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An Overview of the Venezuelan Economic Situation

Via CNBC:  Venezuela after Chavez: An economy on the verge.

The short version:  not good.

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About Steven L. Taylor
Steven L. Taylor is Professor and Chair of Political Science at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. He is the author of Voting Amid Violence: Electoral Democracy in Colombia and is currently working on a comparative study of the US to 29 other democracies. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging at PoliBlog since 2003. Follow Steven on Twitter

Comments

  1. Ben Wolf says:

    Dr. Taylor, the situaion is not quite so dire as the link indicates.

    Its Q3 2014 current account surplus was the highest since Q1 2012. The draining of its foreign currency reserves, particularly USD, is a result of the Federal Reserve’s suggestion of an imminent tapering of QE3 back during the summer of 2013.

    See, back when QE1 really got underway in 2009, the effect was to drain securities from the private sector and the interest incomes that came with them. That $1.7 trillion the Fed was swapping into the banking system became “hot money”, capital that flows wherever it can get the highest return. As securities yields in the U.S. were a no-go, the money went to emerging markets which typically pay out high yields to attract foreign currency. Once the Fed indicated an exit from the current round of QE that hot money rapidly began exiting those markets, resulting in a rapid devaluation of the local currencies. This is the same dynamic trashing the Turkish economy and playing havoc in Russia, Argentina and lots of other countries. The only thing Maduro could have done was enact strong capital controls, which would have been the equivalent of declaring war on the international banking elite.

    Basically the United States is responsible for much of Venezuela’s current problems.

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