Banks Thriving Despite Chávez Bravado

[BayCityProgressive]

http://www.venezuelanalysis.com/articles.php?artno=1980

When Hugo Chavez announced on January 8 that his government intended to nationalise the Venezuelan CANTV phone company and the Caracas electricity system, a little hell broke loose among investors. Venezuelan stocks of all types fell rapidly on world bourses. Phone companies, oil stocks, mining and steel companies with Venezuelan exposure - it mattered not; Mr Chavez would steal from all and sundry, investors felt, and only a fool would invest there.

Macroeconomics indicate that Venezuela is enjoying a boom without equal. Oil is the motor, certainly, but the money is not stopping in government coffers because the rank-and-file are also reaping benefits. In January, the government allotted $7bn to local councils for their needs and wants, representing U$260 per capita - an astounding figure for an emerging nation. Poverty levels have dropped: in 2002 the World Bank reported 47% of the population was below the poverty line; in 2005, it was 34%. GDP growth of 17% in 2004, 11% in 2005 and 10% in 2006 speaks for itself. There are plenty more statistics to choose from, but the picture is clear.

Román Mayorga, the Venezuelan representative of the Inter-American Development Bank, told The Banker in December 2005: “The banks have been making tons of money.” Local bankers have commented on the good relationship they have with government, and there have been innumerable assurances from the state that the banking sector will not be nationalised in any way, shape or form.

[Common Sense Party]

1. Chavez Bravado would be a great name for a rock band. n/t

[GreenZoneLT]

2. Enjoy the high oil prices, Hugo.

Just goes to show, you don't NEED sound economic policy if you've got enough high-priced oil. See Saudi Arabia.

He is smart not to screw around with the banks. Banks create money and generate jobs by lending. One of the dumbest things socialists from Jesus to Marx have espoused is ending the practise of lending money at interest.

[Common Sense Party]

4. That teat WILL run dry one day. It always does

whenever any country relies wholly on a single industry

Hugo needs to worry about runaway inflation. At 27%, Venezuela has the highest inflation in Latin America right now. That is crushing the poor, who are Hugo's base.

He's trying to live it up and make all the socialist strides he can before the worm turns.

[Selatius]

5. Inflation is a function of fractional-reserve banking. (the process of lending)

If a group of people deposit 100 dollars with the reserve ratio set to 10 percent, this means that 90 percent of that money is loaned out. The bank then makes a profit by charging interest.

Yet the kicker is the books still say the people have 100 dollars in the bank even though the bank only has spare cash on hand for 10 dollars. This is not a problem in most cases because the same group of people may only withdraw pennies on any given day. (Just as an example)

However, if there is any reason the same group of people tried to withdraw that entire 100 dollars in a very short amount of time like what happened during the Great Depression, they are royally screwed.

Fractional-reserve banking leads to inflation through the money multiplier effect.

[w4rma]

7. Actually I've read that some Arab countries lend money without interest and are quite successful

in doing it.

[GreenZoneLT]

8. That's a scam.

They claim to lend money without interest, but what they do is mark up the price of the house or whatever they're selling to a level equal to the interest on a normal loan.

It's one of those stupid, religious rules that doesn't fit into society. Jesus was against lending money at interest, too; Christians in medieval Europe used to use similar workarounds. One reason Jews became money-lenders was they provided banking for European Christians.

[w4rma]

12. I was wondering how they did that. So they just apply the "interest" to the sale.

I'll research that more. Thank you for the insight.

[Toots]

11. Ah but Venezuela has more than a single teat

They now are a major world lender. Chavez has 'loaned" Brazil three billion and is ready to do the same for other South American countries. You did notice how this post is about how well banks are doing.. Chevez will make money off his generosity, you can bank on it..

[rman]

9. Every nation depends on natural riches of some kind

That's no basis for concluding such a nation has no sound economic policy.

Besides, Venezuela always has had oil - but it's only now that Chavez is implementing socialist policies, that all Venezuelans benefit from it, and that the economy of Venezuela is growing.

[The Backlash Cometh]

10. Ahem. There is another big difference between Venezuela and Saudi Arabia.

Chavez is actually giving the money to the government agencies which are actually SPENDING THE MONEY. Did you happen to notice the part where poverty levels have dropped?

Why, or why can't anybody remember the month of October when Democrats ruled? Don't you all remember how sales people in America who sold to government agencies made their quotas in October? Yes, government got out of hand because they spent their budgets for the wrong reasons. They did it to justify asking for more money. But what we all forgot was those fat paychecks that came home to middle class families and we had a consumer who could afford to buy in stores outside of Walmart, though not Neiman Marcus.

Now, only Bush cronies can get their hands on that government money and they're in it for the millions. Fewer people getting rich, fewer consumers in America. That's the difference between the disribution of wealth in a Republican administration, and a Democratic one.

So, yes, the oil will one day dry up for Chavez, but for now, he's building infra-structure. Something that neither Bush nor Saudi Arabia has ever thought to do with their money: Trickle down economy, my ass.

[Selatius]

3. This is what happens when you pursue wealth redistribution with social programs.

Before long, you end up like Europe, with good public education, health care, infrastructure, and an informed citizenry. You either do that, or you end up as a failed state or a fascist/quasi-fascist state.

[The Magistrate]

6. Indeed, Sir: A Fate Worse Than Death Societies Must Avoid At All Costs....

"The laborers necessarily constitute the largest postion of society, and it is nonesense to suppose that what benefits the greatest part is injurious to the whole."