Comments on: Avoiding Muggers the Old Fashioned Way: Run http://www.nicholls.edu/bastiatsbastions/2007/03/05/avoiding-muggers-the-old-fashioned-way-run/ What is seen and what is unseen. Tue, 16 Mar 2010 04:51:16 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Steve W http://www.nicholls.edu/bastiatsbastions/2007/03/05/avoiding-muggers-the-old-fashioned-way-run/comment-page-1/#comment-1469 Steve W Thu, 08 Mar 2007 14:00:33 +0000 http://www.nicholls.edu/bastiatsbastions/2007/03/05/avoiding-muggers-the-old-fashioned-way-run/#comment-1469 Dictator Hugo Chavez of Venezuela is setting his economy up for all of the classic responses to Nationalization (thievery by State). Capital, both realized economic (money/stored value) and potential economic (talent) is fleeing where mobile & possible. The huge increase is risk his inane policies have brought are resulting in non-investment acceleration of stripping businesses not able to flee being location or resource bound (the management is diluting the risk by getting as much cash out as possible), outside vendors are offsetting their perception of risks by demanding higher payments from Venezuela, often on a cash basis, and Venezuela itself is at risk of loosing control of its political future as it makes "deals with the devil" with other states with extra-economic agendas to backfill desperate needs caused by the capital & intellectual flight to quality. Basically his policies so increase risk that investors will accept damaging their investment's long term health to get cash out now, investors want a huge risk premium to work with Venezuela, and Venezuela is at risk of becoming politically dependent on a "provider-State" willing to supply needed intellectual & technical skills. Chavez apparently hopes to strike some sort of balance with "provider-States" like China while expecting continued free access to the USA market. When that balance wobbles, Chavez's experiment is done. The $64 question is whether a real democracy could emerge, or if Venezuela will become to China what Cuba was for the USSR? It will be interesting times! Steve Dictator Hugo Chavez of Venezuela is setting his economy up for all of the classic responses to Nationalization (thievery by State).

Capital, both realized economic (money/stored value) and potential economic (talent) is fleeing where mobile & possible.

The huge increase is risk his inane policies have brought are resulting in non-investment acceleration of stripping businesses not able to flee being location or resource bound (the management is diluting the risk by getting as much cash out as possible), outside vendors are offsetting their perception of risks by demanding higher payments from Venezuela, often on a cash basis, and Venezuela itself is at risk of loosing control of its political future as it makes “deals with the devil” with other states with extra-economic agendas to backfill desperate needs caused by the capital & intellectual flight to quality.

Basically his policies so increase risk that investors will accept damaging their investment’s long term health to get cash out now, investors want a huge risk premium to work with Venezuela, and Venezuela is at risk of becoming politically dependent on a “provider-State” willing to supply needed intellectual & technical skills.

Chavez apparently hopes to strike some sort of balance with “provider-States” like China while expecting continued free access to the USA market.

When that balance wobbles, Chavez’s experiment is done. The $64 question is whether a real democracy could emerge, or if Venezuela will become to China what Cuba was for the USSR?

It will be interesting times!

Steve

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