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Trump Venezuela

As Trump Draws Up Venezuela Invasion Plans, Let’s Talk About Hyperinflation And 1,000,000 Bolivar Cups Of Coffee

"He just thinks out loud."

To be sure, trying to discern what Donald Trump might do next on domestic and/or foreign policy is an exercise in abject futility.

For instance, reports out Wednesday suggest that at one point last summer, Trump essentially asked aides at an Oval Office meeting if he could invade Venezuela.

The original reporting on that was from AP, but multiple outlets have since confirmed it, with one official who spoke to CNN chalking it up to Trump’s penchant for saying things that are crazy or otherwise don’t make any sense:

The President says and thinks a lot of different things. He just thinks out loud.

Here sure does.

A person who subsequently spoke to Bloomberg said Trump is still considering “military action” as part of an “array of options”, echoing AP’s reporting, and mirroring reports out last year about a possible military “solution” for the crisis in Caracas.

Just so we’re all on the same page here, the idea of the U.S. military actually invading Venezuela is so far-fetched that it boggles the mind. It’s not even entirely clear what the goal would be, other than toppling Maduro and (I guess) propping up an opposition government in an effort to alleviate the humanitarian crisis and maybe gain some sway over the oil.

As Mark Feierstein, who oversaw Latin America on the National Security Council for President Obama told AP, “the concern is that it raised expectations among Venezuelans, many of whom are waiting for an external actor to save them.”

That’s dangerous for any number of reasons, not the least of which is that it raises the specter of the opposition taking risks they wouldn’t otherwise take on the hope that Trump would be willing to support an armed rebellion.

Anyway, the AP story is all kinds of hilarious, if you can get past the inherently tragic backdrop that is Venezuela’s descent into failed state status.

For instance, it documents how, at one point, H.R. McMaster had to literally “pull Trump aside” and explain to him that continually asking Latin American leaders (at dinner, no less) if they are “sure” they don’t want the U.S. to storm into Venezuela, Iraq-style, is dumber than a bag of hammers:

Then in September, on the sidelines of the U.N. General Assembly, Trump discussed it again, this time at greater length, in a private dinner with leaders from four Latin American allies that included Santos, the same three people said and Politico reported in February.

The U.S. official said Trump was specifically briefed not to raise the issue and told it wouldn’t play well, but the first thing the president said at the dinner was, “My staff told me not to say this.” Trump then went around asking each leader if they were sure they didn’t want a military solution, according to the official, who added that each leader told Trump in clear terms they were sure.

Eventually, McMaster would pull aside the president and walk him through the dangers of an invasion, the official said.

America would later learn that just three months prior to that episode (and this isn’t related to Venezuela, but it underscores how concerned McMaster probably was by September) McMaster called Trump an “idiot with the intelligence of a kindergartner”, at a dinner with Oracle CEO Safra Catz.

One wonders if John Bolton (McMaster’s replacement) would have been so quick to try and dissuade Trump.

Of course Maduro immediately seized on this week’s reporting to reinforce the idea that America is conspiring against his government (and I mean, America is conspiring against his government – rightfully so – but as ever, Trump’s involvement makes the whole thing amenable to accusations that U.S. foreign policy is being conducted by someone who is even more of a buffoon than Maduro). Here’s what he told a military ceremony on Wednesday:

You cannot lower your guard for even a second, because we will defend the greatest right our homeland has had in all of its history, which is to live in peace.

Clearly, anything Maduro says can be immediately dismissed as disingenuous or otherwise absurd, but the point here is that Trump doesn’t help the situation in Venezuela by asking the country’s Latin American neighbors if he has carte blanche to send in the Marines.

If you want to laugh heartily at something which, again, is only funny if you can get past the humanitarian crisis that serves as the backdrop, I would strongly encourage you to skim “Venezuela’s Debt Negotiation Tactics Leaned Heavily On Purported Drug Lords And Actual Pancakes” and “Turns Out Cocaine Kingpin Not Best Choice To Lead Venezuela Debt Restructuring Push“, which detail the involvement of Tareck El Aissami in last year’s debt “negotiations”.

As far as how desperate the situation is in Venezuela, suffice to say they’re just as screwed as they were last month and the month before that and the month before that, etc. For instance, a cup of coffee in Caracas now costs one million bolivars. That, according to Bloomberg’s “Cafe Con Leche Index”:

CafeCon

“Today’s price is the equivalent of almost one-fifth of the monthly minimum wage,” Bloomberg wrote, late last month, adding that “to buy a cup with the most common bill in circulation — the 100-bolivar note — you’d need to gather up a stack of 10,000 of them.”

That’s hyperinflation for you.

Bolivar

“The macro continues deteriorating and hyperinflation has worsened, reaching a peak last month (110% in May according to the National Assembly) and could have surpassed 200% this month according to Inflación Verdadera,” BofAML wrote, in a note dated June 29, before dryly reminding you that “the government has not announced a plan to reduce the fiscal deficit and fight hyperinflation.”

Oil production is of course crashing. This is pretty much the only chart you need on that:

Ven

For those who are keenly interested, here are some further excerpts from the BofAML note mentioned above that just kind of help to flesh out how dire this situation really is following the farce of an election last month:

Amid a collapsing economy, Maduro announced a new cabinet reshuffle and a new PDVSA board. Delcy Rodriguez, a Maduro loyalist replaces Tarek El Aissami as vicepresident. El Aissami becomes economics VP, reinforcing his previous role in the economic front. Maduro argued that this change will pursue an economic revolution but so far we have not seen plans to stop the hyperinflation. El Aissami is considered closer to a more modern wing in economic terms for Chavista standards, normally open to negotiations with private sector business. However, the rent seeking activities, power groups and shrinking USD revenue limits the ability to introduce policy changes. Maduro also appointed Calixto Ortega, an engineer that studied public policies in Columbia University as central bank president. Diosdado Cabello, second in rank in Chavismo becomes the head of the powerful Constituent Assembly replacing Delcy Rodriguez. The recent changes confirm a very high turnover in the ministries that makes very difficult to elaborate a reform plan for the medium term. Ministers of defense and the interior Vladimir Padrino and Nestor Reverol continue in those positions. The cabinet changes seem to give more power to loyalists of the regime with very high exit cost (sanction persons) which may lead to more radicalization of policies and a more embedded control of military allegiances. Most bonds are in default. Venezuela sovereign coupon payments have not been made since the V19s and V24s grace period ended in 12 November. All non-collateralized sovereign and PDVSA bonds are in default or in the grace period and arrears reached $4.5bn (reserves are $8.4bn). Given these delays markets are keeping an eye on potential acceleration of the bonds. Our baseline is for prolonged default of Venezuela sovereign bonds (which are already in default) this year given lack of financial options and collapsing oil production).

Growth

Needless to say, invading the country is not going to solve the economic problems. You might be able to get rid of Maduro, but at least in the short-term, the humanitarian crisis would invariably worsen because the country would become a war zone.

Additionally, military action would engender all manner of ill-will in Latin America, would almost certainly piss off Moscow and Beijing (with the latter having this week loaned Venezuela some $250 million from the China Development Bank to boost oil production) and would be almost impossible to reconcile with Trump’s “America first” mantra.

Finally, it’s not entirely clear that Trump is the man for the job when it comes to rescuing a bankrupt country – after all, he’s bankrupting America right now, both morally and financially.

 

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9 comments on “As Trump Draws Up Venezuela Invasion Plans, Let’s Talk About Hyperinflation And 1,000,000 Bolivar Cups Of Coffee

  1. Error404

    Time for Bolton to start a rumour about Cuba discovering a giant.

  2. He just thinks out loud, like, “if we have nukes why don’t we use them”. Vote…….Vote and vote until this nightmare is over.

    • Lance Manly

      Nixon: I’d rather use the nuclear bomb. Have you got that ready?
      Kissinger: That, I think, would just be too much.
      Nixon: A nuclear bomb, does that bother you?… I just want you to think big, Henry, for Christ’s sake! The only place where you and I disagree is with regard to the bombing. You’re so goddamned concerned about civilians, and I don’t give a damn. I don’t care.

  3. In 2016, Venezuela was exporting nearly half of its crude oil to the US, the rest to China and India equally. Those exports to the US have only dropped by about 20% as of April 2018. So I think disingenuous to say that the US is not making an effort to see the Venezuelan people overcome their situation and that Trump’s queries for military intervention are diabolical from the outset.

    If 20th century history is any indication, Venezuela’s troubles are very much worthy of concern for the Western hemisphere, and open, uncensored discussions at high levels are deserved. The Venezuelan people’s suffering deserve more respect and action than only calls for political correctness, more jabs at populists, and more shorts.

    • Lance Manly

      You should take some time and read the history of our exploits in Latin America. Even when you look at Honduras and El Salvador you can see the remnants of our meddling.

      • Hyperinflation is the kind of environment that compels fathers to prostitute their own daughters for barely enough food to make it to the next john. How are your reading requirements for my having an opinion and desire to see Venezuela recover impacting that?

        • @Johnny, Puerto Rico is an American territory, and Trump’s administration completely bungled any sort of recovery the island could have had. There was no war that preceded the needed recovery in this case.

          It’s formidable that you care about the Venezuelan civilians and their well being, but do you really believe Venezuela would be handled better than Puerto Rico was?

          Do you think that the kind of civil war an invasion would create wouldn’t have civilian casualties? It’s not like you have to dig deep into the history books to see these costs; after all, Syria is still ongoing. How many innocent lives were lost (and continue to be lost) in Syria’s civil war?

          If you believe the US should invade Venezuela to save the civilians, then do you believe the US should invade Syria as well? What about other impoverished countries that don’t make the news because they don’t sit on massive oil reserves? Should the US invade South Africa because the country ran out of water?

          Have you ever thought about any of this, or was the prospect of a dad pimping his daughter all you ever cared about?

          • Yeah, it really does come down to the daughter and father for me. Thanks for asking.

            NYT has just amped up concern for the purity of the Bomba tradition in Puerto Rico today. That is NOT an equivalent crisis. And even remotely suggesting the resurrection of an Arab Spring in Syria is preposterous so long as al-Assad can continue slaughtering protesters and political rivals outright with multilateral support (e.g., Iran, Russia). Our options there are limited as are our options are right now with Venezuela. Hence, only talking and leaking talk.

            That Venezuela has oil, and that we have been purchasing significantly more of it than any other nation in the world is ABSOLUTELY relevant…not only for us, but for Venezuela also. That can’t be separated from the situation with any shred of intellectual honesty, nor with any practical plan to address Venezuela’s crisis.

            I support US military occupation of Venezuela, upon agreement from our Latin American allies, to impose order and reconstruction if necessary. My opinion is that the situation’s bad enough to justify offering it, and it’s only gonna get worse as the days roll on. You know, trade war and all, ese.

  4. Pingback: Exasperated With Inability To Triumph Over Inanimate Commodity, Donald Trump Considers Tapping America’s Emergency Oil Supply Ahead Of Midterms | AlltopCash.com

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