Investing In Collapse: From Caracas To Cuba

Authored by Jeff Thomas via InternationalMan.com,

For years, I’ve been writing about Venezuela, describing it as the “movie” by which we can view the future of other jurisdictions that are presently in decline.

The reason is that declining nations follow the same pattern, time and time again, over the centuries. This is not coincidence. The pattern exists because human nature never changes, regardless of the era or the locale. Political leaders make the same mistakes as their forebears, and the people of a nation react in kind.

For this reason, countries have a sort of “shelf life.” They rise in prominence, due to work ethic and productivity. They then go through a period of abundance, which eventually deteriorates, due to complacency and apathy. Finally, they collapse into a period of bondage.

If we recognize that this pattern has played out countless times over the millennia, we can track any given country and assess where it is at present, in the pattern.

For example, Europe and North America are presently in the last stages prior to collapse, Venezuela is in the process of collapse and Cuba is in the post-collapse recovery.

But, although this may be historically interesting, of what value is it to us in terms of our own lives and the choices we make for our future?

Well, we can observe Venezuela and see the effects of the present policies evident in our own country, if we happen to live in one that’s on the verge of collapse.

For example, we can see that ever-increasing largesse by a government—on the backs of productive taxpayers—is a major destructive trend. “Protective” tariffs and capital controls also lead to collapse. And excessive debt is a pathway to economic collapse.

We can see from the recent history in Venezuela how these political mistakes caused their collapse, and we can now observe how that collapse plays out.

But, going back to the title of this essay, how do we invest in collapse?

Well, the reader will be familiar with the investment principle of “buy low, sell high.” This means that the investor should not wait until an investment is already popular. He should invest when it’s at its leastpopular.

So, let’s look at that a bit more closely.

The principle would suggest that, in the main, the US, in its final, declining stage, is a poor country for investment, but that Venezuela could be a far better possibility.

But at what point should investment take place? Well, there are a few basic assumptions that might be made. First, investment is difficult at a time when there’s massive unrest. If a “boots on the ground” assessment can be made fairly safely, this can be a very advantageous time to begin studying possibilities.

Also, during a collapse, local businessmen and government officials are desperate and will cut virtually any deal with anybody, just to get a bit of money into their hands. Such deals are normally cancelled wholesale by the incoming government, after power has been transferred to them (often just for spite).

So, for any investor, the country should ideally be researched both during and following the collapse and a decision made as to what investments to focus on. Then, when the new government has largely stabilized the country (the riots are over and commerce has begun to function normally), the greatest opportunities for investment occur. The country is desperate for inward investment, and opportunities abound.

So, let’s have a look at a country that has already passed through its collapse stage and has stabilized.

Cuba collapsed for much the same reasons as its neighbour, Venezuela is now collapsing. But that was back in the 1990s. An anomaly in Cuba’s case is that the government was not overturned and the re-stabilisation was left to the still-collectivist government. Being unable to admit that they’d caused the collapse, but desperately needing a recovery, the Castro government chose the obvious solution—capitalism. By this time, the once-committed communist Raul Castro advised his brother Fidel that collectivism was a failure and that they must adopt a free-market if the country was to recover.

However, being unable to admit that the problem was of their own doing (they blamed the American blockade), they set about introducing free-market principles within the existing system.

Over the years since that time, it’s become increasingly possible for Cubans to open their own businesses, and to pay the government taxes on the profits.

Today, there are now so many cuentapropistas (business owners) in Cuba that the taxes generated have not only enriched many of the Cuban people, but have refloated the government. (Even a mid-level bureaucrat understands that the reason he’s been able to discard his thirty-year-old Russian Lada and now has a new Hyundai is due to the influx of tax revenue.) No one in Cuba has the cheek to call it “free-market,” but most everyone understands that the end of food shortages and the importation of such goods as appliances and stylish clothing is due to the cuentapropista revenue.

So, then, why isn’t this big news in the larger world? Well, although the free market has been taking over the Cuban economy (from the bottom, up) for over a decade, the Castro government still maintains ownership of much of the real estate, still owns many businesses, and controls the military. However, the government businesses (as they are collectivist) are highly inefficient, so the flood of tourists prefer the privately run businesses, which are thriving.

And the military is now in charge of renovating Havana’s old buildings for new shops—they’ve become a sort of urban public works department.

Yet the claim internationally is that Cuba is still communist.

Strictly speaking, this is so. But each year, more government businesses fold and more opportunities are given to allow restaurants, tourist accommodations, taxi services, farm cooperatives and factories to be started up privately by the Cuban people.

The government not only condones the free-market development, but encourages it, as today, the butter on their own bread comes from tax receipts, not Russian subsidies.

At present, the government still holds many areas of investment for itself. An outside investor cannot legally make an investment deal with a local unless he’s a “relation.” But the government creates opportunities and joint-ventures with outside investors for tourism, mining, telecommunications, energy, biotechnology, etc., and, in fact, each day cruise ships arrive in Havana Harbour from Miami, loaded with American tourists, whose countrymen are under the impression that they cannot enter Cuba legally.

The anomaly in Cuba is that it’s a country that’s being reinvented from within, but without the customary announcements from the political leaders that the “rebirth” is underway.

Raul Castro has just stepped down as president, but as I’d expected, he’ll stay on as the Secretary General of the Communist party until 2021, which would mean that he’ll continue to engineer the rebirth of Cuba from behind the scenes.

After this date, the cloak of free-market secrecy may be tossed off in Cuba, and those who have invested at the bottom will watch their investments blossom.

Comments

NoDebt Cognitive Dissonance Mon, 05/21/2018 - 22:27 Permalink

According to the author, Cuba has achieved a near-perfect "balance" between communist leadership and capitalist economy.  I would have to assume he thinks China is the ultimate reflection of this ideal, since that's what they do, too.

I would have to believe his prescription for the US would be to put a communist (unelected) government in place of our system of a democratically elected representative republic then run the joint into the ground, collapse, and then magically recover without changing who runs the government.

I ask you, what could ever be fucking better than that?  I'm totally on board with this.  So long as I get to be a member of the ruling communist elite.

Executive summary:  So completely fuck things up that when you finally relent, just a tiny bit, the modest relief will feel so magnificent, you will all be grateful.  Like if I tell you to stop banging your head against a brick wall after 50 years of doing nothing else.

Check, please!  This is so fucking stupid I feel like I'm debating stuff on ZH or something.

In reply to by Cognitive Dissonance

Davidduke2000 Mon, 05/21/2018 - 22:10 Permalink

the common denominator is the us that try to strangle any country it does not like and it does not like anybody.

China is moving to clean Latin america.

Now that Maduro was re-elected with 68% of the vote for the next 6 years, it looks like he will be using the Chinese Yuan as the national currency of Venezuela to stop the slide that is caused by the americans.

China can easily fill the shelves in stores and run all manufacturing facilities that were abandoned by the big business as ordered by the us, the same scenario will happen in Cuba, the Chinese will be going to Cuba on Vacation since China has enough man power to guard the island with a large military force, the same goes for each country that the Chinese are asked to protect.

We can see most Latin america going toward the Chinese and better if they use the Chinese Yuan as their currency they will shut the yanks out completely and make the Yuan as the only reserve currency.

 

Atticus Finch Davidduke2000 Mon, 05/21/2018 - 22:49 Permalink

All discussion I ever read about the failure of Socialism completely ignore international bank collusion to destroy the Socialist country's currency, trade conspiracies to prevent basic societal support and intelligence agency activities to undermine and destabilize societies in all the countries around the world. I don't know whether Socialism works or not because no socialist country has been left alone to function. Any discussion about socialism failure while ignoring international bank and trade collusion and the destabilization programs of the CIA and other Western intelligence agencies is not a discussion about the failure of Socialism, it's a discussion of a 70 year conspiracy to destroy the countries of the world.

 

In reply to by Davidduke2000

Cloud9.5 Peter41 Tue, 05/22/2018 - 08:18 Permalink

The thing to recognize is that this is a process.  It is a cycle.  After the collapse, the more successful become more powerful.  They set themselves up as oligarchs.  They capture government.  They capture the economy.   They strangle competition.  In the process, they collapse the system.  Then the cycle begins all over again.

In reply to by Peter41

bigkahuna Atticus Finch Tue, 05/22/2018 - 05:22 Permalink

big C "capitalism" actually has a name Corporatism and it is not Capitalism. Corporatism, which is oppressive leads to further oppression, which comes under the guise of socialism or communism.

Socialism and communism are whats left as the parasite banksters finish draining the host and begin destroying the host. It is accomplished after real Capitalism has been completely replaced by corporatism and the obligatory "deep state". We are here now - but there is a growing small percentage of us who are aware.

In reply to by Atticus Finch

SH_Resurrected Mon, 05/21/2018 - 23:06 Permalink

"...and Cuba is in the post-collapse recovery."

Cuba collapsed in 1959, thanks to the Castro bros., and it has never, NEVER been close to executing anything that even vaguely resembles a recovery.

Peter41 Mon, 05/21/2018 - 23:49 Permalink

Right, and the aging aircraft, poor airport infrastructure and operations, which led to a airplane crash at Jose Marti airport last week in which over 100 people perished, is a clear example of "re-stabilization" - I have a bridge to sell you in the Saharan desert.

deepelemblues Tue, 05/22/2018 - 00:53 Permalink

Yeah Cuba has been so revitalized that it went from a country where everyone but the very top of the Communist Party leadership was poor as fuck to a country where everyone but the very top Communist Party leadership and Communist Party middle management cadré is poor as fuck.

 

Where do these dipshits come from that think Cuba is stabilized or revitalized or anything. Seriously where. They spout off endlessly about the imminent collapse of Western countries when despite everything retarded Western countries do, they are in a far stronger and more stable position than a shithole like Cuba, and then they talk about how Cuba isn't really a shithole. Don't believe your lying eyes, Cuba is doing better, and countries that actually still produce wealth are about to go off the deep end! How about no. 

 

And the US isn't good for investment? Why? Because your dipshit ideology you are obsessed with and completely emotionally invested in simply MUST be proven right, because your fragile little psyche couldn't handle being wrong? Fuck right off dumbass. Yeah, the US isn't good for investment. Sure. Fucking retard. 

DaveA deepelemblues Tue, 05/22/2018 - 01:49 Permalink

Privatization is much easier on the small scale than the large scale -- just stop telling people they can't grow their own vegetables or open a family pizzeria. How do you privatize an airport? Coordinating thousands of people to produce something useful is really hard even in a mature capitalist system. After decades of communist tyranny and terror, the old managerial class is long gone and must be re-created from scratch.

In 1975 the USSR was more industrialized than China, which made its transition to capitalism that much more difficult. Much easier to privatize a farm than a factory!

In reply to by deepelemblues

Azannoth Tue, 05/22/2018 - 02:00 Permalink

If you think Cuba is anything but a communist shit-hole, I've got a condo development in Detroit you might be interested in investing in

Batman11 Tue, 05/22/2018 - 04:39 Permalink

If we knew how economies worked things would be a lot easier.

Economics was always far too dangerous to be allowed to reveal the truth about the economy.

The Classical economist, Adam Smith, observed the world of small state, unregulated capitalism around him.

“The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.”

How does this tie in with the trickledown view we have today?

Somehow everything has been turned upside down.

The workers that did the work to produce the surplus lived a bare subsistence existence.

Those with land and money used it to live a life of luxury and leisure.

The bankers (usurers) created money out of nothing and charged interest on it. The bankers got rich, and everyone else got into debt and over time lost what they had through defaults on loans, and repossession of assets.

Capitalism had two sides, the productive side where people earned their income and the parasitic side where the rentiers lived off unearned income. The Classical Economists had shown that most at the top of society were just parasites feeding off the productive activity of everyone else.

Economics was always far too dangerous to be allowed to reveal the truth about the economy.

How can we protect those powerful vested interests at the top of society?

The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between “earned” and “unearned” income and they conflated “land” with “capital”. They took the focus off the cost of living that had been so important to the Classical Economists to hide the effects of rentier activity in the economy.

The landowners, landlords and usurers were now just productive members of society again.

It they left banks and debt out of economics no one would know the bankers created the money supply out of nothing. Otherwise, everyone would see how dangerous it was to let bankers do what they wanted if they knew the bankers created the money supply through their loans.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

 

Batman11 Batman11 Tue, 05/22/2018 - 04:41 Permalink

“The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815

This classical economist knew something we don’t know today.

The employee’s money comes from wages.

Disposable income = wages – (taxes + the cost of living)

High housing costs have to be covered in wages reducing profit and driving off-shoring.

The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

The US is taking the piss, no wonder it’s dying.

In reply to by Batman11

JiminGA Tue, 05/22/2018 - 08:00 Permalink

I beg to differ on Cuba.  Yes, there are lots of "privately owned" businesses but all are 50% owned by government, so their "owners" are essentially government slaves. It's a start, but far from capitalism.  As for rebuilding Havana, projections say every building will collapse by 2040 due to poor maintenance, weak building codes, and outdated construction standards.

It's truly a shame Obama decided to aid Cuba with American tourist dollars which enrich the corrupt communist elites.  There is actually a wealthy neighborhood in Havana that's guarded by troops to protect it from regular citizens.