Millions Of Venezuelans Try To Flee The Country BUT They Run Into A Problem
Mar 11, 2017 by Tyler Durden
While shortages of basic foods, medicines, and toilet paper may be a major societal problem, the people of Venezuela face an even more existential problem: the nation now lacks the materials to meet the soaring demand for new passports – making it almost impossible to leave the socialist utopia.
“People used to move to Venezuela from all over the Americas, Europe and Asia and now they are all trying to leave,” Sonia Schott, the former Washington, D.C., correspondent for Venezuelan news network Globovisión, told Fox News.
While estimates of how many passport requests the socialist government received last year vary from between 1.8 million to 3 million, only 300,000 of the elusive documents were doled out.
Everyday, hundreds of people line up outside the passport agency, known as Saime, in the capital of Caracas in the hopes of obtaining one.
It’s an ironic, and yet sad situation, for a country that used to be one of Latin America’s wealthiest and one that was used to seeing people flock to, not away from.
Tomás Páez – author of “The Voice of the Venezuelan Diaspora” – told Bloomberg that since Chávez took power in 1999 nearly 2 million Venezuelans have fled the country and hundreds of thousands are marking their time until they obtains the funds and the passport that will allow them to leave.
Maduro has acknowledged the issue of the chronic shortages in passports and last week launched a new “online” option that will rush a passport to customers within 72 hours for about double the price of waiting in line. The website, however, has crashed numerous times and it is unclear how many passports have been expedited through this process. Saime has stated that the backup in processing passport applications is because the agency lacks enough “materials,” but did not specify what that means. Observers say that while the government may not be able to afford the paper to make the passport. Paper products in the country, including toilet paper, are in short supply in Venezuela. But skeptics think the Maduro government may also be trying to keep people from leaving the beleaguered nation.
“People with the means to get out want to, but the problem is you need a passport and you can’t get it,” Cynthia Arnson, the director of the Latin American Program at the Woodrow Wilson Center told Fox News.
“It’s kind of an excuse by the Venezuelan government that they don’t have materials, because they know the real reason people want a passport is to leave the country.”
Most of Venezuela’s 30 million resident, however, don’t have that kind of money as the monthly minimum wage in the country comes to less than $30 a month on the black market.
Debt Bomb Ready to Explode: “Nitroglycerin On A Bumpy Road”
Mar 9, 2017 by Tyler Durden
Editor’s Comment: The debt problem will always be the worst, because it compounds interest indefinitely, and in a very harsh way, and because it so thoroughly swamps the people who can least afford to deal with it. All the incompetence, corruption and mismanagement of the federal government, and those of the state and local governments, will ultimately enslave the taxpayers and U.S. citizens to generations of debt servitude, where we could ultimately be prodded into promising our children, and their children, as collateral on the debts we owe.
Underneath it all, the Federal Reserve and central bank systems, controlled behind a thin veil of the world’s ranking financial elites, cast booms and busts just as God Almighty casts thunder and lightning, preferring to bring down huge swaths of the population in trials and tribulations that will soon prove hard to endure.
For eight years, it has been easy money to the top of the heap, and flowing credit in the system; but those payments will now come due, and the larger crisis on the horizon… get your affairs in order while you still can.
Bill Gross: “Our Financial System Is A Truckload Of Nitroglycerin On A Bumpy Road”
by Tyler Durden
Courtesy of Bill Gross’ latest monthly letter “Show Me The Money“, here are some perspectives on the only thing that has kept the global economy going since the financial crisis: debt, and lost of it.
in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities.
U.S. Total Credit Market Debt as a Percent of GDP
Central banks attempt to walk this fine line – generating mild credit growth that matches nominal GDP growth – and keeping the cost of the credit at a yield that is not too high, nor too low, but just right. Janet Yellen is a modern day Goldilocks.
How is she doing? So far, so good, I suppose. While the recovery has been weak by historical standards, banks and corporations have recapitalized, job growth has been steady and importantly – at least to the Fed – markets are in record territory, suggesting happier days ahead. But our highly levered financial system is like a truckload of nitro glycerin on a bumpy road. One mistake can set off a credit implosion where holders of stocks, high yield bonds, and yes, subprime mortgages all rush to the bank to claim its one and only dollar in the vault. It happened in 2008, and central banks were in a position to drastically lower yields and buy trillions of dollars via Quantitative Easing (QE) to prevent a run on the system. Today, central bank flexibility is not what it was back then. Yields globally are near zero and in many cases, negative. Continuing QE programs by central banks are approaching limits as they buy up more and more existing debt, threatening repo markets and the day to day functioning of financial commerce.
I’m with Will Rogers. Don’t be allured by the Trump mirage of 3-4% growth and the magical benefits of tax cuts and deregulation. The U.S. and indeed the global economy is walking a fine line due to increasing leverage and the potential for too high (or too low) interest rates to wreak havoc on an increasingly stressed financial system. Be more concerned about the return of your money than the return on your money in 2017 and beyond.
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And as a follow up, a primer by Gross on fractional reserve lending:
“Pretend,” I told the “fam” huddled around the kitchen table, that there is only one dollar and that you own it and have it on deposit with the Bank of USA – the only bank in the country. The bank owes you a buck any time you want to withdraw it. But the bank says to itself, “she probably won’t need this buck for a while, so I’ll lend it to Joe who wants to start a pizza store.” Joe borrows the buck and pays for flour, pepperoni and a pizza oven from Sally’s Pizza Supplies, who then deposits it back in the same bank in their checking account. Your one and only buck has now turned into two. You have a bank account with one buck and Sally’s Pizza has a checking account with one buck. Both parties have confidence that their buck is actually theirs, even though there’s really only one buck in the bank’s vault.
The bank itself has doubled its assets and liabilities. Its assets are the one buck in its vault and the loan to Joe; its liabilities are the buck it owes to you – the original depositor – and the buck it owes to Sally’s Pizza. The cycle goes on of course, lending and relending the simple solitary dollar bill (with regulatory reserve requirements) until like a magician with a wand and a black hat, the fractional reserve system pulls five or six rabbits out of a single top hat. There still is only one dollar bill but fractional reserve banking has turned it into five or six dollars of credit and engineered a capitalistic miracle of growth and job creation. And importantly, all lenders of credit believe that they can sell or liquidate their assets and receive the single solitary buck that rests in the bank’s vault. Well . . . not really.
“And so,” my oldest son, Jeff, said as he stroked his beardless chin like a scientist just discovering the mystery of black holes. “That sounds like a good thing. The problem I’ll bet comes when there are too many pizza stores (think subprime mortgages) and the interest on all of the loans couldn’t be paid and everyone wants the dollar back that they think is theirs. Sounds like 2008 to me – something like Lehman Brothers.”
“Yep,” I said, as I got up to get a Coke from the refrigerator. “Something like Lehman Brothers.”
This article was written by Tyler Durden and originally published at Zero Hedge.
Are Central Banks Losing Control Over Currencies? “Era Has Ended, Threats Are Ineffective”
Mar 10, 2017 by Charles Hugh Smith
Of Two Minds
Editor’s Comment: World power is shifting… but to what extent? The more things change, the more they stay the same. When civilizations rise and fall, and ebb and flow with the passage of time, the central banks remain close to the center of power, or least they have for the past 500 years, and at other points in history.
What are the limits of this economic power base? How far will the powers that be go to retain control? Will they stage financial crashes, and draw out the pain of collapse? Just study history to see where this is all going…
Are Central Banks Losing Control?
by Charles Hugh Smith
Eight years after the crisis of 2008-09, central banks are still injecting $200 billion a month into the global financial system to keep it from imploding.
If you want a central banker to choke on his croissant, read him this quote from socio-historian Immanuel Wallerstein: “Countries (have lost the ability) to control what happens to them in the ongoing life of the modern world-system.”
Stated another way, Wallerstein is asking: what do central banks no longer control?
The quote is from Wallerstein’s recent meditation on China: China is Confident: How Realistic?
“The question is how realistic is this self-assessment of China? There are two premises embedded in China’s self-confidence, whose validity need to be investigated. The first is that countries, or rather the governments of states, can actually control what is happening to them in the world-economy. The second is that countries can effectively contain popular discontent, whether by suppression or by limited concessions to demands.
If this was ever even partially true in the modern world-system, these assertions have become very dubious in the structural crisis of the world capitalist system in which we find ourselves today.”
Central banks still claim absolute control over their currency, interest rates,what’s legal/outlawed in their financial systems, and so on.
Wallerstein is suggesting that era has ended and central banks are losing control of the value of their currency, their role in the global economy and the social discontent that is the ripening harvest of central bank policies that have greatly enriched the rich at the expense of everyone else.
I don’t think Wallerstein picked China out a hat. Though every central bank is experiencing the same erosion of control, China is visibly losing control of the value of its currency, the yuan, and its runaway debt burden, which has skyrocketed from less than 20 trillion RMB 13 years ago to over 160 trillion RMB.
This matters because instability in a nation’s currency quickly spreads to the economy and then to society: as a currency depreciates, the value of everyone’s money declines, i.e. the purchasing power of their money is diminished.
When a currency is devalued, everyone holding that currency is instantly poorer.
When people become poorer through no fault of their own, they become angry with the authorities who engineered the devaluation or let it happen.
This leads to the social discontent Wallerstein references.
Another erosion of purchasing power occurs when wages stagnate while the price of goods and services rises. Can central banks control the erosion of wages’ purchasing power? There is little evidence they can.
As for a central bank’s control of its role in the global economy: those confident in China’s ascent to global #1 power assume China will remain the world’s workshop at least until its domestic populace can absorb all the goods it produces.
But it seems increasingly evident China’s role as the world’s workshop is under threat, and that it doesn’t control the erosion of that role. Domestic populism is trending against globalism, wages are rising in
China as the populace urbanizes, prices are rising faster than wages and the potential for disruptive trade wars is rising.
As for what’s outlawed/banned: recently, I’ve been engaged in some lively online debates about the possibility of China banning bitcoin transactions.
Most people in the discussion reckon China (or any government with a high degree of control of its populace) can shut down bitcoin with no difficulty. The threat of a severe penalty would be enough, or so
I’m not so sure. Look what prohibiting alcohol did: it created an entire economy devoted to bypassing the authorities’ restrictions on alcohol. The penalties were fairly severe, but threats didn’t work when profits beckoned.
If a nation’s currency is losing purchasing power, threats are unlikely to be effective. Indeed, threatening the populace as they try to retain the purchasing power of their capital/savings would be an act of desperation born of a recognized loss of control.
Wallerstein is right: central banks–including the Federal Reserve– are losing control of the value of their currencies, their role in the global economy and the social discontent that arises as central bank policies negatively impact average citizens.
It’s by no means guaranteed that central banks will be able to maintain their death-grip on interest rates, either.
Eight years after the crisis of 2008-09, central banks are still injecting $200 billion a month into the global financial system to keep it from imploding. The returns on their “investment” is diminishing rapidly, and they’re losing control of everything that matters.
This article was written by Charles Hugh Smith and originally published at his Of Two Minds blog.