely those who don't recognize this historical fact who stand to lose the most in an adverse monetary event. (Hello, government economist.)
Second, here's the quote that reveals the ultimate, backstop reason for the move: Bundesbank stated it is a "pre-emptive" measure "in case of a currency crisis."

Germany's central bank thinks a currency crisis is really possible. That's a very sobering fact.
We agree, of course: history is very clear on this. No fiat currency has lasted forever. Eventually they all fail. Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the root cause for failure is universal and inevitable: continual and perpetual dilution of the currency.

Some level of currency crisis is inescapable at this point because absolutely nothing has changed with worldwide debt levels, deficit spending, and currency printing, except that they all continue to increase. While many economists and politicians claim these actions are necessary and are leading us to recovery, it's clear we have yet to experience the fallout from spending more than we have and printing the difference. There will be serious and painful consequences, sooner or later of an inflationary nature, and the average person's standard of living will be greatly reduced.

And now there are rumblings that the Netherlands and Azerbaijan may move their gold back home. If this trend gathers steam, we could easily see a "gold run" in the same manner history has seen bank runs. Add in high inflation or a major currency event and a very ugly vicious cycle could ignite.

Checkmate

If other countries follow Germany's path or the mistrust between central bankers grows, the next logical step would be to clamp down on gold exports. It would be the beginning of the kind of stringent capital controls Doug Casey and a few others have warned about for years. Think about it: is it really so far-fetched to think politicians wouldn't somehow restrict the movement of gold if their currencies and/or economies were failing?
Remember, India keeps tinkering with ideas like this already.

What this means for you and me is that moving gold outside your country – especially if you're a US citizen – could be banned.

Fuel would be added to the fire by blaming gold for the dollar's ongoing weakness. Don't think you need to store gold outside your country? The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment. You'd have easier access to foreign-held bullion, depending on the country and the specific events.

None of this would take place in a vacuum. Transferring dollars internationally would certainly be tightly restricted as well. Moving almost any asset across borders could be declared illegal. Even your movement outside your country could come under increased scrutiny and restriction.

The hint that all this is about to take place would be when politicians publicly declare they would do no such a thing. You could quite literally have 24 hours to make a move. If your resources were not already in place, even the most nimble of us would have a very hard time making arrangements.

Once the door is closed, attempting to move restricted assets across international borders would come with serious penalties, almost certainly including jail time. In such a tense atmosphere, you could easily be labeled an enemy of the state just for trying to remove yourself from harm's way.

The message is clear: storing some gold outside your country of residence is critical at this point, and the window of time for doing so is getting smaller.

Don't just hope for the best; do something about it while you still can. The minor effort made now could pay major dividends in the future. Besides, you won't be any worse off for having some precious metals stored elsewhere.

If you're moved to take action, know that you're not alone. It's critical that you take these first steps now, while you still can. The best chess players in the world aren't that way because they can see the next move. They're champions because they can see the next 14 moves. You only have to see the next two moves to "win" this game. I suggest making those moves now before your government declares checkmate.

There's another "great game" when it comes to the precious metals market: the junior mining sector. The truth is, these stocks aren't for every investor – junior miners are more volatile than any other stock on Earth. However, for those who can stomach sudden price swings and are willing to bet against the crowd, right now junior explorers are offering the profit opportunity of a lifetime.

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The 2 Energy Sectors You Should Invest in This Year

 

Tuesday, September 8, 2009

Venezuela, Iran Ink Oil Invest Deals for South Pars, Dokobuki Field


Iran and Venezuela signed three oil deals Sunday during a Venezuelan presidential visit as the Islamic republic tries to mitigate the risk of new sanctions, Iranian news agencies said Monday. The accords were signed as Tehran is coming under increased international pressure over its nuclear program, including a threat to enforce sanctions against import products to Iran. The semi-official Mehr news agency said on Monday that Iran and Venezuela signed three memorandums of understanding in the energy sector in Tehran on Sunday as part of a visit to the country by Venezuelan President Hugo Chavez. They include two agreements of reciprocal investments in Iran and Venezuela each worth $760 million, according to Mehr and Shana, Iran's Oil Ministry news agency.....Read the entire article

Friday, May 8, 2009

Oil Rises On Positive Unemployment Numbers, Venezuela Seizes 60 Oilfield Service Company Assets


"Oil Rises to Highest Since November as U.S. Job Losses Slow"
Crude oil rose to the highest level since November after a report showed that the U.S. cut fewer jobs than forecast in April, a signal that the worst of the recession has passed and fuel demand may rebound. Oil prices gained 10 percent this week as reports on U.S. home sales and manufacturing in China boosted optimism about the economy and after U.S. crude oil supplies climbed less than forecast. Payrolls fell by 539,000, after a 699,000 loss in March.....Complete Story

"Crude Settles at Fresh Six Month High"
Crude oil futures prices jumped Friday to a fresh six-month high after the latest U.S. employment data showed the economic crisis may be bottoming out. Nymex light sweet crude oil for June delivery settled up $1.92 a barrel, or 3.4%, at $58.63, the highest level since Nov. 11. Crude futures gained in seven of the past eight sessions, rising 17.4%, or $8.71, since April 28. ICE June North Sea Brent crude settled up 2.96%, or $1.67, at $58.14 a barrel.....Complete Story

"Venezuela Seizes 60 Oilfield Service Company Assets"
Venezuelan President Hugo Chavez seized assets from 60 oilfield services companies including Oklahoma-based Williams Cos., using a law the national assembly passed yesterday. Employees at state oil company Petroleos de Venezuela SA worked through the night to take over operations from companies that provided services such as water and gas compression and maritime support, Chavez said. Venezuela’s benchmark government bonds fell the most in 2 1/2 months. “Today, the private services companies disappear.....Complete Story


Today’s Stock Market Club Trading Triangles

Friday, February 6, 2009

Crude Oil Industry Headline News For Friday

"Venezuela Oil Workers Pressure Rig Companies As Woes Mount"
Oil workers aligned with the government of President Hugo Chavez are pressuring rig companies to continue drilling, despite the state's failure to pay for those services at a time of rock-bottom oil prices....Complete Story

"Surge in US Crude Stocks Blunts OPEC Cuts"
Despite OPEC's cut of 1.3 million barrels a day in January, the growing supply glut is a serious setback to the cartel's efforts to curb the crude oil contango....Complete Story

"Crude Oil Falls as U.S. Unemployment Rate Surges, Signaling Lower Demand"
Crude oil fell to a two week low after unemployment in the U.S. climbed in January to the highest level since 1992, signaling that the recession in the world’s biggest energy consuming country is deepening....Complete Story

"Korea National Oil, Ecopetrol Acquire Peru's Petro Tech for $900 Million"
Korea National Oil Corp. and Ecopetrol SA bought Petro-Tech Peruana SA of Peru for $900 million to increase production as falling crude prices reduce the cost of acquiring commodity assets....Complete Story

Thursday, January 15, 2009

Crude Oil Industry Headline News


"Crude Oil Falls Below $34 a Barrel After OPEC Reduces 2009 Demand Forecast"
Crude oil fell below $34 a barrel to a four-week low after OPEC said that demand for its crude will decline 4.2 percent this year as the recession curbs fuel use....Complete Story

"Obama May Bar Offshore Drilling in Some Areas, Interior Pick Salazar Says" President-elect Barack Obama may ban offshore oil and gas drilling in some areas of the Outer Continental Shelf, according to Ken Salazar, Obama’s choice for secretary of the Interior Department....Complete Story

"Iraq Invites IOCs to Workshop on Oil Deals"
The Iraqi oil ministry will hold a workshop in Istanbul on Feb. 12-14 for international oil companies interested in bidding for the country's first licensing round to develop one of the world's largest oil and gas fields....Complete Story

"Chavez Reaching Across Ideologies for Oil, Looks to West for Help"
Venezuelan President Hugo Chavez is inviting Western oil companies to submit bids to develop new areas of the Orinoco Belt for petroleum production....Complete Story

"With Oil Use Off, Market Yawns at OPEC Talk"
Saudi Arabia, the world's largest oil exporter, said it plans to cut output next month to below its OPEC-assigned quota. Even so, oil markets essentially yawned and continued to move lower....Complete Story

"China, Iran Oilfield Cooperation to Help Stabilize Market"
Joint commercial oilfield development by China and Iran would help stabilize the oil market, China's Foreign Ministry spokeswoman Jiang Yu said here Thursday. Iran and China signed a US $1.76 billion deal....Complete Story