Wintery Knight

…integrating Christian faith and knowledge in the public square

What causes Colombia’s economy to grow? What causes Venezuela’s economy to shrink?

Political Map of South America

Political Map of South America

Would you like to have a growing economy? Then follow the lessons of Colombia.

Excerpt:

Colombia expects lower fiscal deficits in 2013 than in 2012, while economic growth is projected at 4.8 percent for both years, Finance Minister Juan Carlos Echeverry said on Thursday.

Latin America’s No. 4 oil producer has seen a strong recovery from the global economic crisis, recouping three investment-grade credit ratings and continuing to reap strong inflows in the mining and oil sectors.

Presenting the latest fiscal plan, Echeverry said the government had revised down the 2012 central government fiscal deficit target to 2.4 percent of gross domestic product from 2.8 percent previously, and the consolidated deficit to 1.2 percent of GDP from 1.8 percent. The consolidated deficit includes the central and regional governments.

The central government deficit target is seen at 2.2 percent of GDP in 2013, with the consolidated deficit at 1 percent.

“This fiscal plan is serious, reasonable, we’re not extracting liquidity from the economy, but injecting liquidity into the economy,” Echeverry told reporters.

The government expects the economy to grow 4.8 percent this year and next. Economic expansion was 5.9 percent in 2011, the fastest growth rate in four years, helped by high foreign investment and strong consumer spending growth.

Colombia has attracted billions of dollars in foreign direct investment over the past decade, mostly into the oil and mining sectors after U.S. military aid helped security forces deal crippling blows to leftist guerrillas and cocaine cartels.

Consumer prices have remained at steady levels in recent months, and economists expect 2012 annual inflation to fall within the central bank’s target of 2 percent to 4 percent.

The fiscal plan forecasts full-year inflation at 3 percent this year and next.

Under Obama, the United States has been running deficits of between 8-10% GDP. Revenue is the same as usual, but spending to reward reckless, irresponsible behavior has skyrocketed.

Would you like to avoid a shrinking economy? Then avoid the policies of Venezuela.

Excerpt:

Venezuela has devalued its currency, joining Iran, Argentina and others whose wars on math brought the same result. Some call this a “restorative.” It’s not. It’s what happens when big government hits a wall.

Venezuela’s monster 47% devaluation from 4.3 to 6.3 bolivars to the dollar, reportedly ordered by President Hugo Chavez from his hospital bed in Cuba, marks the reckoning for his regime’s big-spending ways in Venezuela’s low-growth economy.

[...]This devaluation is characteristic of all tyrannies, which benefit by effectively expropriating the savings of the private sector through monetary means rather than the more common thuggery.

Chavez’s meltdown is coming for the same reason devaluations are also shaking Argentina, which is undergoing a new fiscal disaster of its own, Egypt, which is going through a slo-mo devaluation that’s pushing up the price of food and prompted its Islamofascist rulers to actually urge people to eat less food, and Iran, whose madhouse economics has triggered hyperinflation.

It’s how dictators do business. This is Chavez’s sixth devaluation in the last decade of his big-spending power, following devaluations in 2002, 2003, 2004, 2005, 2010 and 2011. Every one of these devaluations inflates away some of his debts — but at the expense of the country’s savings and investment, which are snapped away through inflation.

What’s more, this devaluation, which was done to plug his deficit spending and prop up the state oil company, will only cover 60% of the country’s deficit, meaning more devaluations ahead this year, likely to take the bolivar to 8 by year end.

Venezuelan officials, predictably, claimed it was “good” as well as an “improvement” that protects the middle class against “speculators,” echoing the party line of establishment economists such as Joseph Stiglitz, former Bill Clinton adviser and chief economist of the International Monetary Fund, who in the past has called devaluations an economic ” restorative.”

Tell that to the panic buyers across Venezuela. There, terrified consumers who are buying goods ahead of expectations of soaring prices, while the poor have seen their life savings wiped out.

When Obama took office, a US dollar was worth over 1.20 Canadian. Today it’s worth about 98 cents. He has been devaluing the currency in order to pay for massive government spending. Private savings of individuals have been devalued, as a result. Inflation is a hidden tax on those who earn and save.

In the United States, we are doing the exact opposite of Colombia. We are embracing Venezuela policies, and expecting Colombia results. Why are we stupid enough to believe words instead of results? Socialism doesn’t work. Capitalism does work. We should choose what works.

Filed under: News, , , , , , , , , , , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Click to see recent visitors

  Visitors Online Now

Page views since 1/30/09

  • 4,431,137 hits

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 2,104 other followers

Archives

Follow

Get every new post delivered to your Inbox.

Join 2,104 other followers

%d bloggers like this: