Wednesday , 28 September 2016


Desperate Venezuela: The Moment Of Financial Reckoning Looms Larger

According to Goldman Sachs Group, Venezuela’s government may have to deplete its internationalVenezuela flag reserves to satisfy its debt requirement through the end of the year. The banking giant also notes that, despite the government’s declared willingness to pay its debt, “the moment of financial reckoning looms larger.” Doubling down on the economic disaster, as Venezuela’s crisis worsens its gold reserves have been shrinking dramatically. According to IMF data, the country’s stockpile has dropped by 36% in one year, and by a whopping 50% just since February.

The comments above and below are excerpts from an article written by James Cordelaine(GoldCoPreciousMetals.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.

 

With the Venezuelan economy now in shambles, everyday life in the South American country has become a living hell. Families wait in supermarket lines for eighteen hours at a stretch just to purchase small amounts of oil, rice or pasta.  Violent crimes are on the upswing, and Caracas, the country’s capital, has become the world’s most violent city. Many government offices are not open even two days a week. Starvation and malnutrition are becoming more common, and well-known companies, like beer producer Empresas Polar, are closing up shop.

Dany Bahar, a fellow at the Brookings Institution and associate at the Harvard Center for International Development, observes the political events behind Venezuela’s economic decline have been gathering force for more than a decade, due to tanking crude prices and the failures of President Nicolás Maduro’s government to address the problem.

As credit rating agency Moody’s declares the nation “highly unlikely” to meet its debt obligations this year, Bahar feels Venezuela’s problems will require “significant foreign intervention” by the International Monetary Fund (IMF) or other organizations…

The IMF forecasts Venezuela’s economy will shrink 10% in 2016, the most it’s contracted in more than a decade.  In the meantime, its rate of inflation shot up to about 700%.

The Atlantic bluntly states in a recent article that, “Venezuela desperately needs new economic policies—and likely new political leadership to enact them.” There are many who agree, including the county’s opposition-controlled National Assembly, which has challenged the power of the Supreme Court that supports President Maduro.

Under the circumstances, it’s somewhat understandable – but highly regrettable – that Venezuela is parting with its gold so readily in the midst of this economic turmoil. Gold has traditionally been a source of security for countries looking to hedge against currency volatility; and heaven knows Venezuela has had more than its share of that.  The bottom line?  They’re giving up the only security they have left.

Disclosure: The above article has been edited ([ ]) and abridged (…) by the editorial team at munKNEE.com (Your Key to Making Money!) to provide a fast and easy read.
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