The Weimar Republic of Venezuela

Fri, Jun 3, 2016 - 7:24pm

“LOOK EVERYONE! GORILLA SHOOTING!” You may have seen the biggest story of the entire year, maybe the biggest story of modern times, play out over the last week when Harambe the Gorilla was shot and killed at the Cincinnati zoo after a child fell into its enclosure and the beast began dragging the boy around. Television, newspapers, and major media outlets from across the world descended as the story nearly broke the internet. Should they have shot it? What kind of savages shoot an innocent animal? What kind of savages care so little for a boy’s life? Who will be charged? Why are people being charged at all? Why aren’t the parents being prosecuted? Who should pay for this outrage? Is it an outrage? Why are you outraged? Why aren’t YOU outraged?

Meanwhile, in this same western hemisphere, a nation that just two generations ago was the wealthiest country per-capita in all of South America is now suffering a catastrophic economic collapse and hyperinflationary event, to a near mainstream media blackout punctuated by occasional, drive-by articles that are largely misleading. Virtually the only in-depth, ongoing coverage of this catastrophe has been on the internet, mostly in the alternative media.

In 1970, Venezuela was not only the richest country in Latin America, it was one of the twenty richest countries in the entire world, with a per capita GDP higher than Spain, Greece, and Israel and only 13% lower than that of the United Kingdom.

My wife’s Nicaraguan Godfather, an extremely well-traveled man, still speaks with awe of how when he was young, the ordinary Venezuelan middle class would fly to Miami several times a year for vacations as a standard way of living. It was nice, cheap to them given the exchange rate at the time, and the hotel staff spoke Spanish! Possessing astounding natural resources, Venezuela is not only the “Saudi Arabia of the Americas” as it sits upon famously vast oil reserves, it also has an exceptional growing season, fertile soils, and rich deposits of everything from gold to bauxite to aluminum. And yet this country, arguably blessed with the greatest concentration of natural wealth per square mile of any country in the Americas, is literally starving to death at this very moment. People are hunting and killing stray dogs and cats in the streets just to survive, and even pigeons are being hunted for food. Exactly as people did during the Weimar Republic hyperinflationary event of 1921-1923, shortages of food are now so endemic throughout the country that standing in long lines, waiting and hoping that food will be delivered to your store and that you can buy it quickly before the currency depreciates even more, has become a way of life.

For sound money advocates, precious metals investors, or the good folks at TFMR (most of whom have read the classic When Money Dies: The Nightmare of the Weimar Collapse ) what we are seeing in Venezuela right now is shockingly familiar. We know the story of unbacked printing of fiat currency and we know how badly it ends. We also know this should be huge news! We want to shout “Look!!! This is exactly what we’ve been talking about for years, yet you keep dismissing us as tinfoil hatted cranks!” So why is one of the biggest stories of the year, and probably the decade, being dribbled out in tiny, disingenuous soundbites? Why is a zoo gorilla shooting (or whatever random faux outrage of the day) given such outsized coverage relative to actual impact on current and future affairs? Why is the western media whistling past the graveyard of Venezuelan hyperinflation and brutal economic collapse?

I suspect it largely comes down to three things: (1) A reflexive instinct on the part of the Media to cocoon the progressive “narrative” of social justice redistributionism = good / any opposition to this = bad… especially during a Presidential election year, (2) outright embarrassment for previous support/praise for Chavez, or for vocal support of the exact types of policies Chavez enacted, and (3) deep-seated fear that people will connect the dots between redistributionist tax policies and entitlement spending, irresponsible money printing, and ultimate economic collapse. A fear, in other words, that people might realize, through this real-world example, that even resource rich, formerly wealthy countries are not immune to the laws of economics and a Weimar ending. In short, Venezuela brings out a whole host of giant skeletons from a closet that the Media, their easy-money policy dependent corporate masters, and the social justice peddling intelligentsia “thought leaders” of the academy would rather just stay hidden. So Venezuela is ignored, downplayed, and above all else, treated as a story about “bad luck” and corruption.

Matt O’Brien has been one of the few mainstream reporters to write about Venezuela in the national press, for the Washington Post, every few months during 2016. Yet as an intelligentsia wannabe (a former writer for Wonkblog and The Atlantic), despite his knowledge of what is happening, despite being one of the only mainstream reporters giving this story attention, old Matty cannot bring himself to truly name the beast that killed Venezuela. Look at this recent article purporting to identify the causes of the collapse. The author contorts, distorts, and bends over backwards to shield Socialism and money printing as the root cause of the disaster, instead working hard to place the blame on corruption, the deliberately vague euphemism “economic illiteracy” (which could mean anything), and even drug smuggling. Now these were certainly facets of the Chavez and Maduro governments, as far as they go, but they are hardly causative by themselves. He even lamely tries to say “Look at Alaska, they have ‘socialized’ oil revenues and that’s been just fine”, but his argument ignores two massive realities. One, the human failings and shortcomings he mentions are present in EVERY Latin American government (and, I would argue, pretty much every government, period) so like all central planners he seems unaware that the implication of his defense is that for his favored system to work as he apparently envisions, he will have to await the arrival of some mythical perfect angels to run his socialist paradise. Second, in his rush to blame mere corruption and malfeasance, he studiously ignores the long, extensive list of highly socialist actions enacted through the years that Ricardo Hausmann, former Venezuelan Minister of Planning and someone far better placed to know and understand the true causal factors in this case, writes are the primary causes of the present misery:

“In Venezuela, the Law of Just Costs and Prices is one reason why farmers do not plant. For that reason, agro-processing firms shut down. More generally, price controls create incentives to flip goods into the black market. As a result, the country with the world’s most extensive system of price controls also has the highest inflation – as well as an ever-expanding police effort that jails retail managers for holding inventories and even closes the borders to prevent smuggling. Fixing prices is a short dead-end street.

…After former President Hugo Chávez was reelected in 2006, he expropriated farms, supermarkets, banks, telecoms, power companies, oil production and service firms, and manufacturing companies producing steel, cement, coffee, yogurt, detergent, and even glass bottles. Productivity collapsed in all of them.”

All that (price controls, freebies for the poor, mandated wage hikes, government take-overs of the means of production, etc) is textbook Socialism, paid for through unbacked money printing, and is a far cry from the mere “corruption, drugs, and stupidity” story being peddled by O’Brien to protect Socialism from the stink of Venezuela, isn’t it? Chavez ran the middle class out of the country for nearly two decades, making it impossible for people with the education and skills to manage businesses, bring products to market, garner a living or even earn profits without most of them being “redistributed” through confiscatory tax rates to the poor, to buy the votes of the “Chavistas”. The smart ones got out. Without a middle class left - without working farms, distribution networks, factories, and the people to make them run - what is left? A shell of a country that is collapsing before our very eyes, and there is nothing anyone can do about it.

The story is a ruinous embarrassment for leftist academics, progressives, and writers who have at one time or another either directly praised Chavez for taking these actions in the past or who themselves have advocated for many of these same “solutions” as part of their political ideology or platform.

This Huffington Post article fawning over Hugo Chavez at the time of his death in 2013 is a good example, and while it’s a bit overwrought it is not at all out of the mainstream of the “thought-makers”. The author likens Chavez to Simon Bolivar and describes him as a man of the people, bringing social justice and fighting against corruption (hilarious, given that his no-talent thirty-something daughter is now believed to have a net worth of 4 billion dollars, much of it presently in offshore accounts). The Huffington Post, using standard tactics of the New Left in linking racial equality with Socialism (thereby dishonestly marginalizing anyone who disagrees with their economic agenda as inherently racist) wrote that Chavez “represents the socialist ideal: that the poor, the coloured, the illiterate, the segregated and the oppressed citizens deserve a fair shot at the basic constructs of society: education, healthcare and employment.” The author went on to rave that “Chávez offered light where there was once darkness, supplied doctors to the sick, afforded free schooling”.

If you have the stomach for it, review the recent pictures from this Daily Mail article on the current state of hospitals and health care throughout the country, to witness the endpoint of this amazing healthcare system that Chavez was so widely praised for by the redistributionists at HuffPo. I’ll bet, given current events, that this is one article they might want back. I’ll also bet that this, and many other similarly embarrassing (in hindsight) articles and opinion pieces, has a lot to do with why we aren’t hearing about Venezuela much in the mainstream press these days. Why further embarrass yourself, your colleagues, or at the very least, your side?

Salon provides us with another fine example from just three years ago. In 2013 they published this astounding, and frankly quite revealing, praise for Chavez:

His full-throated advocacy of socialism and redistributionism at once represented a fundamental critique of neoliberal economics, and also delivered some indisputably positive results. Indeed, as shown by some of the most significant indicators, Chavez racked up an economic record that a legacy-obsessed American president could only dream of achieving. …In a United States that has become more unequal than many Latin American nations, are there any constructive lessons to be learned from Chavez’s grand experiment with more aggressive redistribution?

This… THIS is exactly why the media is prevaricating or ignoring Venezuela. Because, to quote Salon’s eminent business writer David Sirota above, there are indeed “lessons to be learned from Chavez’s grand experiment in aggressive redistribution”, but they are not the ones our media, academic, or corporate betters would like us to learn. As people search for dogs in the streets to kill for food, fight for toilet paper, watch children starve, try to smuggle baby formula into the country, wait in lines for days in the vain hope that their depreciating Bolivars will buy something (anything) that might randomly show up at the store that day from the failed supply chain, watch the murder rate skyrocket until Caracas becomes the most dangerous place on earth… the lessons are plain, all right. So LOOK OVER THERE!!! THEY SHOT A GORILLA!!!

. . .

The aftermath of hyperinflation in the Weimar Republic was unforeseeable and devastating, a shattered generation whose anger and helplessness gave rise to Adolph Hitler, National Socialism, and ultimately the horror of World War II and 70-90 million military and civilian deaths. Nobody could have foreseen such things at the time, obviously, but from utter devastation often comes unexpected and dangerous outcomes. I will be watching the Venezuelan hyperinflationary event and economic collapse very carefully in the months and years to come, and will be very mindful that its aftermath will also likely be both unpredictable and dangerous. Will dominoes fall, with Venezuela’s 2016 collapse causing refugee flows possibly taking down Columbia, perhaps as early as 2017? Would this be enough to destabilize Ecuador, and will all this on the northern border of a huge and powerful, but increasingly fragile Brazil suddenly mean that we may find ourselves on the verge of an economic crisis the length and breadth of South America circa 2018 or 2020? Would that roil the entire world economy? I have no idea. I DO know that a black swan event is one that few people see coming, and at this point I think it is safe to say that few people realize the extent of the damage, or the possibility for far-reaching consequences, of the Weimar event taking place in Venezuela. I also know that folks there would have been very wise to have bought and stacked real money while they could. In their case, it just might have made all the difference:

Just in case... Keep stacking.

About the Author


Jun 10, 2016 - 10:11am

Maybe not the last comment in this thread

It has always been my concern (as a social democrat and a capitalist investor) that the return of a tax policy requiring the wealthy to pay their share in taxes would result in a capital flight from the country. I think with a Sander's presidency, there might have been such an attempt but to some degree, it's already happened. Huge sums are being squirreled away in off-shore tax havens that are no longer committed to investment in America. The world has become a very small place and capital flows wherever it can get a deal. Indeed, Uncle Sam doesn't even frown on it so long as you remember that if you profit a bunch in China, Brazil or Africa, that is was "American" capital that you used to do it with and there is tax due back home on your international windfall. Why is that so hard to understand. Armand Hammer never had a problem with it and he was one of the wealthiest people in America.
The bottom line, the refusal by the wealthy to pay their fair share in taxes is a huge factor in the decay of America. Our future is entrusted to the young for whom we must provide the basis of an education that is competitive to the best in world and the world is providing a university education for their youth. So must we and that means, we must no longer saddle our university graduates with a mountain of debt. In other words, free or at least heavily subsidized university education.

It is a travesty and an unthinkable shame that their are people in our country who every day feel a lump under their arm or start pissing or shitting blood who are reluctant to seek medical care. One, because they can't afford the time off from their minimum paid job to do it and of course two, because they don't have a medical plan. Children are being forced into hunger because a breadwinner in the family has become sick. That's not America I just described, that's a third world country.

Our infra-structure is crumbling. Electrical outages are occurring more and more frequently, contamination spills, even bridge collapses. The bulk of today's tax revenues go toward our debt but we need more funds to pay for these essential real expenses. The lower 90% has paying more than their fair share. We have no alternative but to pursue that segment that has been given a tax holiday for much too long.

Jun 9, 2016 - 10:51am

Last to comment

I know this thread is over but came across this today. Speaks to the issue using the state of Connecticut.


It’s kind of a political hack thing to say, but I’m going to say it anyway: What is happening in Connecticut is not all that different from what is happening in Venezuela (although on a much, much smaller scale, obviously, and without the humanitarian crisis).

What I mean by that is: If you make it difficult for people to conduct business and commerce, the smartest among them are going to go somewhere where they can, and leave everyone else behind. Some people call it a brain drain. Every once in a while there is a glimmer of hope in Venezuela that the opposition might be able to oust Maduro, but even if they did, anyone who was talented enough to help rebuild the country is already gone.

Capital goes to where it is treated best. Period.

Part of my shtick as a macro investor is to figure out where capital is going to be treated best, and send it there before everyone else does. This takes some pretty sharp political intelligence. Capital is flooding to Argentina now, after the election of Mauricio Macri, but the time to invest was actually in 2013, when Cristina Kirchner lost the midterm elections and was prohibited from running for another term. I once was blindsided by an investment in Chile because I did not anticipate Michelle Bachelet Part 2, Electric Boogaloo.

boomer sooner
Jun 6, 2016 - 11:11pm

Morals, ethics, compassion for others

I'm getting ready for the annual Jeepin Colorado family trip and came across this reminder on the Wrangler Forum. Seems to fit with the discussion.

BTW- High mounain jeeping is a religious experience. Said many a prayer sucking the seat covers between the cheeks looking over NOTHING but air in front of my hood.

10 Rules of Trail Etiquette

Keep track of the vehicle behind you.

(click picture for higher resolution)

Despite what some people think, we four wheelers are very considerate when off road. We stay on marked trails, look out for others, obey the rules, and clean up after ourselves. I’m sure you are a responsible driver. Even so, it’s good to review trail etiquette from time to time.

Here are my top 10 rules of etiquette for four wheeling and camping. Read this list carefully. Are any of these unfamiliar to you? Do you need to brush up on any principles?

1. Be considerate. That’s the overriding principle here, and it deserves special mention. As you encounter others—whether friends or strangers—remain considerate. Perhaps you don’t feel like going out of your way for someone. At least avoid the temptation to be a four-wheel bully. Lord knows there are enough bullies in this world.

2. Yield right of way to mountain bikes, horses and hikers. They can’t compete with a two-ton vehicle. Slow down as you approach them, and give them space. Avoid kicking up unnecessary dust, honking your horn, and such. Want to really make an impression? Offer a bottle of water, some gas, a wrench or a helping hand when needed. You’ll feel better, and you’ll help improve our image.

3. Yield to a vehicle driving uphill. That vehicle may need some momentum to climb. If we force him to stop, he may need to back up to gain that momentum.

4. Keep track of the vehicle behind you. If you come to an intersection or a curve, make sure the vehicle behind you sees which way you went. Don’t assume he did. He might be in a dust cloud or behind a bush or boulder.

The other vehicle should try to keep up, too. However, that could involve eating a lot of dust; that’s no fun. If you go through something difficult, look back and make sure the other vehicle made it.

5. Closely observe the vehicle ahead of you. This will help you pick the proper line(s) for negotiating a rough spot. It means keeping the proper distance back. Too close, and you could find yourself in a dust cloud. You also want to make sure the other vehicle’s rear end isn’t in your blind spot. Back off until you are at the proper distance. (The ability to see their rear differential is a good starting point.)

Where there are multiple obstacles, drop back farther to get a better perspective. This will also give you more time to think through your strategy.

Scan the trail behind that vehicle for signs of fluid leakage or even fallen parts. You may be able to alert a fellow driver before things get worse!

6. When stopped, pull completely off the trail. You may not be the only person on the trails. Someone could overtake you or come at you from the other direction. When you pull off, pick a spot that’s already been disturbed. Try not to park on tall, dry grass. Your catalytic converter could start a fire.

7. Don’t throw cigarette butts out the window. Not only is that littering, but it can be a fire hazard. Southern California suffers several fires every year caused by discarded cigarette butts. Don’t be a butthead. Dispose of them properly!

8. Boys left, girls right. Need to stop for a pee call? This little ditty is a reminder of which direction everyone goes.

Have numerous vehicles and no cover? Use a “dispersed” arrangement. The last vehicle stops. Everyone keeps driving until the 2nd to last vehicle feels it’s far enough from the last vehicle. He stops and notifies the group. The process continues until everyone feels they are far enough away. How spread out you get depends on terrain features.

9. Be mindful of other campers. Don’t slam car doors or run the vehicle engine before 7 am.

10. My Special Rule: No music in camp. Yep, no radios, no loud MP3 players, or other artificial noise makers. Look, you’re out in the country to experience nature. You don’t—or shouldn’t—want to spoil the setting with some music, would you? Besides, we don’t all agree on our music choice.

Now, it’s OK if someone brings along a guitar or banjo. What better way to enjoy a campfire than with a sing-along, right? For the most part, though, enjoy the sounds of Mother Nature. They are better than anything man can create.

This list may seem like a lot to digest, but the rules are based on common sense. Recommit to the principles of off-road driving, and you will become an even better, more responsible four wheeler.

# # # #

Jun 6, 2016 - 3:10pm

Religion = faith in something

"The Dutch philosopher, Herman Dooyeweerd, makes the observation in his Roots of Western Culture, that the underlying foundation of all of life is religious. Christianity, he notes, establishes an antithesis that "pertains to the relation between the creature and his creator, and thus touches the religious root of all temporal life." His subsequent thoughts on this bring to light the profound tension that exists between our faith and this world, between belief and unbelief."

Even an atheist has faith

Which is the basis of Dooyeweerds religious ground motives





Therefore culture is religion externalized.

Jun 6, 2016 - 12:10pm


While I personally do not agree with culture being religion externalized, I believe it more complex than that. Even Tocqueville understood Americas one time greatness did not come from its English roots but the people,s goodness, that was not found within them naturally it was a result of faith and common belief system. If I have to spell out what that belief system is we are all in a lot of trouble. And to save you time I understand that some framers were Deists and or Agnostics of different bents.

“Americ a is great because she is good. If America ceases to be good, America will cease to be great.”
Alexis de Tocqueville

Jun 6, 2016 - 11:24am

Lost Mind - Well Put

I can live with that

Jun 6, 2016 - 9:20am

Now that, LostMind

was a pretty darn good post! Thanks!

Jun 6, 2016 - 9:04am

All things are eventually highjacked by man!

Reading everyone's opinions on race, religion, creed, blah blah blah is all the same forever and forever the same...

Greed and power are the two things inherent in man to deviate from doing the RIGHT THING...

What is the right thing? "Do unto others as you would have them do unto you!" sounds complicated does it not...

Anyway, lots of animosity over independent perceptions of right and wrong.

Nothing works as long as man chooses to do the opposite of the above. Socialism and Capitalism, Christianity and Islam, White and Black... doesn't matter. Live for others and take care of yourself and you will be a happier person. Live just for yourself and you will seek domination of those around you...

Humility is sorely missing in all things. True anything is hard to come by. The fact we continue to seek "true" something without understanding the basic tenements of life lead us to continuous battles over words and deeds...

Love you fellow Turdites. You ALL are very precious indeed; regardless of race, religion, sex, or ideology.

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

J SiefertAIJ
Jun 6, 2016 - 8:33am

Re.: Culture is Religion Externalized

How anyone can believe that crock of crap is beyond me. Just about everything mentioned is an exact opposite of the real world. For instance it was not Christian tradition that promoted prosperity in the West but the advancing ethical & legal values of the West at the end of the Middle Ages that were subsequently ascribed to Christianity by Christians practicing their own self aggrandizement. Christian tradition was however responsible for holding back the West's potential development for major parts of the 1000 years of the Middle Ages.

Jun 5, 2016 - 11:27pm

Moved to new thread

Never mind.

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