Friday, January 31, 2014

Venezuela and Argentina may not survive the month

Today Argentina’s government debt which is due to mature in 2015 collapsed as the market went nearly bidless sending rates up to 19%.

The debt was trading close to par only 30 days ago. The problems plaguing Argentina are nothing new. They have been following in the steps of Venezuela for the last couple of years although to their credit (if you can call it that) they have caught up with Venezuela’s economic destruction rather quickly.

Both countries suffer from policies that starve their citizens from making independent financial transactions to the mutual benefit of everyone. A centralized government can in no way handle the billions, if not trillions of economic calculations required to allow any economy to thrive.

Maduro recently mandated that no business of any sort is allowed to make more than 30% profits (see my twitter feed w/ comments directed straight to Maduro). This is pure insanity, the problem is that the people that are hurt the most are the ones in the worst position to understand what’s happening to them. The corrupt politicians loot their countrymen and tell them all their woes are the fault of the mighty businessman.

Media in both countries criticize businesses for raising prices yet no outlet is bold enough to put the blame squarely where it belongs, i.e. with a government that is diluting its own currency. A business MUST raise prices or not offer the services at all - which of course is what inevitably happens and why shortages in toilet paper and basic goods occurs.

The cure here is to help the poor understand they’ve been duped. No easy task for sure but its crucial to educate them on basic economic principles. If there’s any cartoonists out there that speak Spanish call me and we’ll put together some basic material.

In the meantime what we can do is encourage the entrepreneurs and hard working citizens of these countries to come to the U.S. These countries are practicing a form of economic terrorism and there is every reason to grant their citizens asylum here.

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