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

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, Barack Obama, Big Government, Colombia, Corruption, Crisis, Debt, Deficit, Devaluation, Dictator, Economic Growth, Economy, GDP, Government, Hugo Chavez, Pork, Socialism, Spending, Venezuela, Waste

Socialist Argentina follows-up runaway inflation with price controls on groceries

Take a look at this article from the leftist Washington Post, which reports on how the socialists in Argentina have imposed price controls in order to minimize the impact of runaway inflation caused by money printing.

Excerpt:

Argentina announced a two-month price freeze on supermarket products Monday in an effort to stop spiraling inflation.

The price freeze applies to every product in all of the nation’s largest supermarkets — a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies’ trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported.

[...]Economist Soledad Perez Duhalde of the abeceb.com consulting firm predicted on Monday that the price freeze will have only a very short term effect, and noted that similar moves in Argentina had failed to control inflation. Consumers shouldn’t be surprised if the supermarkets are slow to restock their shelves and offer fewer products for sale, she added.

A more effective way to contain inflation would be to “reduce government spending, which is financing an expansion of the money supply, and to have a credible price index.”

Isn’t ironic that the United States is pursuing the exact same policy of printing money and overspending as Argentina has? Excerpt we are a little further along.

So what happens next in Argentina? Zero Hedge explains:

What consumers will certainly do is scramble into local stores to take advantage of artificially-controlled prices knowing very well they have two short months to stock up on perishable goods at today’s prices, before the country’s inflation comes soaring back, only this time many of the local stores will not be around as their profit margins implode and as owners, especially of foreign-based chains, make the prudent decision to get out of Dodge while the getting’s good and before the next steps, including such measures as nationalization, in the escalation into a full out hyperinflationary collapse, are taken by Argentina’s female ruler.

[...]So to summarize: first capital controls, then a currency crisis, then expectations of sovereign default, then a rise in military tensions, and finally – price controls, after which all out chaos usually follows.

Study this sequence well: it is coming to every “developed” country near you in the months and years ahead.

Just to be clear, price controls are a clear signal to suppliers to stop supplying, since they cannot make any money if prices are held low by government decree. Price controls lead to shortages, necessarily.  And that’s what’s in store for Argentina once the private sector food suppliers (and other companies) pull out of there when they can’t make a profit. There are other places they need to be.

Imagine if America elected a charismatic, incompetent fool to run our country like socialist dictators do in Argentina or Venezuela. Imagine if the mainstream media, with their non-quantitative degrees and lack of real-world experience, covered for his every blunder. Where would we be then?

Filed under: News, Argentina, Banana Republic, Credit Rating, Crisis, Cristina Kirchner, Currency Devaluation, Debt, Default, Deficit, Hugo Chavez, Inflation, Price Controls, Socialism, Venezuela

Europe is going socialist – what’s the worst that could happen?

European Debt to GDP and Credit Rating

From MSN Money.

Excerpt:

European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro.

EU officials have told Reuters the ideas are part of a range of contingency plans. They emphasized that the discussions were merely about being prepared for any eventuality rather than planning for something they expect to happen – no one Reuters has spoken to expects Greece to leave the single currency area.

[...]The discussions have taken place in conference calls over the past six weeks, as concerns have grown that a radical-left coalition, SYRIZA, may win the second election, increasing the risk that Greece could renege on its EU/IMF bailout and therefore move closer to abandoning the currency.

No decisions have been taken on the calls, but members of the Eurogroup Working Group, which consists of euro zone deputy finance ministers and heads of treasury departments, have discussed the options in some detail, the sources said.

As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.

[...]Another source confirmed the discussions, including that the suspension of Schengen was among the options raised.

“These are not political discussions, these are discussions among finance experts who need to be prepared for any eventuality,” the second source said. “It is sensible planning, that is all, planning for the worst-case scenario.”

I noticed an article that came out in CNN Money that explained how American households had lost almost 40% of their net worth since 2007 – the exact year that Nancy Pelosi took control of the House and Harry Reid took control of the Senate. The Democrats have been running the European playbook since they took over in 2007. We are just a few steps behind the Europeans thanks to the borrow and spend policies of the Democrats.

Filed under: News, Crisis, Debt, Europe, Failure, Greece, Italy, Keynesianism, Leftism, Marxism, Portugal, Socialism, Spain, Welfare State

EPA administrator boasts about crucifying oil and gas firms

Tom sent me this article from CNS News.

Excerpt:

Sen. James Inhofe (R-OK) took to the Senate floor today to draw attention to a video of a top EPA official saying the EPA’s “philosophy” is to “crucify” and “make examples” of oil and gas companies – just as the Romans crucified random citizens in areas they conquered to ensure obedience.

Inhofe quoted a little-watched video from 2010 of Environmental Protection Agency (EPA) official, Region VI Administrator Al Armendariz, admitting that EPA’s “general philosophy” is to “crucify” and “make examples” of oil and gas companies.

In the video, Administrator Armendariz says:

“I was in a meeting once and I gave an analogy to my staff about my philosophy of enforcement, and I think it was probably a little crude and maybe not appropriate for the meeting, but I’ll go ahead and tell you what I said:

“It was kind of like how the Romans used to, you know, conquer villages in the Mediterranean.  They’d go in to a little Turkish town somewhere, they’d find the first five guys they saw and they’d crucify them.

“Then, you know, that town was really easy to manage for the next few years.”

“It’s a deterrent factor,” Armendariz said, explaining that the EPA is following the Romans’ philosophy for subjugating conquered villages.

Soon after Armendariz touted the EPA’s “philosophy,” the EPA began smear campaigns against natural gas producers, Inhofe’s office noted in advance of today’s Senate speech:

“Not long after Administrator Armendariz made these comments in 2010, EPA targeted US natural gas producers in Pennsylvania, Texas and Wyoming.

“In all three of these cases, EPA initially made headline-grabbing statements either insinuating or proclaiming outright that the use of hydraulic fracturing by American energy producers was the cause of water contamination, but in each case their comments were premature at best – and despite their most valiant efforts, they have been unable to find any sound scientific evidence to make this link.”

We want to be careful with environmental regulations so that we don’t hurt job creators. We need to work to have money, and we shouldn’t have to give up our prosperity in order to make a few bureaucrats feel as if they are “saving the world”.

Filed under: News, Abuse of Science, Crisis, Democrat Party, Employment, Energy, Environmentalism, Gas Prices, Global Warming, Green Agenda, Green Jobs, Hidden Agenda, Inflation, Jobs, Oil and Gas, Power, Prosperity, Socialism, Supply and Demand, Work

Europe’s socialist debt crisis: who suffers most? Can bailouts fix it?

This is the most popular article on Investors Business Daily right now.

Excerpt:

Rational or not, Greece’s street riots and emigration rates signify one thing: Socialism offers very little to the young. So why is the EU’s $172 billion bailout geared toward saving so much of the failed socialist system?

As Europe prepares to deliver a historic $172 billion bailout to Greece in a deal announced Monday, it’s pretty much a given that the austerity conditions required, in the absence of a true free market, will hit youth hardest. Athens will be trashed by another youth rampage, as many youths blame the pain on something other than Greece’s deeply rooted socialism.

A bigger effect will come from Greeks who do recognize reality. They won’t riot. They’ll leave, voting with their feet just as Eastern Europe’s youth once did.

The young in both cases are victims of socialism, which claims to make people equal but, in reality, penalizes the young. For Greece, a country already gutted by a below-replacement birth rate and an aging population, that’s a disaster.

It’s not just Greece, but also every EU state with institutionalized socialism — where high government spending seeks to create a warm blanket insulating everyone from risk, but instead has led to bankruptcy.

[...]One out of five jobs in Greece is held by a bureaucrat, which is why unemployment among the under-24s runs at 42%. A 2010 poll shows that seven out of 10 Greek college graduates seek to leave.

Some 9% of Greek college graduates and at least 51% of Greece’s Ph.D.s are already gone, according to University of Macedonia demographer Lois Lambrianidis.

What jobs there are come from the bottom of a two-tier labor system that shields older workers in Greece’s rigid labor market. Young Greeks earn a 500-and-change euro monthly minimum wage as older workers doing the same work make 700.

In contrast, immigrant-magnet Australia holds packed job fairs at its Athens embassy. In 2011, it took in 249,000 immigrants. In 2012, a 20% rise is expected.

[...]Meanwhile, Spain’s EFE News reports that the Spanish Embassy in Santiago, Chile, has seen a 10% rise in registered nationals to 48,000, while Chile reports a 25% rise in work permits issued to Spanish citizens.

It’s not just jobs that are penalizing Europe’s young. Housing is stacked against youth, too. Eurostat reports that in 2008, 46% of young European adults ages 18-34 lived with their parents — 51 million people.

The two-tier job market, which leans heavily toward unstable contract employment, affects housing choices for the young. Other socialist measures designed to protect current owners against the market also shut out the young.

Perhaps most hostile of all to youth are the EU’s outdated state pension systems — which force the young to pay the pensions of the old as the population shrinks.

In Italy, 14% of all economic output goes to pensions. It’s no coincidence that states attracting Europe’s young, like Chile and Australia, have privatized their social security systems that give youth a real shot at building personal wealth and a credible pension through their own efforts, instead of political favoritism.

This is the direction that the United States is also headed in. What I find mystifying is why young people in the United States are voting for these policies. Young people here have a higher rate of unemployment, and they ought to know that all of these entitlement programs won’t be there for them when they retire. What possible reason could they have for voting for more and more government control?

Filed under: News, Bailout, Crisis, Debt, Deficit, EU, Europe, European Union, Greece, Greek, Jobs, Pension, Public Sector, Socialism, Unemployment, Unemployment Rate, USA, Young, Youth