Episode 186 – Venezuela, Davos and claims of racism

The Velvet Glove and The 12th Man will be in Melbourne on the 9th and 10th of February. The boys would love to catch up with listeners on Sunday morning for breakfast. Email trevor@ironfistvelvetglove.com.au and we will let you know the details.

4:52 A Podcast Prayer

Let us pray.

6:00 Feedback on episode 185 from Brett and Bronwyn

7:45 Australia backs Juan Guaido as interim Venezuela president

Australia’s Foreign Affairs Minister Marise Payne said Mr Guaido, the opposition leader and president of the National Assembly, ought to lead the Latin American nation until elections are held.

“Australia calls for a transition to democracy in Venezuela as soon as possible,” Senator Payne said on Monday.

“We now urge all parties to work constructively towards a peaceful resolution of the situation, including a return to democracy, respect for the rule of law and upholding of human rights of the Venezuelan people.”

Hmmm, political turmoil, a hostile congress, public servants who have no money and need to stand in food lines for hand outs?

Questions over the legitimacy of the election where only 46% voted?

It all sounds like the USA except bump the voter turnout figure up to 55%

In other words, the USA is in crisis and we recognise Nancy Pelosi as the true President and call on Donald Trump to bring on an immediate election.

According to Francisco Rodriguez:

When an economy’s exports fall, that economy’s imports won’t necessarily decline immediately if the economy can borrow or dip into its savings in order to cushion the blow.  That is why countries subject to high terms of trade volatility are well advised to save during boom times.  And that is precisely what Venezuela didn’t do.

On this, the blame falls squarely to the government of Hugo Chávez, who led the economy during the largest external boom in its history and basically spent all of it. As a result of (*corruption and) Chávez’s willingness to pour money into everything – from paying off nationalizations to buying the support of Caribbean countries with cheap oil –  Venezuela ended up in a much more vulnerable position than just about any other oil exporting country when the shock hit.

  • inserted by The Iron Fist, not the original author

Were the country selling as many barrels to the rest of the world today as in 2015, it would have exported $51bn in oil this year. By contrast, Venezuela will sell only $23bn of oil internationally in 2018.

The bottom line is that if you want to understand Venezuela’s economic implosion, you have to understand what happened to its oil exports.

 

 

For the purposes of comparison, Chart 2 plots the evolution of Colombian oil production during the same period.  Venezuela’s neighbor also produces high-cost oil; after the bottom fell out from under oil prices, some of those barrels were no longer profitable to produce.  As the figure shows, the decline in Colombia’s oil production during this period of time was quite similar in magnitude to that of Venezuela.  This suggests that the initial stage of the production decline was in line with what can be explained based on the fall in profitability caused by the price collapse in a high-cost producer

It is striking that the second change in trend in Venezuela’s production numbers occurs at the time at which the United States decided to impose financial sanctions on Venezuela.  Executive Order 13.808, issued on August 25 of 2017, barred U.S. persons from providing new financing to the Venezuelan government or PDVSA (Petróleos de Venezuela, S.A. is the Venezuelan state-owned oil and natural gas company.)

The Executive Order is part of a broader process of what one could term the “toxification” of financial dealings with Venezuela.  During 2017, it became increasingly clear that institutions who decided to enter into financial arrangements with Venezuela would have to be willing to pay high reputational and regulatory costs.  This was partly the result of a strategic decision by the Venezuelan opposition, in itself a response to the growing authoritarianism of the Maduro government.

Six months later, the President of the National Assembly was writing letters to international banks warning them that if they lent money to Venezuela they would be not only violating Venezuelan law but favoring a government that was recognized as dictatorial by the international community. When Goldman Sachs Asset Management purchased $2.8bn of bonds in May from the Venezuelan government through an intermediary, angry Venezuelans gathered to protest outside its New York office and the opposition vowed not to pay the bonds if it reached power.

A reasonable case can be made that Venezuela’s opposition was completely within its prerogative to request that debt issuances be authorized by the National Assembly as well as to question the morality of lending to the Maduro government.  Our point is that the spilling over of this political crisis into the arena of finance had consequences for the country’s economy and for the living standards of Venezuelans.

Sanctions had the effect of definitively closing the door on any possibility of a Venezuelan debt restructuring.  Since the sanctions impeded the nation from accessing new financing, they also impeded it from issuing new bonds in exchange of old ones, the modality they would have needed to use to restructure bond debt

Perhaps even more important than Trump’s Executive Order was a letter of guidance issued by the Financial Crimes Enforcement Network (FinCen) on September 20, 2017, warning financial institutions that “all Venezuelan government agencies and bodies, including SOEs [state-owned enterprises] appear vulnerable to public corruption and money laundering” and recommending that several transactions originating from Venezuela be flagged as potentially criminal.

Many financial institutions proceeded to close Venezuelan accounts, reasoning that the compliance risk of inadvertently participating in money laundering was not worth the benefit.  Venezuelan payments to creditors got stuck in the payment chain, with financial institutions refusing to process wires coming from Venezuelan public sector institutions.  Even CITGO, a Venezuelan-owned firm incorporated in Delaware, had trouble getting banks to issue it letters of credit.

These restrictions impacted Venezuela’s oil industry in several ways.  First and most evidently, loss of access to credit stops you from obtaining financial resources that could have been devoted to investment or maintenance.

There are also more direct links between finance and real activity that can lead a firm that gets closed off from financial ties to experience a decline in its productive capacity.  For example, one of the most effective mechanisms that PDVSA had found to raise production in recent years was the signing of financing agreements in which foreign partners would lend to finance investment in a joint venture (JV) agreement as long as they could pay the loan from the JV’s production.  The Executive Order effectively put an end to these loans.

The sanctions also blocked CITGO from sending profits and dividends back to Venezuela (which had been averaging about $1 billion USD per year since 2015).

In his report former United Nations rapporteur Mr De Zayas said modern-day economic sanctions and blockades are comparable with medieval sieges of towns. “The business of the United States is business. And that’s what the United States is interested in. And they can’t [currently] do business with Venezuela.”

America specialises in fucking up countries so their companies can move in and take over.

The scene is set for more US intervention. Gee when has that ever gone wrong?

The US has deliberately made an economic catastrophe much worse  in the hope that its Venezuelan allies can seize power through violence as they briefly did in April of 2002.

Just Yesterday

The Trump administration intensified its interference in politically-fractured Venezuela on Monday by announcing the seizure of billions of dollars in assets connected to the nation’s state-owned oil company, a move critics decried as part of a “dangerous” U.S. policy to help opposition forces overthrow elected president Nicolás Maduro.

Under the sanctions, U.S. companies can continue to purchase Venezuelan oil, but the payments must be held in an account that cannot be accessed by the Maduro regime.

“If the people in Venezuela want to continue to sell us oil, as long as that money goes into blocked accounts, we’ll continue to take it,” Mnuchin said. “Otherwise we will not be buying it.”

The discussion diverts into Cuba and China.

35:55 China tests opening up social credit scores to social media platform WeChat with debt map

In China’s Hebei province, a red circle sweeps out a radius on a map, like a naval radar scanning for enemy ships.

Key points:

  • Almost 13 million people are on a financial blacklist
  • A new app marks the location of “deadbeat debtors”
  • Courts are finding new ways to “name and shame” people under China’s developing Social Credit System

It is the latest tool to be piloted as part of China’s Social Credit System (SCS) that is geared at monitoring the behaviour of the Asian superpower’s 1.4 billion citizens and separating the trustworthy from the disobedient.

Nicknamed the Deadbeat Map, the mini program is accessible within Chinese social media platform WeChat and it allows users to pinpoint the location of those who have failed to pay their debts within a 500-metre radius

Warren Mundine

The first rat to jump onto a sinking ship

43:26 The Fist Was Wrong

Some of the most prominent voices in the conservative base were furious at President Trump on Friday after he agreed to reopen the government without getting money for a border wall — the sort of terms he had spent more than a month rejecting. They derided the deal as a capitulation by a leader who they had trusted to stand firm.

Among those leading the charge was the conservative author Ann Coulter, one of Mr. Trump’s earliest and firmest supporters. She told The Times columnist Frank Bruni last year that “implementing the principles of ‘The Communist Manifesto’” would be less of a betrayal by Mr. Trump than retreating on the wall, one of his central campaign promises.

45:33 Emotional Support Animals

You can’t make this stuff up. Now a 4ft long alligator.

46:58 Speaking in tongues

The leader of the Church of England has said that he prays in tongues every day – although the archbishop of Canterbury said it was “not usually an immensely ecstatic moment”.

48:55 Davos

In a forum in Davos, Michael Dell – the 39th richest person in the world – was asked if he was in favour of that tax proposal. Naturally the audience tittered, and Dell responded by talking up his own foundation and made the rather weird claim that he has contributed more to that over the past 20 years than he would have through the 70% tax rate.

Dell, however, then overplayed his hand by claiming in what he thought was the coup de grace that he didn’t “think it would help the growth of the US economy … name a country where that’s worked – ever”.

At this point fellow panellist and MIT professor Erik Brynjolfsson helpfully responded: “the United States”. He further noted that the tax rate had been at that level “from about the 1930s through about the 1960s” and what is more “there is actually a lot of economics that suggests that it’s not necessarily going to hurt growth”.

Dell said he would contribute more than 70%. Here are the facts:

He says growth would suffer and he knows better how to spend money. We say BS.

How does the average person compare?

  • The average person gives around 2.23% of their lifetime earnings to charity – Based on an average salary of £28,677, an adult would make £1,347,819 over their career. The average person donates around £30,000 in their lifetime, which is 2.23% of their salary.
  • 36 out of the Top 50 Charitable Billionaires still donate less than the average person – The average publicly recorded donation for billionaires not signed up to The Giving Pledge amounts to 1.8% of their wealth – less as a percentage than most people on average salaries. This goes up to an average of 4.3% when Giving Pledge billionaires are included.

BTW Waz, Paul Ramsay made most of his money from Private Health Insurance

55:56 The world’s top 100 economies: 31 countries; 69 corporations

Here is a table comparing government revenues (from the CIA World Factbook) and corporate turnover (Fortune Global 500 – ditto).

This comes from

Five Ways to Curb the Power of Corporations and Billionaires

By Jeremy Lent

Changes in our personal consumption patterns are important, but are ultimately inconsequential compared with the impact of the transnationals that have come to dominate our global economic and political system. Of the world’s hundred largest economies, sixty-nine are now corporations. Political parties in many of our so-called democracies are funded in large part by billionaires, while government cabinet positions are staffed by corporate executives. International bodies setting global policy are infiltrated by corporate agents so successful at entrenching corporate power that even those governments that still prioritize their people’s needs can no longer make autonomous decisions without risking crippling lawsuits from the transnationals whose interests they threaten. Meanwhile, countries and cities compete with each other to beg their corporate overlords for investment dollars, even it means undermining public services and legal protections for their own populations.

If we are to avoid disaster, our global economic system with its gaping inequities and deranged consumption will eventually need to be dismantled and replaced by one based on life-affirming principles rather than wealth maximization.

59:00 A new word

Digisexual

1:00:52 Beer Report

We plan to work our way through the top 100

1:02:39 Australia Day

Good on you Secular Party for intellectual honesty and bravery.

You’re a Racist!

A debate over Australia Day has resulted in a fiery exchange on Studio 10 between Yumi Stynes and Kerri-Anne Kennerley.

When KAK suggested city-based ‘Invasion Day’ protestors were ignoring social problems in rural areas Yumi Stynes objected, accusing her of “racist” views and generalising.

Protesters gathered outside Network 10’s offices in Pyrmont on Tuesday morning to demand the broadcaster sack Studio 10 presenter Kerri-Anne Kennerley.

In defence of KAK

Indigenous women are 34 times more likely to be hospitalised as a result of domestic violence than their non-Indigenous counterparts. It’s a situation Indigenous academic Marcia Langton described as a ‘national crisis’ on a recent Late Night Live panel.

Marcia Langton AM, professor of Indigenous studies at the University of Melbourne, believes tolerance of and failure to report violence against Indigenous women is a national crisis.

‘Everybody with a decent heart is just thoroughly sick of the violence,’ says Langton. ‘Then, there are the perpetrators of various ages, from young through to old, who make all sorts of excuses for the violence. They purport that this is the Aboriginal way.

‘I want to say to all the brothers out there who are tolerant of violence: do you truly believe that our society would have survived if the violence against women was at those rates prior to colonisation? This is a sick situation. This is an unacceptable situation. It is severely perverted.’

Is this crisis a result of the law being inadequate, or inadequate policing? Josephine Cashman insists that our laws are up to scratch, but the problem is that they’re not being applied in Aboriginal communities.

Spare me the faux Martin Luther King

She is an actress on a show called Wentworth. Her name is Shareena Clanton

1:14:48  Lady Gaga

A beautiful moment, if the crowd would shut the fuck up.

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3 comments on “Episode 186 – Venezuela, Davos and claims of racism
  1. Warren Foster says:

    I’ve listed a few facts below regarding Paul Ramsey so that the Dear Listener make their own mind up with regards to his legacy and if Australians should recognise his contributions more.
    1. He was a businessman not a surgeon (as Glove guessed). He started out as a land surveyor in Bowral NSW
    2. He “wanted a significant part of his personal fortune to be spent on funding an academic centre to revive the liberal arts and humanities”
    3. In 2017 the Ramsay Centre for Western Civilisation was launched, funded by a bequest by Ramsay. It was the “biggest philanthropic gift in the history of education in Australia”
    4. The balance of his USD$3.4B estate was donated to the Paul Ramsay Foundation which seeks to address disadvantage in health and education.
    5. I can’t find any direct links between the Paul Ramsey Foundation and Tony Abbott (as noted by Fist). The Board and CEO appear to have no direct links with the Liberal Party or any political organisation.
    6. There’s no evidence to suggest the proceeds aren’t being spent wisely (they certainly aren’t buying nuclear powered submarines with any of it). If they were spending it unwisely, should we hold him responsible given that he died five years ago?
    He might have made his fortune from Private Health BUT keep in mind that the Australian economy was built on selling iron ore and coal to an oppressive communist regime and the destruction of the environment from agriculture.

  2. Warren Foster says:

    Aiden,
    I am the self appointed President of the 12th Man Fan Boy Club.
    Please contact me ASAP.
    Waz

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