Things Are Never So Bad That They Can't Get Worse: Inside the Collapse of Venezuela
I finished this book!
I wrote about it before, when I was not finished yet, from the perspective of: this is what happens when a country's residents no longer respect the rule of law -- everything falls apart. But there were many causes for the collapse of Venezuela, according to the author William Neuman.
One cause was incompetent economic management by the government. But normally such incompetent managers would be replaced by the next election. In Venezuela this never happened because the government threw opposition leaders in jail, rigged the elections, and -- the remaining opposition leaders then boycotted the rigged elections.
Another cause was the lack of unity among the opposition parties, and the incompetence of opposition party leaders.
And yet another cause was the incompetence of the Trump administration, which ignored the proposals of its own Latin America experts and piled sanctions upon sanctions on the Venezuelan economy, hoping to thereby dislodge the authoritarian government, while instead impoverishing the vast majority of Venezuelans.
Furthermore, the author blames Venezuelan culture for wanting to receive free handouts based on oil revenues without wanting to carefully manage oil production, and -- for not respecting the rule of law. Theft and murder are commonplace now, making it impossible to start a small business that could provide jobs and economic growth.
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I wonder whether the author left another cause unexplored -- the utter randomness of life. History is often told as a compelling narrative, with good and bad actors, and an assumed arc of either progress or collapse. If a country is successful, we look for reasons to explain that success. If a country collapses, we look for reasons to explain that collapse. But when we see an array of data points and then look for reasons to explain these data points, we can easily find patterns among random data that "explain" things in ways that support our own biases.
I'm reminded of Rorschach tests, and dreams, and divination tools such as I Ching and Tarot.
Especially as residents of the US we've come to expect that economic progress is a sort of natural law. In the wake of the Industrial Revolution, the discovery and extraction of fossil fuels, the invention of microprocessors, achievements in public health and medicine -- we believe that further exponential progress is inevitable -- we take it for granted. Everything Must Serve Economic Growth!!
While progress is happening, we like to credit our own hard work and ingenuity, and our own form of government. But when things fall apart we look for corrupt and incompetent people to blame -- throw the bums out, if we can. Few people blame themselves.
Conservatives say incompetent government bureaucrats should get out of the way and let the free market provide. Progressives say capitalism is the problem and that government regulation and share-the-wealth policies are needed. And then everybody cherry-picks the data to make points supporting their own positions. But they're all only half correct -- we need both competent business leaders and competent government regulators. And we need a sense of shared responsibility. And then we need good luck.
Many of the problems that plagued Venezuela's ruling classes prior to its collapse also plague our own ruling classes in the US. But while the US is flying high we discount these problems and believe our success is due to our own hard work, ingenuity, and form of government ("freedom"). If we end up throwing Trump in jail for his crimes, aren't we acting like many "banana republics" that have done the same to their opposition leaders? If some US Republicans boycott a vote because they believe elections are rigged, how is that different from the way Venezuela's opposition leaders behave?
We have corruption at the top in the US, but because we've legalized unlimited campaign donations from billionaires and corporations, we simply do not view it as corruption, we view corruption as something that only happens somewhere else.
-----
Periodic economic collapses are inevitable, because economies follow different kinds of overlapping and variable cycles. Nearly every country has experienced an economic collapse at some point, even as the human race has generally made great progress over the past few centuries along several dimensions. The collective panic toward COViD that happened around the world during the spring of 2020 was a sort of economic collapse. As was the Great Recession of 2008. Both of these events required trillion-dollar bailouts from the Federal Reserve and other major central banks, unlike anything we've seen in modern economic history -- the amount of cash in US bank reserves is now 6x what it was during the summer of 2008. There's never been an expansion quite that large in US monetary statistics before, not even during the Great Depression or WW2. Similar recent expansions occurred in British Pounds, Euros, and Yen. It's amazing that hyperinflation hasn't yet resulted from the explosion of cash used to prevent economic collapse over the past 14 years. Yet we're all very concerned about the 8% inflation we're having right now. Objectively, prices haven't yet risen far enough to match the amount of cash expansion in the system.
The sort of collapse we've seen in Venezuela could definitely happen here in the US. But until it does, I can sound like a doomsayer. And maybe it won't happen here during my lifetime. The point I'm trying to make is that there's an additional factor -- that of randomness -- and that only after a collapse do we go out looking for particular people and behaviors to blame, when those people and behaviors are acting in corrupt and criminal ways all along -- we simply do not blame them until things blow up.
-----
The US federal government has been running a Ponzi scheme since 1981, when the ratio of federal debt to GDP starting increasing from 31% then to 121% now. Quadrupling the debt load of the federal government relative to the size of the economy. There's no way we're paying back $31 trillion in federal debt -- we're currently projected to increase this debt to $45 trillion over the next 10 years. Nobody's even talking about paying it all back, or how we would do so.
And this measures our federal debt on a current cash basis only -- what has already been borrowed to make payments up until now. On an accrual basis, counting the obligations the federal government has already promised to pay in the future, including Social Security and such, our current federal debt would be four times higher, an additional $97 trillion according to the US Treasury's latest report. The total obligations of the US federal government, accounted for correctly, exceed the net worth of everybody living in the US.
The US is thereby, technically, insolvent.
For now, enough people believe the US Treasury will make good on its obligations, so they are willing to hold US debt and they are willing to buy even more US debt. But this is a Ponzi scheme operating in full transparency -- every projection, even official government projections, shows that our borrowing is unsustainable -- yet the US Treasury is by far the largest borrower in the world. There is no other entity that owes as much as $31 trillion in current debt (forget about the additional $97 trillion).
Sometimes I hear Republicans talk about how we need to balance the federal budget, yet when they were last in charge they passed a gigantic tax cut without corresponding spending cuts. During Trump's four years the federal debt expanded by $8 trillion -- that's faster than ever before, it took Obama eight years to expand the debt by that much. The federal debt quadrupled under Reagan/Bush, doubled again under Baby Bush, nearly doubled again under Obama.
Our American Ponzi scheme is bipartisan, the largest Ponzi scheme in the history of humanity, yet ... we haven't collapsed yet. So we're generally not blaming anybody yet for the behaviors that will lead to our inevitable collapse. And nobody can tell you with precision when the US will collapse, so ... ... for now we continue with our Ponzi scheme as though nothing at all is wrong.
After we collapse, a brilliant author will recount all the various reasons leading to our collapse, and I expect by the time we've actually collapsed all of the same reasons causing Venezuela's collapse will be found here in the US.
-----
One of my favorite history podcasters spoke about how we often look back at history and assume that people were different back in that time and place. Otherwise, why would they have put up with such a horrible leader, or such a horrible war, why would they have committed genocide, etc.
His point, one that I've taken to heart, is that people are people, and that if we found ourselves in the same situations as those historic peoples, we would've done the same things they did.
But when times are good, we believe that times are good because we're good people. When times are bad, we blame somebody else. When this great Ponzi scheme of ours collapses, we definitely won't blame ourselves for repeatedly electing politicians from both major parties who kept promising us more tax cuts or tax credits or payments or benefits than we were willing to pay for. We won't blame ourselves for the gigantic bailouts of 2008 and 2020 that temporarily delayed our collapse and made the ultimate collapse-to-come even worse. No, Democrats will blame Republicans and vice versa. Maybe we'll find an ethnic, religious, or sexual minority to scapegoat. We'll blame the rich for being too greedy, or the working class for being too lazy. We'll blame the criminals, of course, although there are always criminals everywhere and everywhen. Maybe we'll start a war -- we can defintely blame the Chinese for "stealing our jobs".
A key to Venezuela's collapse was their government borrowing too much when times were good, and then having to borrow even more when times were bad, until the world realized it was no longer able to meet its obligations. The US has been traveling down the same path for 40 years, and our borrowing habits continue to accelerate. At some point ... the world will realize we're no longer able to meet our obligations. Nobody knows when that tipping point will occur. But it must. Unsustainable trends cannot last. And then we'll find somebody to blame.
I wrote about it before, when I was not finished yet, from the perspective of: this is what happens when a country's residents no longer respect the rule of law -- everything falls apart. But there were many causes for the collapse of Venezuela, according to the author William Neuman.
One cause was incompetent economic management by the government. But normally such incompetent managers would be replaced by the next election. In Venezuela this never happened because the government threw opposition leaders in jail, rigged the elections, and -- the remaining opposition leaders then boycotted the rigged elections.
Another cause was the lack of unity among the opposition parties, and the incompetence of opposition party leaders.
And yet another cause was the incompetence of the Trump administration, which ignored the proposals of its own Latin America experts and piled sanctions upon sanctions on the Venezuelan economy, hoping to thereby dislodge the authoritarian government, while instead impoverishing the vast majority of Venezuelans.
Furthermore, the author blames Venezuelan culture for wanting to receive free handouts based on oil revenues without wanting to carefully manage oil production, and -- for not respecting the rule of law. Theft and murder are commonplace now, making it impossible to start a small business that could provide jobs and economic growth.
-----
I wonder whether the author left another cause unexplored -- the utter randomness of life. History is often told as a compelling narrative, with good and bad actors, and an assumed arc of either progress or collapse. If a country is successful, we look for reasons to explain that success. If a country collapses, we look for reasons to explain that collapse. But when we see an array of data points and then look for reasons to explain these data points, we can easily find patterns among random data that "explain" things in ways that support our own biases.
I'm reminded of Rorschach tests, and dreams, and divination tools such as I Ching and Tarot.
Especially as residents of the US we've come to expect that economic progress is a sort of natural law. In the wake of the Industrial Revolution, the discovery and extraction of fossil fuels, the invention of microprocessors, achievements in public health and medicine -- we believe that further exponential progress is inevitable -- we take it for granted. Everything Must Serve Economic Growth!!
While progress is happening, we like to credit our own hard work and ingenuity, and our own form of government. But when things fall apart we look for corrupt and incompetent people to blame -- throw the bums out, if we can. Few people blame themselves.
Conservatives say incompetent government bureaucrats should get out of the way and let the free market provide. Progressives say capitalism is the problem and that government regulation and share-the-wealth policies are needed. And then everybody cherry-picks the data to make points supporting their own positions. But they're all only half correct -- we need both competent business leaders and competent government regulators. And we need a sense of shared responsibility. And then we need good luck.
Many of the problems that plagued Venezuela's ruling classes prior to its collapse also plague our own ruling classes in the US. But while the US is flying high we discount these problems and believe our success is due to our own hard work, ingenuity, and form of government ("freedom"). If we end up throwing Trump in jail for his crimes, aren't we acting like many "banana republics" that have done the same to their opposition leaders? If some US Republicans boycott a vote because they believe elections are rigged, how is that different from the way Venezuela's opposition leaders behave?
We have corruption at the top in the US, but because we've legalized unlimited campaign donations from billionaires and corporations, we simply do not view it as corruption, we view corruption as something that only happens somewhere else.
-----
Periodic economic collapses are inevitable, because economies follow different kinds of overlapping and variable cycles. Nearly every country has experienced an economic collapse at some point, even as the human race has generally made great progress over the past few centuries along several dimensions. The collective panic toward COViD that happened around the world during the spring of 2020 was a sort of economic collapse. As was the Great Recession of 2008. Both of these events required trillion-dollar bailouts from the Federal Reserve and other major central banks, unlike anything we've seen in modern economic history -- the amount of cash in US bank reserves is now 6x what it was during the summer of 2008. There's never been an expansion quite that large in US monetary statistics before, not even during the Great Depression or WW2. Similar recent expansions occurred in British Pounds, Euros, and Yen. It's amazing that hyperinflation hasn't yet resulted from the explosion of cash used to prevent economic collapse over the past 14 years. Yet we're all very concerned about the 8% inflation we're having right now. Objectively, prices haven't yet risen far enough to match the amount of cash expansion in the system.
The sort of collapse we've seen in Venezuela could definitely happen here in the US. But until it does, I can sound like a doomsayer. And maybe it won't happen here during my lifetime. The point I'm trying to make is that there's an additional factor -- that of randomness -- and that only after a collapse do we go out looking for particular people and behaviors to blame, when those people and behaviors are acting in corrupt and criminal ways all along -- we simply do not blame them until things blow up.
-----
The US federal government has been running a Ponzi scheme since 1981, when the ratio of federal debt to GDP starting increasing from 31% then to 121% now. Quadrupling the debt load of the federal government relative to the size of the economy. There's no way we're paying back $31 trillion in federal debt -- we're currently projected to increase this debt to $45 trillion over the next 10 years. Nobody's even talking about paying it all back, or how we would do so.
And this measures our federal debt on a current cash basis only -- what has already been borrowed to make payments up until now. On an accrual basis, counting the obligations the federal government has already promised to pay in the future, including Social Security and such, our current federal debt would be four times higher, an additional $97 trillion according to the US Treasury's latest report. The total obligations of the US federal government, accounted for correctly, exceed the net worth of everybody living in the US.
The US is thereby, technically, insolvent.
For now, enough people believe the US Treasury will make good on its obligations, so they are willing to hold US debt and they are willing to buy even more US debt. But this is a Ponzi scheme operating in full transparency -- every projection, even official government projections, shows that our borrowing is unsustainable -- yet the US Treasury is by far the largest borrower in the world. There is no other entity that owes as much as $31 trillion in current debt (forget about the additional $97 trillion).
Sometimes I hear Republicans talk about how we need to balance the federal budget, yet when they were last in charge they passed a gigantic tax cut without corresponding spending cuts. During Trump's four years the federal debt expanded by $8 trillion -- that's faster than ever before, it took Obama eight years to expand the debt by that much. The federal debt quadrupled under Reagan/Bush, doubled again under Baby Bush, nearly doubled again under Obama.
Our American Ponzi scheme is bipartisan, the largest Ponzi scheme in the history of humanity, yet ... we haven't collapsed yet. So we're generally not blaming anybody yet for the behaviors that will lead to our inevitable collapse. And nobody can tell you with precision when the US will collapse, so ... ... for now we continue with our Ponzi scheme as though nothing at all is wrong.
After we collapse, a brilliant author will recount all the various reasons leading to our collapse, and I expect by the time we've actually collapsed all of the same reasons causing Venezuela's collapse will be found here in the US.
-----
One of my favorite history podcasters spoke about how we often look back at history and assume that people were different back in that time and place. Otherwise, why would they have put up with such a horrible leader, or such a horrible war, why would they have committed genocide, etc.
His point, one that I've taken to heart, is that people are people, and that if we found ourselves in the same situations as those historic peoples, we would've done the same things they did.
But when times are good, we believe that times are good because we're good people. When times are bad, we blame somebody else. When this great Ponzi scheme of ours collapses, we definitely won't blame ourselves for repeatedly electing politicians from both major parties who kept promising us more tax cuts or tax credits or payments or benefits than we were willing to pay for. We won't blame ourselves for the gigantic bailouts of 2008 and 2020 that temporarily delayed our collapse and made the ultimate collapse-to-come even worse. No, Democrats will blame Republicans and vice versa. Maybe we'll find an ethnic, religious, or sexual minority to scapegoat. We'll blame the rich for being too greedy, or the working class for being too lazy. We'll blame the criminals, of course, although there are always criminals everywhere and everywhen. Maybe we'll start a war -- we can defintely blame the Chinese for "stealing our jobs".
A key to Venezuela's collapse was their government borrowing too much when times were good, and then having to borrow even more when times were bad, until the world realized it was no longer able to meet its obligations. The US has been traveling down the same path for 40 years, and our borrowing habits continue to accelerate. At some point ... the world will realize we're no longer able to meet our obligations. Nobody knows when that tipping point will occur. But it must. Unsustainable trends cannot last. And then we'll find somebody to blame.