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"Cash-Strapped" Venezuela Stares Into The Abyss... And Its Default Risk Goes Parabolic

Tyler Durden's picture




 

Some two weeks ago (when Venezuela CDS was trading at only 2300  bps) we previewed what - with almost absolute certainty - would be the first "casualty of the crude carnage" - Nicholas Maduro's little socialist paradise that couldn't: Venezuela. As a reminder, back then we learned that the OPEC member was in such dire straits it had burned through a third of a Chinese' bailout loan in the matter of days.

Since then it only got worse, and as we reported early last week in How Goldman Sachs Became Broke Venezuela's Loan Shark, Venezuela is now scrambling to obtain any cash even if it means doing deals with the devil, or, alternatively, god's busy worker on this planet, Goldman Sachs.

Then, in a bout of desperation, late the same week, the country - desperate to give the impression that it is not terminally insolvent and still has some foreign reserves left - ordered its Central Bank to dramatically change the rules, in a step "that enables them to count a whole new set of 'assets' as potential international reserves including "stones" and "precious metals held in their vaults on behalf of foreign financial institutions."

Some free advice to Maduro: if there is anything that screams panic, it is when countries begin changing the rules in the last minute and, just as bad, the definition of terms, be it Europe which recently added the "contribution" from hookers and blow to GDP, or Venezuela, which overnight made its reserve calculation meaningless.

What happens next is bad, if you are Venezuela that is (it will be quite lucrative for many bankruptcy bankers and lawyers). BofA's Francisco Rodrgiuez did some math on the topic, finding that "OPEC’s decision to maintain output at current levels is bound to usher in price instability in energy markets. Until now, one of the reasons Venezuelan authorities chose to maintain high levels of relative price distortions was because they could. If oil prices remain at or below current levels for a sustained period, Venezuelan external accounts will be put under severe stress, requiring authorities to choose between further import cuts and more orthodox economic adjustments. If oil prices remain near current levels, Venezuela would need at least $25bn in new external financing to maintain current import levels. If Brent recovers to $77, as our commodities team expects, Venezuela would still have to come up with $16bn."

The punchline: "We are thus skeptical that the economic team's plan to tap international lenders, including China, over coming weeks will yield any tangible results."

What this means in simple terms is that Venezuela is now desperate for any cash. As CNBC's Silvana Ordonez reports, citing Diego Moya-Ocampos, a senior political risk analyst at IHS, "Clearly the government is trying to send signs to the market that they are working on necessary adjustments that the economy needs in order to honor international commitments and keep up with social policies, which are essential for political stability. However, these policy adjustments are not enough. This reflects simply that the government is desperately looking for funds to compensate for the lost revenues from declining oil prices."

Worse, if as we speculated in November, China decides it no longer needs to be locked into a contractual arrangement with OPEC's weakest link and instead lets the country implode, it may realize it can obtain better terms when dealing with Maduro as a Debtor in Possession: a supersenior status that would likely guarantee it half-priced oil or better.

In any event, we are sticking to our forecast that when the OPEC dominoes start falling, Venezuela will be the first one to go, as confirmed by Oswaldo Ramirez, director at ORC Consultores, a political consulting firm in Venezuela who said that the country's strategy is simply "not sustainable in the long term, unless you change the state, fiscal and economy policy." 

None of those will change. Which is probably why earlier today Venezuela CDS soared again by several hundred points wider touching 3100 bps (800 wider since our first post) and is now in record wide territory - suggesting the same probability default risk as when just after the Lehman collapse, crude traded briefly as low as $30 - as the bankruptcy vultures start circling over what will most certainly be the next sovereign bankruptcy carcass.

 

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Mon, 12/08/2014 - 17:40 | 5530063 Dre4dwolf
Dre4dwolf's picture

Why is this important?

Mon, 12/08/2014 - 17:45 | 5530077 knukles
knukles's picture

Because now Hugo's Ghost can sell his gold that he physically got back from the BoE when it really was the one and same stash that was "sold" by the winning insurgents out of the Libyan Central Bank to raise money for freedom fighters' pay, arms and ammo.
And if you believe that ....  About why it was "sold" from the Libyan CB  .....

Mon, 12/08/2014 - 18:01 | 5530136 DaddyO
DaddyO's picture
"Cash-Strapped" America Stares Into The Abyss... And Its Default Risk Goes Parabolic

Sorry Tyler, but I couldn't resist...it's just the timing that is off at this point.

DaddyO

Mon, 12/08/2014 - 18:12 | 5530175 Richard Chesler
Richard Chesler's picture

Banana dictator looks in the abyss, there's nothing staring back at him. At that moment, Banana dictator packs the gold into his jet. And that is what keeps him out of the abyss.

Mon, 12/08/2014 - 18:13 | 5530180 Latina Lover
Latina Lover's picture

Wonder who will default first.. Venezuela or the Ukraine?

Mon, 12/08/2014 - 18:33 | 5530261 NoDebt
NoDebt's picture

Ukraine is "in play" between Russia and the US- no collapse of the western-leaning government they worked so hard to install will be tolerated.  

Venezuela doesn't matter.  We got them locked in 5-by-5, 24/7/365.  And, of course, Goldman will be around to pick the bones clean after they collapse.  Never underestimate the Goldman effect on outcomes.

Mon, 12/08/2014 - 18:59 | 5530349 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

If they knock of their commie state in our part of the world, the CIA can then move in and install a pro-US gov't. Hey, it is a return to the 1980s!

Mon, 12/08/2014 - 21:47 | 5530845 wintermute
wintermute's picture

Meanwhile, the Venezeulan congressman,  Guido Ochoa, president of the country’s Science Technology and Innovation Commission, buys a Bitcoin mining hardware maker.

http://arstechnica.com/business/2014/12/mysterious-politician-steps-in-t...

Tue, 12/09/2014 - 01:57 | 5531509 NewThor
NewThor's picture

Can siri skynet 3d print a bitcoin?

I spent my life savings on Iraqi World of Warcraft gold.

That investment was a turd. 

Mon, 12/08/2014 - 18:36 | 5530271 DaddyO
DaddyO's picture

Ukraine has no more gold, so strategically, Venezuela still has something to be looted, I think a destabilization will begin occuring to the south of us.

TPTB will then loot the repatriated gold and move it back into more friendly vaults with their greedy little mitts.

The only thing Ukraine will be good for is Putty's chess board and rattling the EU chains a bit.

DaddyO

 

 

Mon, 12/08/2014 - 21:54 | 5530870 lastboyscout
lastboyscout's picture

The Ukraine has value to Russia because of it's location for Gazprom pipelines and it fertile ground to feed the Russian citizens. The US is doing the dirty work (poorly) for the Saudi King in Syria and the Ukraine.

Mon, 12/08/2014 - 18:37 | 5530278 COSMOS
COSMOS's picture

When is one of these oil producing countries going to stand up and demand payments in GOLD?

Mon, 12/08/2014 - 18:43 | 5530297 DaddyO
DaddyO's picture

Never, what do you think happened to Muamar?

Caught 230 grains of high speed lead flu...for trying the very thing you suggest.

DaddyO

Mon, 12/08/2014 - 20:05 | 5530569 Ignatius
Ignatius's picture

Actually, I think he was sodomized with a knife - an ending more befitting Tony Blair and friends, me thinks.

Tue, 12/09/2014 - 01:49 | 5531494 NewThor
NewThor's picture

Don't you mean clone Tony Blair?

didn't the real one get thrown in the la brea tar pits in 2001?

something about saturn and a sacrafice to eris.

i d k. martians are weird. 

 

Tue, 12/09/2014 - 00:20 | 5531324 tarabel
tarabel's picture

 

 

When oil is $500 an ounce.

Come on, people, figure it out. Oil is dropping ike a rock in search of a floor, any floor, to the price in worthless but desperately needed fiat. Who's going to pay gold for something that can be bought with security-threaded toilet paper. Not me. How about you guys?

Tue, 12/09/2014 - 01:46 | 5531486 NewThor
NewThor's picture

The new Technology transition is going to be interesting. 

Cavemen love gold, paper & blood. 

I got my ION U. 

Tue, 12/09/2014 - 00:11 | 5531307 tarabel
tarabel's picture

 

 

Well, the CDS oddsmakers have Venezuela #1, Ukraine #2, and the Grand Duchy of Evil (Muskovy) #3. Sounds about right to me. Ukrainians are in the middle of a war and thus have a rally round the flag moment going to stretch out their agony. Venezuela is spending its last remaining cookie jar money on swimming lessons for rodents.

Tue, 12/09/2014 - 01:48 | 5531489 NewThor
NewThor's picture

It's probably cheaper to put the animals in an unbreakable bubble. 

Tue, 12/09/2014 - 07:28 | 5531724 Latina Lover
Latina Lover's picture

Actually Argentina ranks ahead of your beloved Ukaine for default per Deutche Bank, but thanks for the insights.

Tue, 12/09/2014 - 13:41 | 5533182 tarabel
tarabel's picture

 

 

I was under the impression that Argentina was already in default from a technical standpoint and was relying upon the handy chart published here at ZH a couple of days ago. You're not suggesting that Deutsche Bank is a superior source of information to ZH, are you?

Regardless, your beloved Grand Duchy of Evil is still in the race and closing on the leaders, whomever they might be, despite having manifold advantages over those two (or three) suffering nations.

Tue, 12/09/2014 - 01:56 | 5531503 NewThor
NewThor's picture

Bank of America. Can I haz crazy odds?

Mon, 12/08/2014 - 18:03 | 5530146 Karlus
Karlus's picture

Hugo lasted how many years? Since 1999? And Maduro (the toady) started in Apr 2013?

 

Nice knowing you Nick, hope you didn't get too comfy sleeping in Hugo's room. You will be lucky to end up better than Benito did. I would avoid ESSO stations if I was you.

Mon, 12/08/2014 - 18:06 | 5530159 falconflight
falconflight's picture

Avoid Citgo stations like the plague.  

Mon, 12/08/2014 - 18:29 | 5530250 DaddyO
DaddyO's picture

Sorry Karlus, Hugo's kin are still sleeping in the palace.

Maduro had to make other lodging arrangements...no room at the inn, so to speak.

DaddyO

 

Mon, 12/08/2014 - 18:33 | 5530269 NoDebt
NoDebt's picture

Is that true?  If so, it's good for the Venezuelans to know where his family can be easily located.

Mon, 12/08/2014 - 18:39 | 5530283 DaddyO
DaddyO's picture

As of this past summer it was being reported that Chavez's kin refused to leave the palace.

That's why I included the link to the story.

I found it hard to believe that in a two bit fifedom like Venezuela, you couldn't remove the front door and roust the bums out.

Forget the 72 hour 'pay or quit' notice.

DaddyO

Mon, 12/08/2014 - 20:59 | 5530710 wee-weed up
wee-weed up's picture

 

 

As of this past summer it was being reported that Chavez's kin refused to leave the palace.

---------------------------------

OMG! Shut your mouth! Don't give the Obozo's any ideas...

Mon, 12/08/2014 - 19:12 | 5530395 WillyGroper
WillyGroper's picture

True dat. 

Chavez' daughters won't move out.

Mon, 12/08/2014 - 18:15 | 5530192 Latina Lover
Latina Lover's picture

Knuckles, does Venezuela have any gold, and if so, in what quantity?

Mon, 12/08/2014 - 19:04 | 5530364 knukles
knukles's picture

Don't remember the amount (you can look it up on line) but they repatriated all the gold they'd long-held at the Bank of England several years ago.  Physically moved it back to Caracas.
No can grabbie with sticky hands to rehypothoicate or fill other repatriation requests.
No goldie no tickie or something like that old laundry lady saying.
Say, talking about laundry ladies, during WWII the ladies who did the laundry for the AAF guys used to have a bonanza of unclaimed property....

Just thinkin'

Mon, 12/08/2014 - 20:43 | 5530665 The_Dude
The_Dude's picture

Isn't that how Soros got his start? 

Mon, 12/08/2014 - 21:00 | 5530716 wee-weed up
wee-weed up's picture

Soros is STILL a laundry lady!

Mon, 12/08/2014 - 21:48 | 5530851 lastboyscout
lastboyscout's picture

You can be certain that China is only interested in Venezuela for its gold and it's oil, in that order. When China calls the loan, and Venezuela van't pay, China will get the gold, then the oil.


Mon, 12/08/2014 - 17:48 | 5530089 Rainman
Rainman's picture

i don't get it either ... everybody knows nothing but sheeps are permitted to go bankrupt anymoar ... this is just another can to be kicked. 

Mon, 12/08/2014 - 18:05 | 5530155 kaiserhoff
kaiserhoff's picture

They are not members of the right clubs.

I don't see much domino potential within OPEC, but in Latin America, all the economies seem to be on the brink.

This could be fun.

Mon, 12/08/2014 - 18:17 | 5530193 Escrava Isaura
Escrava Isaura's picture

 

 

Venezuela has to trade their oil in their currency, the Bolívar. And they will be fine.

 

Mon, 12/08/2014 - 22:04 | 5530890 wintermute
wintermute's picture

Do you even attempt to form a thought in your brain before you type a comment?

Mon, 12/08/2014 - 22:24 | 5530955 Escrava Isaura
Escrava Isaura's picture

 

 

Are you talking about Bitcoins, instead?

 

Mon, 12/08/2014 - 23:52 | 5531256 Real Estate Geek
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I think our buddy Escrava is a bot.  Check out the "Bot accusation" subroutine in 3, 2, 1 . . .

Tue, 12/09/2014 - 00:05 | 5531289 assistedliving
assistedliving's picture

nah, more like a white slave that dreams to escape to America.  You made it.  We're happy for you.  show some gratitude

Mon, 12/08/2014 - 18:14 | 5530170 noben
noben's picture

Dear Venezuela,

Step 1:  Lease a large naval port to Russia and China, if you want to keep your oil, gold and freedom.  Else the NY vultures and Squids will take over, strip all assets and take possession of all real assets that they desire.  Including your beauty queens.

Step 2:  Sell Oil for Gold or CNY.

Step 3:  Wave your private parts in the direction of DC/NY.

Note:  Be sure not to do this bass ackwards, or you won't like the results.

Mon, 12/08/2014 - 18:21 | 5530199 Escrava Isaura
Escrava Isaura's picture

 

 

noben

That would work, too.

Mon, 12/08/2014 - 22:37 | 5530997 post turtle saver
post turtle saver's picture

it's important because it proves once again that socialism is a great idea until you run out of other people's money... a lesson I wish the US of fucking A would have learned 40 years ago, dammit...

Tue, 12/09/2014 - 00:27 | 5531331 Dre4dwolf
Dre4dwolf's picture

O I get that, but we don't need a failed state like Venezuela to show us, I mean why is this important to people outside of Venezuela? how does it impact say people in the USA directly? Lets say hypothetically Venezuela just got pelted by thousands of space rocks, and wiped out the entire country leaving nothing standing.....and it just fell off the map and no longer existed.... what would be the net effect for the rest of the world? VNZ Exports only 2.5% of its product to the USA.... which is nothing.... and their currency is essentially toilet paper at this point, so why would you want to sell anything to them???

the total value of their trade is 40 Billion...... the entire nation of Venezuela in terms of perceived value to the USA (that we actually get out of them) is only like 1 billion Fiat dollars... its chump change... in-fact we should just buy Venezuela and make it a resort, we could build a nice Disney land there or something....

JPMorgan counterfeits more than that in an afternoon.

 

Apple collapsing would have more of a negative effect on markets than Venezuela getting attacked by martians.

Mon, 12/08/2014 - 17:41 | 5530065 Oldwood
Oldwood's picture

How come the other socialists countries of the world do not come to their rescue. I mean really, its just supposed to be the evil capitalists that will let someone starve.

Mon, 12/08/2014 - 17:46 | 5530079 kaiserhoff
kaiserhoff's picture

Such a shame.

  And Communism was working so well in North Korea;)

Mon, 12/08/2014 - 17:49 | 5530092 Oldwood
Oldwood's picture

Maybe the North Koreans can send them some tree bark, just to help out. I hear its right tasty with the right dinner wine.

Mon, 12/08/2014 - 18:28 | 5530243 orez65
orez65's picture

Just tried chocolate covered tree bark that I bought at Costco.

Great taste and a happy intestine! 

Maybe North Korean bark will become a hit with the left wing "elite".

Mon, 12/08/2014 - 20:20 | 5530596 Oldwood
Oldwood's picture

That stuff is dangerously goood! North Korea wishes they had that tree bark!

Mon, 12/08/2014 - 17:52 | 5530090 knukles
knukles's picture

All socialists believe in sharing fair and square until it becomes with their money
I know.
I got a buncha Progressive buds out here in CA.

They all want global income redistribution.
Until I point out that the Global upper 1% of annual income earners (Gross) in US $ is $25,000 per annum and they would be givers as opposed to givees.  They get terribly uncomfortable what I suggest that their stash in CalPers and CalStrs would do just fucking fine.
But, never let facts get in the way of a Progressive.

Mon, 12/08/2014 - 17:52 | 5530106 Oldwood
Oldwood's picture

What's yours is mine and what's mine is..well...er...I seemed to have misplaced it! But I'll put a check in the mail tomorrow...I promise...if I can find it..

Mon, 12/08/2014 - 18:19 | 5530210 Escrava Isaura
Escrava Isaura's picture

 

 

Oldwood

Socialism is capitalism for the public.

Capitalism is socialism for the rich.

 

Mon, 12/08/2014 - 18:44 | 5530302 Oldwood
Oldwood's picture

"isms" are labels created for the purpose of theft, to define what we know to be wrong as right by some mystical truth unseen to the mortal. A free market is not however an "ism" regardless of how we try to use the term capitalism to describe it. It had meaning in its beginning much as liberalism or progressivism did, and now we see it as just another manipulative use of language to obscure and deceive. If you recall it has been the left that has insisted that we merge or hybridize capitalism with socialism to make capitalism less harsh, more representative of our kinder and gentler persuasion on the world. This collectivism has been a virus deliberately inserted into a free market system under the name of capitalism, knowing it would simultaneously destroy the free market AND the "ism" of capitalism. We constantly see this reference to capitalism in the negative, like what we are experiencing is a result of unfetterd capitalism while WE KNOW it is nothing like what we definitionally have always understood capitalism to be. Now it is a bastardized mutant that does not fit in any classification other than an atrocity to freedom and eventually life on this planet. Every step we take towards a controlled economy takes us closer to the edge yet with each new crisis the scarlet "C" has been hung around the necks of business. Through all of this, we never see a reversion to the principles of a free market. WE do see the selective elimination of specific rules and regulations that allow a small subset of criminals destroy our markets further, giving cause celeb to the notion that it is capitalism that is the destructive force. We look around the world for examples of this socialist utopia and other than a few tiny exceptions, there are none.

Mon, 12/08/2014 - 19:36 | 5530501 Escrava Isaura
Escrava Isaura's picture

 

 

Oldwood

It's not that complicated. Mainly, there are four forms of capitalism:

Penny capitalism: Farmers selling their goods

Local capitalism: Small business. Such as your hardware store. Owners that would be serving on their school-board, volunteer firefighters, and so on in their communities. 

Social capitalism: Such as the Amish’s in America. Where the labors/manufactures owns their production. Then, they hire business managers to assist them.  

And Multinationals: America largest corporations and banks are great examples

                                                                                                                      

My advice?

Focus on Penny, Local, and Social Capitalism. Multinationals as well as ‘Black-market” are totally corrupted.

Note: US multinationals offer great prices for Americans because of their global scale advantage, and because they’re subsidized by the US Government (US Empire/dollar).

 

Mon, 12/08/2014 - 20:33 | 5530628 Meat Hammer
Meat Hammer's picture

We can argue about ISMs all we want but what it really boils down to is this:

If it ain't individual sovereignty, it's crap...no matter the intentions of the ISM.

Period.  End of fucking story.

Mon, 12/08/2014 - 20:49 | 5530684 Escrava Isaura
Escrava Isaura's picture

 

 

Self-Ownership in America? Good luck.

 

The union members tried to buy the bankrupted steel companies in Pennsylvania and these businesses still closed to these days.

 

Do you know why?

 

Mon, 12/08/2014 - 20:50 | 5530693 Meat Hammer
Meat Hammer's picture

I'm a free man because I say I am.

Mon, 12/08/2014 - 21:07 | 5530728 Escrava Isaura
Escrava Isaura's picture

 

 

But...., are you free of being charged?

 

Mon, 12/08/2014 - 20:45 | 5530673 The_Dude
The_Dude's picture

You've met my wife...

Mon, 12/08/2014 - 23:09 | 5531129 Freddie
Freddie's picture

Don't worry Kucks.  Your pals money will eb and is being looted from CalPers.   Years ago during say Pete Wilson (R) it was very well managed.  Today it is a piggy bank for the liberal elite.

Mon, 12/08/2014 - 17:40 | 5530067 astoriajoe
astoriajoe's picture

its a good thing defaults don't exist anymore, or else I'd be worried. Or is that just European defaults?

Mon, 12/08/2014 - 17:49 | 5530099 knukles
knukles's picture

Don't matter.  Just wait for the counter-parties asking them to post additional collateral

Collateral? We ain't got no steeinking collateral.
Sorry Goldilocks, but the shiny is in their vaults back home and not in the basement of the BoE in the City.

Mon, 12/08/2014 - 17:56 | 5530120 Oldwood
Oldwood's picture

You don't need no steenking collateral when you have "good will" or good faith and credit of any government willing to steal from its citizens in order to keep the Ponzi going. Any time we hear the government promise anything to anyone, be prepared to bend over. Its probably just a coincidence that homosexuality is becoming such the rave now. More and more Americans readily prepared to bend over with a smile.

Mon, 12/08/2014 - 17:41 | 5530068 LawsofPhysics
LawsofPhysics's picture

Do they have oil and other REAL resources?  Time to stop playing paper games and use those resources to make things of real value for yourself.  Settle with other countries in PMs or commodities.  Fuck the paper, you will find yourself to be "richer" than you think (or dead).  Either way your solvency will be resolved.

Mon, 12/08/2014 - 17:47 | 5530086 Oldwood
Oldwood's picture

I think oil is a REAL resource and they can't sell it for shit to pay their bills. Or are you saying they should default? Its not like its never happened before. There are two perspectives to debt. One is to acquire interest payments and the other is control. Venezuela will find out how much they will have to sacrifice if they are not going to surrender their sovereignty. Their economic policies have put them between the rock and a hard place, and as we shall too soon find out, reconciliation is a bitch.

Mon, 12/08/2014 - 17:53 | 5530112 LawsofPhysics
LawsofPhysics's picture

Are you kidding me?  They will default.  What the fuck is the rest of the world going to do about it?  Don't think they will, move your ass right on down.

ALL DEBT is dealt with eventually.  If you are sitting at a computer anywhere in the western world then you got it right motherfucker, "reconciliation is a bitch".

 

Mon, 12/08/2014 - 18:01 | 5530137 Oldwood
Oldwood's picture

Of course they will default, but not all defaults are equal. They still must function in this world and to do so means they will have to make some compromises. Do you think the Chinese will take it with a smile? Only if they walk out holding title to Venezuela's assets. They have made promises to the wrong people. This is but the beginning of the pillaging of the world. Country's assets belong to the people but their governments have the legal right to trade, sell or give them away. The elite of the world are making knowingly bad loans to governments all over the world, governments who own nothing but hold trading rights to everything. Do you think they deliberately want to lose their asses or is it possible this is about leverage, about gaining control of the assets held by the countries of the world. Something they could have never done with a military, only with a foreclosure notice.

Mon, 12/08/2014 - 18:05 | 5530151 Karlus
Karlus's picture

Hell, lets have a Revolution! Plenty of stuff to steal when one of those happen!

 

Viva la Venezuela!

Mon, 12/08/2014 - 18:08 | 5530164 Jethro
Jethro's picture

The Revolution will be Pay Per View?

Mon, 12/08/2014 - 21:28 | 5530802 Crisismode
Crisismode's picture

 

 

I'm dying to see the Chinese come into South America to assert their

"Rights" and take over a South American country.

 

Monroe Doctrine USA will condone that . . . sure, yup.

Nah, not without a shooting war.

 

In the South China Sea, the USA loses.

 

In the South American Atlantic,

not so much.

 

 

Mon, 12/08/2014 - 18:21 | 5530214 Oldwood
Oldwood's picture

If you want to ultimately control people yo need to appeal to the base animal instincts. A revolution is an easy way to get there. Once you have them in the street and once they have dropped thier inhibitions to theft and violence, they are like controlling a stampede to trample anything in their path that might present the intitator a target. Nothing good will ever come from a modern revolution as they already have to much control. A principled and grass roots revolution may be successful but voices of moderation will be destroyed as we have already witnessed.

 

Mon, 12/08/2014 - 18:06 | 5530161 LawsofPhysics
LawsofPhysics's picture

Please, get one thing straight.  They, as a country, don't have to do jack shit.  This time around if anyone, including the chinese wants to stake a claim to any of Venezuela's assets, they are going to have to kill a lot of Venezueleans, period.

Let's see how committed to world war the eilites are.

Mon, 12/08/2014 - 18:14 | 5530186 Oldwood
Oldwood's picture

Well then lets get another thing straight. Those bureaucrats running Venezuela don't give one shit about "their" assets as they really aren't theirs, they belong to the people (you know, the ones they are constantly fucking over) and as such will make any deal they can to remain in power. There, as here, these people work at the will of these "investors" and I find it hard to believe that anyone in government is ultimately going to bite the hand that feeds it. Deals will be made, as they already have. They didn't end up here by making a wrong turn in the dark. They have been making deals all along.

Mon, 12/08/2014 - 18:17 | 5530200 LawsofPhysics
LawsofPhysics's picture

Good luck kicking that can then...

Mon, 12/08/2014 - 18:26 | 5530236 Oldwood
Oldwood's picture

What can? They are going down unless we see a spike in oil prices. They have little leverage if the primary asset they hold to bargain with is in over supply or little demand. I just think that those holding debt will press for some type of settlement that will cause long term costs to the people. I think that is why they are in such a bad position now...past defaults and a socialist populist government that will continue to promise more than it can deliver to the people as well as everyone else. Circling the drain like everyone else, just a little closer to the aperture and moving much more quickly now.

Mon, 12/08/2014 - 23:11 | 5531136 Freddie
Freddie's picture

How has Argentina gotten away with it for so long?

Mon, 12/08/2014 - 18:36 | 5530273 Quantum Nucleonics
Quantum Nucleonics's picture

Medium of exchange, paper money or whatever, has nothing to do with Venezuela's problem.  The problem is that socialism doesn't work.  Chavez nationalized most industry and put his cronies, with no practical experience, in charge of the state oil company.  Despite sitting on the world's largest oil reserves (conventional and low extraction cost), production has declined by a third since Chavez took power.  He bled the oil sector dry to provide cash for welfare payments (leaving nothing for cap.ex) to create the illusion of prosperity for his uneducated, poor supporters.  Venezuela has lots of resources with "real value", but they don't have the knowledge or cash to extract them.  Interestingly, had Venezuela developed it's oil sector to the fullest extent, it might have kept oil prices low enough that there wouldn't have been a US shale boom, not yet anyway.

Mon, 12/08/2014 - 20:44 | 5530669 Dingleberry
Dingleberry's picture

I agree.

Oil production is not for the lazy or simple, and is very complex, particularly over water where much of theirs is located.

Just goes to show you where liberal statists exist and infest any culture.....you get similar results.

Mon, 12/08/2014 - 23:46 | 5531232 emersonreturn
emersonreturn's picture

QN,

 

perhaps russia can help here, giving assitance in extracting the resources, developing other resources...putin met with venezuela late spring i believe it's possible this outcome may've been discussed.  on a large enough chessboard these events ought to have been considered.

Tue, 12/09/2014 - 00:02 | 5531275 Quantum Nucleonics
Quantum Nucleonics's picture

Disagree. Russia doesn't have much experience with heavy oil extraction tech, and even with conventional oil they need tech and capital. Russia's main interest in Venezuela is the same as in Cuba and Nicaragua, et all. A strategic foothold in the western hemisphere, a place to land a Tu-95. 

Tue, 12/09/2014 - 00:05 | 5531277 Quantum Nucleonics
Quantum Nucleonics's picture

Im no fan of Putin, but I'm sure he and I agree he's got better things to do with $30  - $40 billion than to piss it away in Venezuela.

 

Mon, 12/08/2014 - 17:42 | 5530070 Realname
Realname's picture

Derivatives market bonanza!

Mon, 12/08/2014 - 17:47 | 5530083 ebworthen
ebworthen's picture

Caracas carcass.  Time for a debt jubilee.

Mon, 12/08/2014 - 17:49 | 5530094 Joebloinvestor
Joebloinvestor's picture

Watch them seize all foreign assets, big and small.

Mon, 12/08/2014 - 17:52 | 5530108 knukles
knukles's picture

I'm not sure that there's much left they haven't already seized.

Mon, 12/08/2014 - 18:12 | 5530172 The Most Intere...
The Most Interesting Frog in the World's picture

Just speaking for myself, I for one would like to get my hands on all of their big and small foreign assets.  

Mon, 12/08/2014 - 18:36 | 5530275 Quantum Nucleonics
Quantum Nucleonics's picture

Eh, Chavez already stole everything that wasn't nailed down before he died.

Mon, 12/08/2014 - 17:48 | 5530097 PontifexMaximus
PontifexMaximus's picture

They have a lot of nice girls with really good boob jobs. That's also a real asset.

Mon, 12/08/2014 - 21:16 | 5530763 wee-weed up
wee-weed up's picture

But have you seen the Columbian hookers?

They come highly recommended by the Secret Service!

Mon, 12/08/2014 - 17:54 | 5530113 Sizzurp
Sizzurp's picture

This is a non-story.  Quantitative easing solves all fiscal problems everywhere.  Just ask Bernanke and Yellen, they have all the answers.  It's free money.

Mon, 12/08/2014 - 18:47 | 5530320 Quantum Nucleonics
Quantum Nucleonics's picture

Venezuela hasn't been so lucky with that.  They've been printing money hand over fist, with the empirical outcome matching theory.  Bolivar went from 100 to 160 in the last MONTH.  (that's a 28,000% inflation rate, annualized)  It started the year at 40 and was 10 as recently as 2012.  A cautionary tale for the US, Japan, and Europe.

Tue, 12/09/2014 - 05:22 | 5531668 Haus-Targaryen
Haus-Targaryen's picture

TBF - Other than LTRO Europe hasn't printed shit.  

Their balance sheet has been cut by 30% since 2012.  

The EURO is a still a piece of shit currency, but the EUR won't go down in a blaze of hyperinflation.  It will get ripped apart long before that in infighting, and various peoples digging up thousand year old grievances.  

Mon, 12/08/2014 - 17:54 | 5530117 wstrub
wstrub's picture

A country with REAL RESOURCES getting pushed by the almighty printing press..............It just doesn't seem right.

Mon, 12/08/2014 - 18:00 | 5530134 LawsofPhysics
LawsofPhysics's picture

It won't last.  Such is the way with those "fuck it" and "fuck all your paper promises" moments throughout history.

"Full faith and credit" --  king dollar for now...

Mon, 12/08/2014 - 18:05 | 5530148 blabam
blabam's picture

Real recources that are really uneconomical because of shitty socialist policies. 

Mon, 12/08/2014 - 17:55 | 5530122 wendigo
wendigo's picture

Hate to be in Columbia when V implodes. Talk about refugees.

Mon, 12/08/2014 - 17:57 | 5530126 mayhem_korner
mayhem_korner's picture

 

 

Why don't they just print moar...

Oh. 

Mon, 12/08/2014 - 18:03 | 5530143 assistedliving
assistedliving's picture

NETFLIX charter just left Teeterboro full of Squid.  Heading to Caracas to pick over the car(a)cass.  That and some Secret Service type R&R

Mon, 12/08/2014 - 18:03 | 5530147 falconflight
falconflight's picture

I suspect that Obama's Regime will bail them out upon default.

Mon, 12/08/2014 - 18:05 | 5530153 Jethro
Jethro's picture

The vault comment got me to thinking, was Gringotts based on Goldman Sachs?

Mon, 12/08/2014 - 20:08 | 5530576 Richard Chesler
Richard Chesler's picture

The trolls were.

 

Mon, 12/08/2014 - 18:06 | 5530156 Escapedgoat
Escapedgoat's picture

It is the Venezuelan Banksters that do all these. Not Putin or Chaves in Charge.

That is the PROBLEM.

Mon, 12/08/2014 - 18:07 | 5530160 ncdirtdigger
ncdirtdigger's picture

I can loan them treefiddy if they be handing over some of that repatriated gold

Mon, 12/08/2014 - 18:19 | 5530208 silverer
silverer's picture

It's the socialist project gone awry. But it was expected, because we always know how reruns end.

Mon, 12/08/2014 - 18:27 | 5530234 Quantum Nucleonics
Quantum Nucleonics's picture

A shining example of the miracle of socialism.

Mon, 12/08/2014 - 19:40 | 5530510 Anusocracy
Anusocracy's picture

Foraging worked for foragers.

Sort of.

Mon, 12/08/2014 - 18:32 | 5530262 Miketheterrible
Miketheterrible's picture

And if they default? Argentina defaulted twice. Russia defaulted before. So what? If a large company can claim chapter 11 bankruptcy, why cant the country? Cant get more loans? Well, that will mean they need to learn to live within their means. At least they have oil. If they can get into manufacturing and agriculture production, I know Russia would be more than willing to import that. Lots of money. Oil prices now are still much higher than late 90's and last I checked, venezuela was a country then as well.

Maybe they need to rethink their economic methods. A fresh start might be good.

Mon, 12/08/2014 - 18:34 | 5530267 fainzilberg
fainzilberg's picture

they want to give up petrodollar? burn them at low price

Mon, 12/08/2014 - 18:44 | 5530311 The Duke of New...
The Duke of New York A No.1's picture

Hey you VZ Dummies .... just demand to be paid 80% cash and 20% in Gold - your financial problems will be quickly solved;

 

http://youtu.be/Bc7Urzm0QE8?t=14m17s

Mon, 12/08/2014 - 18:52 | 5530331 The Duke of New...
The Duke of New York A No.1's picture

Of course what I'm reffering to is 80% cash and 20% in Gold for VZ Oil ... increasing it to 70% cash and 30% Gold might even be better;

http://youtu.be/Bc7Urzm0QE8?t=14m17s


Mon, 12/08/2014 - 19:46 | 5530526 bentaxle
bentaxle's picture

Nope, 65% cash, 30% Gold, 5% toilet rolls.

Mon, 12/08/2014 - 18:56 | 5530345 kchrisc
kchrisc's picture

Those in the know know that Venezuela had two choices: They could deal with Goldman Sachs, and the rest of the Zionist west's banksters, or deal with the Zionist's west's collection agent, the DC US military.

An American, not US subject.

Mon, 12/08/2014 - 20:54 | 5530705 Meat Hammer
Meat Hammer's picture

cough CIA cough

Mon, 12/08/2014 - 19:11 | 5530396 Baldrick
Baldrick's picture

did Venezuela just hypothicate bankers gold? was it goldman who gave a loan to Venezuela for some of their gold?

Mon, 12/08/2014 - 19:27 | 5530450 jubber
jubber's picture

So which Spanish Banks are wearing this shit?

Mon, 12/08/2014 - 19:27 | 5530452 Super Hans
Super Hans's picture

It is really amazing.   I can confidently say that Spain ruined all cultures that it came into contact with.  

Mon, 12/08/2014 - 19:39 | 5530511 darteaus
darteaus's picture

Double Down China!

I dare you!

Mon, 12/08/2014 - 19:43 | 5530519 Heavy
Heavy's picture

So...it at least looks like 2008 all over again on that chart, eh?

Mon, 12/08/2014 - 19:49 | 5530532 SmittyinLA
SmittyinLA's picture

BTW American banks have been financing Venezuela's oil credit diplomacy program known as "PetroCarib" since 2005 (Boosh regime) whatever unpaid fuel bills left for already consumed oil will be shared by the creditor pool, last time I checked the tab was 12 billion dollars* (Venezuelan perp figures).

http://en.wikipedia.org/wiki/Petrocaribe

The practice of issuing long term debt since 2005 also drove up all our oil prices, now come finance losses.  

The payment system allows for purchase of oil on market value for 5%-50% up front with a grace period of one to two years; the remainder can be paid through a 17-25 year financing agreement with 1% interest if oil prices are above US$40 per barrel.

Mon, 12/08/2014 - 19:51 | 5530540 Paracelsus
Paracelsus's picture

I once lived down under.The New Zealand gov't years ago brought in a "no nukes" policy and USN was going to have to declare whether the ships were nuke free.Naturally the US Gov't didn't want this to spread so they decided to make the Kiwis an example.

They cut the Kiwis off from all intelligence and military cooperation.This in spite of the New Zealand assistance in Antarctic operations,and of course the enormous contribution in two world wars,Korean conflict,etc. The message from DC: no free lunch.

I know this is off topic,but I quite think the Chavez gold repatriation ruffled someone.

Mon, 12/08/2014 - 20:39 | 5530646 Dingleberry
Dingleberry's picture

I remember that well. But this was just a bit of a row. Nothing serious. The kiwis had to be punished a bit as you correctly surmised. We can't have random wankers out there demanding to know secret shit, even if it's not that secret.

But if the kiwis ever really went off the reservation.....they would be economically sanctioned.  And they would be truly fucked, a little country like that full of sheep and hobbits.  At least Venezuela and Rusia have oil. And they are bleeding out their arses about right now.

The kiwis, to their credit, seem to know their limitations.

Tue, 12/09/2014 - 05:31 | 5531672 OZZIDOWNUNDER
OZZIDOWNUNDER's picture

Spot on Kiwi !  The USA Govt AHoles are certainly World Class. They excell in Prison Population & ultra low wages for their slaves. They also have the Worlds best Tanks & armour for Domestic Policing as well as the World renowned Torture facilities in the small province og Gitmo in Cuba.

This is the one Govt that lots of Americans would like to see ripped down  - hopefully in my lifetime.

Mon, 12/08/2014 - 20:06 | 5530574 Fred123
Fred123's picture

Maduro just might find himself at the wrong end of a rope. Couldn't happen to a better guy.

Mon, 12/08/2014 - 21:30 | 5530764 Emergency Ward
Emergency Ward's picture

Nicolas Maduro's Venezuela playing kissy face with Goldman Sachs.  Who would have guessed?

Mon, 12/08/2014 - 21:50 | 5530858 q99x2
q99x2's picture

I can tell when I'm trying to be hoodwinked. Is Greece going to default?

Mon, 12/08/2014 - 22:09 | 5530906 Shhh dont wake ...
Shhh dont wake the VIX's picture

You know things are bad when your response to a crisis is:  "Quick,  somebody send out the Vampire Squid Signal!!"

Mon, 12/08/2014 - 22:57 | 5531080 himaroid
himaroid's picture

The economy is going down to see chavez.

Tue, 12/09/2014 - 00:14 | 5531316 tarabel
tarabel's picture

 

 

His first comment as he shuffled off the mortal coil:

 

"Do I smell sulfur?"

Mon, 12/08/2014 - 22:59 | 5531086 Bennie Noakes
Bennie Noakes's picture

Nothing to worry about. VZ bonds will crash to nothing, Goldman (and other TBTF banks) will buy them up. Then Goldman will pressure the IMF for a VZ bail out. The bonds will be partially paid back as a condition of the IMF loan and huge profits will be had by all (banks).

Tue, 12/09/2014 - 10:08 | 5532115 tvdog
tvdog's picture

If Venezuela were smart, they'd balance their budget now and default rather than going to the IMF. That's poison.

Tue, 12/09/2014 - 00:13 | 5531312 tarabel
tarabel's picture

 

 

Ought to be interesting to watch this play out. Sooner or later, CDS will be unavailable for Maduro at any price. What happens then, and how fast?

 

Interesting case study to use for future contestants.

Tue, 12/09/2014 - 01:57 | 5531510 jtg
jtg's picture

Blue sky, but what if Venezuela defaults on all of its Western held debt then turns to the BRICS and SCO institutions? Something new could be evolving, a new economic and social paradigm that is other than capitalist or communist.

Tue, 12/09/2014 - 05:25 | 5531670 OZZIDOWNUNDER
OZZIDOWNUNDER's picture

No doubt the USA neocons are laughing  - - BUT I for one hope the Venezuelian Govt  just defaults & tells all the Vulture Funds & the USA Govt  to  - - GO FUCK THEMSELVES !

Tue, 12/09/2014 - 03:26 | 5531603 lakecity55
lakecity55's picture

Lloyd: "Give us your Gold and then we'll talk."

Tue, 12/09/2014 - 07:30 | 5531727 Wahooo
Wahooo's picture

As with Greece, Venezuelan bonds are just waiting to be plucked.

Tue, 12/09/2014 - 08:47 | 5531864 Ewtman
Ewtman's picture

Unfortunately OIL isn't going to save them...

 

http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...

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