Free Markets, Free People


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How to crash a country

If you want a recent example, try Venezuela where socialism was “installed” and the inevitable happened … the economy finally crashed.  In fact, its so bad that we’re now headed into hyper-inflation territory:

Venezuela is preparing to issue bank notes in higher denominations next year as rampant inflation reduces the value of a 100-bolivar bill to just 14 cents on the black market.

The new notes — of 500 and possibly 1,000 bolivars — are expected to be released sometime after congressional elections are held on Dec. 6, said a senior government official who isn’t authorized to talk about the plans publicly.

Many Venezuelans have to carry wads of cash in bags instead of wallets as soaring inflation and a declining currency increase the number of bills needed for everyday purchases. The situation is set to get worse. Inflation, already the fastest in the world, could end the year at 150 percent, said the official.

The government stopped releasing regular economic statistics in December, when it reported inflation had reached 69 percent.

We’ve chronicled and discussed the failure of Venezuela as a “socialist republic” for a few years.  Of course, as reported earlier this month, not everyone there is poor.  Apparently the daughter of Hugo Chavez is suddenly worth $4 billion.  I’m sure all of that is from Hugo’s army retirement pay.

All of that to say, I’m not sure what sort of example some people need to understand that socialism doesn’t work.  It didn’t work in the USSR.  It hasn’t worked in Cuba. And Venezuela is just the latest example of its failure.

But this is America, where a good portion of the population apparently lives in a fantasy land, is ignorant of the laws of economics or actually believes that the government has money.  And if they don’t believe the government has money, they do believe it has a “right” to yours.  Your progressive agenda from the only progressive Democrat brave enough to call himself what the rest are as well … a Socialist:




We call it the “Venezuela plan”.


Venezuelan government seizes electronics chain over “fair” pricing … or so they claim

If you thought Hugo Chavez was bad, his successor, Nicolás Maduro, is Chavez without the charisma.  But Maduro learned all of Chavez’s tricks to stay in power, and one of them is to claim to be involved in a perpetual war against outside forces who are bent on destroying their socialist paradise.   In this case the “high prices” in Daka stores (equivalent to our Best Buys) gained the ire of Maduro who sent the military in to seize the stores and require them to offer “fair prices” on their electronics:

Members of Venezuela’s National Guard, some of whom carried assault rifles, kept order at the stores as bargain hunters rushed to get inside.


Daka’s store managers, according to Maduro, have been arrested and are being held by the country’s security services. Neither Daka nor the government responded to requests for comment.

Of course, Daka is unlikely to continue to serve Venezuela if it can’t make a profit – something most socialists governments have never understood.  But let’s look at the real reason this is happening:

“I have no love for this government,” said Gabriela Campo, 33, a businesswoman, hoping to take home a cut-price television and fridge. “They’re doing this for nothing but political reasons, in time for December’s elections.”

Maduro faces municipal elections on Dec. 8. His popularity has dropped significantly in recent months, with shortages of basic items such as chicken, milk and toilet paper as well as soaring inflation, at 54.3% over the past 12 months.

Which means:

“This is more like government-sanctioned looting,” said 42-year-old Caracas-based engineer Carlos Rivero. “What stops them going into pharmacies, supermarkets and shopping malls?”

It is exactly like government-sanctioned looting.  And the engineer’s point is telling – what industry in Venezuela can feel safe given the actions of this government?  Why would any foreign entity ever invest or take the chance of establishing itself in Venezuela?  Each election would put them on a target list for seizure depending on how poorly the head of the government viewed his popularity and how much he felt it necessary to boost his reputation.

The one entity whose job it is to protect you from force and fraud is engaged in both “legally”.

Why would anyone feel safe?


Once again socialism is proven to be a lie

The lie – that central planning and a command economy run by enlightened socialists is superior to capitalism.

As usual, that’s been proven to be false … again …  and as irony would have it, capitalism is their savior.

Steve Orlicek, a rice farmer here, is living the American dream. He owns a thriving business; he vacations in the Bahamas.

His good fortune springs from many roots, including an unlikely one: He is a prime beneficiary of the socialist economic policies of Hugo Chávez, Venezuela’s late president and critic of what he called U.S. "imperialism."

I know, you’re just surprised, right?  I mean, Venezuela, pre-Chavez, was pretty much self-sufficient.  And the new, better way that Chavez promised – *cough* socialism *cough* – was going to make Venezuela the economic jewel of South America.  That is, after he stripped the foreign companies of their assets and nationalized or took over the businesses of the home-grown capitalists first, and then put himself in charge of the economy.

And, as usual, the result of that tired old plan played out exactly as it has everywhere else in the world.  It failed miserably:

It is a paradoxical legacy of Mr. Chávez’s self-styled socialist revolution that his policies became a moneymaker for the capitalist systems he deplored. During his 14 years in power, he nationalized large farms, redistributed land and controlled food prices as part of a strategy to help the poor.

But these policies turned Venezuela from a net exporter to a net importer of rice—from farmers like Mr. Orlicek. "The rice industry has been very good to us," Mr. Orlicek said, sitting in his newly renovated home, appointed with a baby grand piano played by his wife, Phyllis.

It isn’t just rice. Production of steel, sugar and many other goods has fallen in Venezuela, leading to occasional shortages. Until recently, Venezuela was largely self-sufficient in beef and coffee. Now it imports both.

In this year’s first half, the U.S. exported $94 million of rice to Venezuela, a 62% jump from a year-earlier, making Venezuela the U.S.’s fourth-largest rice market, according to the Department of Agriculture.

Overall, Venezuelan imports have quadrupled since Mr. Chávez took office, to $59.3 billion in 2012 from about $14.5 billion in 2000, according to Venezuela government figures and economists at Barclays PLC. Exports to Venezuela from the U.S. hit $12 billion in 2011, up 16% from the previous year, the latest U.S. government figures show.

I remember the US bailing out the Soviet Union year after year when its wheat harvests again failed to produce the needed grain.  Socialism fails again.   Command economies have never worked (except in the short periods of warfare).  Complex systems like economies do not lend themselves readily to central control and function properly.  No central authority is able to a) know all the variables that comprise a healthy economy, or b) how to weight them or c) understand their complex interactions.  Healthy economies are true grassroots systems.  They are driven by billions upon billions of buying decisions made by individuals – something the socialists would prefer to ignore. 

Venezuela is just the latest in a long line of countries and economies who have fallen for the utopian promises of socialism and again proven that it is and always will be a leftist fantasy.  Unfortunately, real people end up suffering for the “dream” of something for nothing.  But the belief must be ingrained somewhere in the genetics of our species because time and again a new group falls for the promise and ends up flat on their face while the capitalists are thankfully there to bail them out.


Sean Penn about Hugo Chavez: “I’ve lost a friend”

Hugo Chavez has assumed room temperature.  I’ve always been taught it is bad manners to talk ill of the dead.  In this case I’ll risk it.  It is a huge boon for liberty and individual rights that Hugo is no longer at the helm of the shipwreck he’s made of his country and its economy.

Of course, there are those who feel differently about a man who had no respect for individual liberty, property or rights:

Sean Penn said in a statement to the Hollywood Reporter that “the people of the United States lost a friend it never knew it had. And poor people around the world lost a champion. I lost a friend I was blessed to have. My thoughts are with the family of President Chavez and the people of Venezuela.”

No one ever said our celebrities were particularly bright.  I mean this is Sean Penn who tried to paddle around New Orleans in a row boat in the wake of Katrina to … well, one assumes to prove something.  Instead he just became another problem for those actually doing rescue work.

So it’s not particularly surprising to see him, blinders firmly in place, saying silly stuff about Chavez. Chavez was a dictator, a tyrant, a bully, amoral, violent and singularly ideologically driven. And, in terms of how the world works economically, ignorant as a stump (a common condition for most socialists) – as is Penn.

Hugo Chavez was no “friend of the poor”. He simply used them, by giving them other people’s property, to provide himself with a power base.

With Chavez’s passing, perhaps Venezuela can now recover from the long national nightmare it has undergone during the Chavez years.

Here’s hoping.


Hugo Chavez reportedly has cancer

Venezuelan socialist strong man Hugo Chavez is reported to have had cancer surgery in Cuba (how freakin’ bad is it when you have to go to Cuba for treatment).

The usually vivacious Chavez, 56, confirmed in a stern speech on Thursday he had surgery in Cuba to remove a cancerous tumor and was receiving more treatment. He said he needed time to recover before returning to Venezuela to run his self-styled revolution.

A fiery critic of the United States, Chavez will miss events marking Venezuela’s 200th anniversary of independence from Spain. He had to cancel a regional summit planned for the momentous July 5 date.

Markets have generally reacted positively to news of Chavez’s health problems, on the presumption they improve the chances of a more business-friendly government.

The last sentence says it all.   If ever there’s been a person to ruin the economic health of a country, it is Hugo Chavez.   He’s now vulnerable.  And as the article says, there’s a power vacuum forming and in most cases that’s not a good thing – in this case, it could be a good thing:

"Political vacuums are rarely to be encouraged, but this one could lead to a slowdown in public spending and could raise the likelihood of an opposition victory in the next elections, and thus a less confrontational governing style," said Richard Segal, an emerging markets analyst at Jefferies in London.

An interesting situation.  And the longer he remains in Cuba, the shakier his position in Venezuela becomes.  Nothing would do the world and Venezuela more good than to see another revolution which ousts him from power and returns the country to a real democracy and market based economy.


Twitter: @McQandO

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Chavez’s relationship with Gahdafi says more about Chavez than Gahdafi

Hugo Chavez is really interested in pulling his good friend Moammer Gahdafi’s bacon out of the fire.  Did I say bacon – how insensitive of me.  Let’s just call it “fat” and leave it at that.

Yes, Hugo is good buddies with the guy who is in the middle of doing whatever he can to hold on to power to include bombing his own people.  And, of course, Chavez is also using it as an opportunity to blame the US and divert attention from the atrocities his good buddy is ordering committed daily:

Venezuelan President Hugo Chavez has called for an international good will commission to mediate in Libya; in contrast the U.N. Security Council over the weekend voted for tough restrictions and possible war crimes charges against the Libyan regime.

On Monday, Chavez said Gadhafi, "has been my friend and our friend for a long time," in remarks broadcast on Venezuelan state television.

And in comments made on Thursday, Chavez described alleged preparations to invade Libya as "a madness, and in front of that madness, as always, the Yankee empire that tries to dominate the world, at the cost of fire and blood."

You’ve got to love a guy who can delude himself so completely.  He’s the prototypical autocrat.   And he’s watching tyrants very similar to himself falling one by one. 

And you have to laugh at how lame it is when he tries to push it all off on "the Yankee empire”, when we’ve got an administration that has been mostly silent about everything and was so timid that it sent a commercial ferry for its evacuees instead of using the military.  Yup, “the Yankee empire” is just dyin’ to lay a little “fire and blood” on the world.

So Hugo Chavez, now the head of the dictator protection league, peddles his “peace plan”, with an eye to keeping a mad man in power.

Yeah, that ought enhance his reputation.


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Iran to place missiles capable of hitting US in Venezuela

Iran is again upping the ante in the game of brinksmanship it is playing with the US and the rest of the Western world. It’s latest move? An agreement with the anti-US regime in Venezuela to base medium range ground-to-ground missiles there.

Iran is planning to place medium-range missiles on Venezuelan soil, based on western information sources[1], according to an article in the German daily, Die Welt, of November 25, 2010. According to the article, an agreement between the two countries was signed during the last visit o Venezuelan President Hugo Chavez to Tehran on October19, 2010. The previously undisclosed contract provides for the establishment of a jointly operated military base in Venezuela, and the joint development of ground-to-ground missiles.

At a moment when NATO members found an agreement, in the recent Lisbon summit (19-20 November 2010), to develop a Missile Defence capability to protect NATO’s populations and territories in Europe against ballistic missile attacks from the East (namely, Iran), Iran’s counter-move consists in establishing a strategic base in the South American continent – in the United States’s soft underbelly.

Some of us are old enough to remember the Cuban missile crisis of the Kennedy era and the fact that we went to the very brink of nuclear war to prevent the USSR from establishing missile bases in the US.

Of course the USSR was a nuclear power at the time and so the possibility of  nuclear weaponry being a part of those missiles was both real and likely.  Iran, on the other hand, isn’t yet a power with nuclear weapons (or so say it and the rest of the world).  But it is anticipated that they will soon have that capability. 

So, if the report is true will the US allow the establishment of such missile bases in Venezuela?  And with the possibility of the regime in Iran developing nuclear weapons, the possibility they’ll “share” them with Venezuela has to be taken serious.  The agreement apparently allows Iran to establish a military base there manned by Iranian missile officers, soldiers of the Iranian Revolutionary Guard.  The base with be jointly occupied by Venezuelan military as well.

And then there is this bit of ominous news about the agreement:

In addition, Iran has given permission for the missiles to be used in case of an "emergency". In return, the agreement states that Venezuela can use these facilities for "national needs" – radically increasing the threat to neighbors like Colombia. The German daily claims that according to the agreement, Iranian Shahab 3 (range 1300-1500 km), Scud-B (285-330 km) and Scud-C (300, 500 and 700 km) will be deployed in the proposed base. It says that Iran also pledged to help Venezuela in rocket technology expertise, including intensive training of officers

Not only that, it is through Venezuela that Iran is planning to bypass UN weapons sanctions as well:

Russia decided not to sell five battalions of S-300PMU-1 air defence systems to Iran. These weapons, along with a number of other weapons, were part of a deal, signed in 2007, worth $800 million. Now that these weapons cannot be delivered to Iran, Russia is looking for new customers; according to the Russian press agency Novosti[2], it found one: Venezuela.

Novosti reports the words of Igor Korotchenko, head of a Moscow-based think tank on international arms trade, saying that if the S-300 deal with Venezuela goes through, Caracas should pay cash for the missiles, rather than take another loan from Russia. "The S-300 is a very good product and Venezuela should pay the full amount in cash, as the country’s budget has enough funds to cover the deal ," Korotchenko said. Moscow has already provided Caracas with several loans to buy Russian-made weaponry, including a recent $2.2-mln loan on the purchase of 92 T-72M1M tanks, the Smerch multiple-launch rocket systems and other military equipment.

If Iran, therefore, cannot get the S-300 missiles directly from Russia, it can still have them through its proxy, Venezuela, and deploy them against its staunchest enemy, the U.S..

So, thus far, this is what the US’s “unclenched fist” has brought.  A move by Iran – whether admitted or not – to establish a way at striking at the US should the US strike Iran.  Additionally, it has found an ally to help it avoid weapons sanctions and obtain advanced weaponry that would help protect it’s nuclear facilities from air strikes through a proxy (of course, training and maintenance and parts may be difficult to obtain should Venezuela buy them and send them to Iran).

Iran has obviously not been sitting idly by while the West contrived to choke it off from the weaponry it wants.  Additionally it has found a way to make any strike on their facilities much more risky for the US.

Anna Mahjar-Barducci of Hudson New York (Hudson Institute) concludes:

Back in the 1962, thanks to the stern stance adopted by the then Kennedy administration, the crisis was defused.

Nowadays, however, we do not see the same firmness from the present administration. On the contrary, we see a lax attitude, both in language and in deeds, that results in extending hands when our adversaries have no intention of shaking hands with us. Iran is soon going to have a nuclear weapon, and there are no signs that UN sanctions will in any way deter the Ayatollah’s regime from completing its nuclear program. We know that Iran already has missiles that can carry an atomic warhead over Israel and over the Arabian Peninsula. Now we learn that Iran is planning to build a missile base close to the US borders. How longer do we have to wait before the Obama administration begins to understand threats?

Her points are dead-on.  The unclenched fist, as we predicted, has caused the aggressors of the world to decide to push the envelope.  Believe it or not  And why not?  There’s no penalty evident for doing so.  As mentioned here at QandO, 2009 would be a year that the bad guys watched the new guy on the block and assessed him (weak or strong?).  If they decide he’s a weak sister, they will begin to test him in 2010 and 2011.  North Korea is right now in the middle of doing that and, as this deal indicates, Iran (nor Venezuela) has absolutely no fear of the US’s reaction to basing missiles capable of hitting the US mainland in Venezuela.  And START does nothing to address this situation, obviously.  Yet that’s the administration’s current priority.

The phone is about to ring at 3am.  You have to wonder when it does if it will just go to the answering machine.


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Natural disaster? It’s capitalism’s fault …

Strongman Hugo Chavez says the flooding in Venezuela that has resulted in 70,000 homeless and 32 deaths is easy to understand.  It’s the result of “criminal capitalism” and it’s effect on the world’s climate:

"The developed nations irresponsibly shatter the environmental order, in their desire to maintain a criminal development model while the immense majority of the earth’s people suffer the most terrible consequences," he said on Venezuelan television Sunday.

You may be wondering why this sort of stupidity is even worth mentioning.  It is worth mentioning because it is a sterling example of the nonsense that has been precipitated by AGW scaremongering that I discuss below.  This is a dictator’s excuse, however absurd it sounds, for his regime’s inability to control the flooding in his country. 

"The world’s powerful economies insist on a destructive way of life,” he said on Sunday. "And then refuse to take any responsibility."

I’m sure it doesn’t take much imagination to figure out what taking "responsibility" would mean. In the past this would be viewed as another in a long line of failed socialist dictators who, because of their crippling of their country’s economy, have rendered unable to cope with natural disasters. But with the convenient excuse of AGW to pin the blame on, and by extension the richer nations, shifting the blame is a natural.

Any bets as to whether this will be a topic in Cancun?


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Hugo Chavez wishes he had Obama’s approval numbers

That’s right – even at their lowest ebb right now, Obama’s are better numbers than Hugo has (although Harry Reid would probably kill for Hugo’s numbers):

In a survey last month, Consultores 21 found that only 36 percent of Venezuelans approved of Chavez’s performance, a seven-year low.

Any guess why? Yeah, I know, a real stumper. Let’s channel Bill Clinton’s campaign message for a minute. Ah, yes, there it is – "it’s the economy, stupid." Do you know what the Venezuelan economy looks like right now?

The Economist magazine provides statistics weekly on 57 nations, from the United States to Estonia. Its most recent report forecasts that gross domestic product in Venezuela will decline by 5.5 percent in 2010. Next worst is Greece, with a 3.9 percent decline. Greece, of course, came close to defaulting on its debt earlier this year, and analysts at Morgan Stanley worry that Venezuela is moving in the same direction.

“Our new baseline of at least three years of economic contraction suggests the risks to Venezuela’s ability to honor its international financial commitments may be on the rise,” wrote Daniel Volberg and Giuliana Pardelli in a June report, at the same time predicting that GDP will fall by 6.2 percent in 2010. “While most of Latin America, in line with the globe, has been in recovery mode since last year, Venezuela has seen an intensifying downturn in activity,” they added.

So that’s GDP, the single best measure of economic health. When it comes to inflation, no one is close to Venezuela. Consumer prices are already up 31 percent for 2010 and are expected to rise more by year-end. Only two of the remaining 56 nations monitored by the Economist are suffering double-digit inflation: India and Egypt, both with 11 percent price increases.

Venezuela’s stagflation is all the more remarkable because, as the No. 8 oil-producing nation in the world, the country should be benefiting handsomely from high oil prices.

And it most likely would be doing so if it didn’t have an idiot who thinks socialism works at the helm.

Chavez has spent a lot of time, however, consolidating the organs of government power under his control and stomping out any opposition media in an attempt to keep Venezuelans in the dark (and not just from the rolling blackouts that plague the country) as to what is happening. But economics have a way of running those sorts of blockades when the reality of them sets in on the populace:

But even a news blackout would not prevent Venezuelans from knowing firsthand what is happening to their nation’s economy. Retail sales were down 12 percent in the first half of the year; sales of food, beverages, and tobacco in specialty stores were off 30 percent. Chavez slapped on permanent exchange controls to prevent “the oligarchy from taking U.S. dollars and depositing them in banks around the world.” But like most such controls, they have only panicked investors and businesses and led to more capital flight. Figures from the Central Bank of Venezuela showed $9 billion in capital outflows in the first half of the year.

Venezuelans go to the polls tomorrow in a similar situation to the US – midterm elections and a ruling party that has proven to be inept and corrupt. It is parliament they’ll be voting for. And given the shape of the country, the censorship, inflation, crime (Caracas is more dangerous than Baghdad) and economic disaster Venezuelans have been experiencing the opposition does indeed have some "hope" for "change".

Whether Hugo actually allows that, of course, is another matter altogether.


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Fidel Castro – Socialism doesn’t work

We could have told him that 50 years ago:

Fidel Castro told a visiting American journalist that Cuba’s communist economic model doesn’t work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.


Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba’s economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn’t even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.


The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen’s food needs are sold to them through ration books at heavily subsidized prices.

Of course the "Cuban model" only “worked” while the USSR existed. It was essentially based in heavy subsidies paid Cuba by the USSR for being its main proxy in the Americas. And the USSR’s woes most firmly underlined the problems with a centralized demand economy run by the state. Even so, Cuba continued on along that vein even after their greatest benefactor and financial supporter collapsed like a wet paper box. Now, finally, after pushing Cuba into poverty, Castro admits socialism is a bust.

China, while still totalitarian, recognized the economic problems soon enough to avert a similar disaster by loosening up economically. Cuba and North Korea, though, have continued to use the disastrous economic model and are basket cases (Cuba has instituted some modest economic changes, but not enough to break the dependency on the state the government of Cuba had ingrained on multiple generations of its population).

Of course Castro’s admission comes to late for the people of Venezuela who’ve been roped into a Cuba-style socialist government by strong man Hugo Chavez. Predictably, the Venezuelan economy is in shambles.

You have to wonder how many more ruined economies it will take before the socialists of the world (or wannabes) recognize that their brand of government and economics is a disaster and has probably ruined more lives than any other economic system in history.


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