| Trapped in Venezuela: Looking to Get Out? Good Luck! Posted: 27 Aug 2014 10:15 PM PDT Every day, the cost of a plane ticket out of Venezuela goes up. That assumes you can get a plane ticket, and you probably cannot, even if you booked three months ago. Delta Air Lines, American Airlines, and Lufthansa cut the number of flights. Air Canada stopped all service. Economy class tickets to New York city cost as much as $3,000, if you can get them. And you probably can't. Instead, people take five-day rides to Lima, Peru as a means of escape. And that takes money as well. The result is best described as Trapped in VenezuelaWith the cash-strapped government holding back on releasing $3.8 billion in airline-ticket revenue because of strict currency controls, carriers have slashed service to Venezuela by half since January, adding another layer of frustration to daily life here.
The lack of flights is complicating family vacations, business trips and the evacuation plans of Venezuelans who want to leave the country, which is whipsawed by 60% inflation, crime, food shortages and diminishing job prospects. Steve H. Hanke, a Johns Hopkins University economics professor, says Venezuela tops his so-called "misery index," which takes into account inflation, unemployment, economic stagnation and other factors in 89 countries.
"In Venezuela, you have the sensation that you can't leave," says Virginia Hernández, a Venezuelan who is studying orthodontics in Argentina. During a recent trip to see family in Caracas, she wound up marooned. The Venezuelan state-run carrier Conviasa had no plane available to fly its scheduled Caracas-to-Buenos Aires route, and other airlines servicing Argentina had sold out their flights.
The Caracas polling company Datanalisis found that one in 10 citizens—most of them middle- and upper-class Venezuelans between 18 and 35—are seeking to leave the country, more than double the number who sought to abandon it in 2002, which was marked by an unsuccessful coup attempt against then President Hugo Chavez and a paralyzing oil strike.
Travel agents are swamped with requests but turn customers away because there are no tickets to sell. Some travelers are left taking the bus, with trips to Lima, Peru, a five-day journey, now packed with middle-class Venezuelans who used to fly.
Many Venezuelans who want to leave the country simply can't. Tickets for short flights to other transit hubs in the region, such as Panama City or Bogotá, are difficult to come by.
On top of that, stringent currency controls mean that Venezuelans have access to only $400 a year, making it nearly impossible to pay the high prices airlines demand for tickets on the Web.
"Just about all of my friends want to get out of here," said Roberto Villarroel, a 19-year-old university student who wants to move to Argentina. "I'm still looking for a ticket, though. The prices go up every day."
Some Venezuelans, particularly those who are affluent, are paying whatever price is required to leave.
Rafael Larrazabal, a 44-year-old businessman, could find only first-class tickets on Delta, and he purchased them months in advance. On a recent day, he, his wife and two young children boarded a flight to Atlanta and then Berlin, where they plan to start anew.
"What's the future here?" remarked Mr. Larrazabal at a tearful family send-off. "The country is not functioning. There's crime. I said, 'Let me see if I can get out of here alive and then see what happens.'" Hyperinflation, Venezuela StyleThat's hyperinflation folks, a complete collapse of faith in currency. People think it's going to happen to the US. They are crazy. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| IMF Chief Under Investigation in French Fraud Case; Meet David Lipton (an Obama Clone), Lagarde's Possible Replacement Posted: 27 Aug 2014 01:07 PM PDT IMF chief Christine Lagarde Under Formal Investigation in French fraud case. IMF chief Christine Lagarde has been put under formal investigation by French magistrates for alleged negligence in a political fraud affair dating from 2008 when she was finance minister.
Lagarde was questioned by magistrates in Paris this week for a fourth time under her existing status as a witness in the long-running saga over allegations that tycoon Bernard Tapie won a large arbitration payout due to his political connections.
Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.
Lagarde's lawyer, Yves Repiquet, told Reuters he would personally appeal the magistrates' decision. That means Lagarde would not have to return to Paris in the meantime, allowing her to continue her duties as managing director of the International Monetary Fund uninterrupted.
The inquiry relates to allegations that Tapie, a supporter of conservative former President Nicolas Sarkozy, was improperly awarded 403 million euros ($531 million) in an arbitration to settle a dispute with now defunct state-owned bank Credit Lyonnais.
The inquiry has already embroiled several of Sarkozy's cabinet members and France Telecom's chief executive, Stephane Richard, who was an aide to Lagarde when she was Sarkozy's finance minister.
In previous rounds of questioning, Lagarde has not recognized as her own the pre-printed signature to sign off on a document facilitating the payment, Repiquet told Reuters by telephone. What's This Really About?Politics. If Nicholas Sarkozy won the last presidential election instead of Francois Hollande, there would be no investigation. Is Lagarde guilty of anything? Not knowing the peculiarities of French laws (other than to know full well from personal experience, French laws are damn peculiar), it's hard to say. For my experience, please see Mish Fined 8,000 Euros for Quoting French Blog. In the US, it's safe to conclude that anyone who funneled funds for political purposes would be considered a hero by one side, with the other side demanding "justice". In the US, individuals other than Bernie Madoff and Martha Stewart don't get prosecuted. And companies, especially banks, get off the hook with at most a small fine relative to the billions of dollars siphoned out of the system. Does it Matter?Does it matter if Lagarde is forced out of the IMF? Not at all. I am quite certain the IMF can find someone equally incompetent, if not far worse, to take her place. Isn't that the goal? Meet David LiptonWaiting in the wings to replace Lagarde is David Lipton, IMF First Deputy Managing Director, a US citizen who would likely replace Lagarde if she could not fulfill her duties. Previously, Lipton was a Managing Director at Citi, where he was Head of Global Country Risk Management. Lipton an Obama Clone on Income InequalityPlease consider Lipton's views on Fiscal Policy and Income Inequality. Thank you for providing me the opportunity to present the key findings of a new IMF study on fiscal policy and income inequality.
Income inequality has been rising in many parts of the world in recent decades. This, and the social tensions associated with fiscal consolidation that many have faced in part stemming from the global financial crisis, have put the distributional impact of governments' tax and spending policies at the heart of the public debate in many countries. Of course, the question of just how much redistribution the state should do is, at its core, a political one that economic analysis cannot answer. But I think that we can all agree that whatever degree of redistribution governments choose, it should be done with fiscal instruments that achieve their distributional objectives at a minimum cost to economic efficiency.
Based on these principles, we examine a range of options for achieving redistribution efficiently.
To start, countries could consider making their income tax systems more progressive. For example, in economies where a flat rate is used, there may be scope for more tax progression at the top.
There is also scope to more fully utilize property taxes, both as a source of revenue and as an efficient redistributive instrument.
On the VAT, the recommendation is thus to minimize exemptions and special rates, in order to efficiently raise revenues to help finance pro-poor spending. For instance, elimination of reduced VAT rates in the United Kingdom, and using the proceeds to increase social benefits, would significantly reduce inequality.
On the expenditure side, I would like to start first with education. Improving the access of low-income families to education is an efficient tool for boosting equality of opportunity, and over the long run, it can also reduce income inequality. In advanced economies, this entails increasing the access to tertiary education for low-income families, including through scholarships and loans. For developing economies, a strengthening of access to quality secondary education is also required, for example, by eliminating tuition fees.
The good news is that quite a lot is now known about how governments can best address the challenges of squaring their equity and efficiency concerns, a task on which the Fund stands ready to help.
Thank you. Things Can Always Be WorseIf you thought Lagarde was bad, the on-deck alternative clearly shows things can always be much worse. Common Sense ProposalThe IMF is far worse than useless. Ideally, it should cease to exist. At a bare minimum, the US should stop all funding of this socialist predator entity. Unfortunately, and given the IMF plays the role of economic hit-man for US banks, don't expect my common sense proposal to be adopted. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| US 10-Year Treasury Cheapest in G7, Yield Spread Near Record High Posted: 27 Aug 2014 11:32 AM PDT Saxo Bank chief economist Steen Jakobsen points out the 10-Year US treasury note is the cheapest 10-year government bond in the G7, with the interest rate spread near a record high. Spread of US 10-Year Note Yield vs. G7 Average Yield click on chart for sharper imageVia email Steen says ... US 10 Year cheapest in G-7! This is one of the reasons for my change to US fixed income and short US Dollar.
US 10 Year spread vs. G-7 equivalent now at 79 bps - close to all time high. As the chart indicates there is considerable mean-reversion in this data series.
The market is long, very long the US dollar into ECB and FOMC meetings where consensus quietly is looking for 10 bps cut by the ECB, maybe even announcement of "private" ABS [Asset Backed Securities]. In the US the regional banks want the discount rate normalized, but reality is close by.
I remain long US fixed income - and will add on any sell off. Long investors could use IEF. IEF IEF is the Barclays 7-10 Year Duration Bond Fund. $TNX The 10-Year Treasury currently yields 2.37%. For the spread to be +0.79%, the G-7 average 10-Year yield is 1.58%. $USD - US Dollar Index US dollar has been rising in belief Fed tapering will complete and rate hike will follow. Meanwhile, the consensus bet is that rate cuts will take place in Europe. Are rate hikes that will not happen priced into the US dollar ? I believe so and that is what Steen believes as well. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Ukraine Seeks Ceasefire Following 'Very Tough and Complex" Talks With Putin Posted: 27 Aug 2014 01:47 AM PDT On August 10, Ukraine said No Cease-Fire Until Rebels Surrender. Things changed. This just in ... On August 26, Reuters reported Poroshenko Seeks Ceasefire After 'Very Tough' Talks With Putin. Ukrainian President Petro Poroshenko promised after late-night talks with Russia's Vladimir Putin to work on an urgent ceasefire plan to defuse the separatist conflict in the east of his former Soviet republic.
The first negotiations between the two leaders since June were described by Putin as positive, but he said it was not for Russia to get into the details of truce terms between the Kiev government and two rebel eastern regions.
"We didn't substantively discuss that, and we, Russia, can't substantively discuss conditions of a ceasefire, of agreements between Kiev, Donetsk and Luhansk. That's not our business, it's up to Ukraine itself," he told reporters early on Wednesday.
Poroshenko, after two hours of one-to-one talks which he described as "very tough and complex", told reporters: "A roadmap will be prepared in order to achieve as soon as possible a ceasefire regime which absolutely must be bilateral in character."
Despite the positive tone, it remained unclear how the rebels would respond to the idea of a ceasefire, how soon it could be agreed and how long it might stick.
And with Putin insisting the details were an internal matter for Kiev, there was no sign of progress on a fundamental point of disagreement: Ukraine's charges that Moscow is sending arms and fighters to help the rebels, and Russia's adamant denials.
The leaders shook hands at the start of their meeting in the Belarussian capital Minsk just hours after Kiev said it had captured Russian soldiers on a "special mission" on Ukrainian territory.
In a televised statement at the start of the talks, Putin urged Poroshenko not to step up his offensive against the pro-Moscow rebels, and threatened to slap economic penalties on Kiev for signing a trade accord with the European Union that he said would squeeze Russian goods out of its market.
Poroshenko replied by demanding a halt to arms shipments from Russia to the separatist fighters.
In his comments after the meetings, Putin said the two presidents agreed to talks on a resumption of gas supplies to Ukraine, which Russia severed in mid-June in a dispute over pricing and debt.
"We need to resume our energy dialogue, including about gas problems. Sincerely speaking, this is a complicated issue, it has reached a dead end, but we still need to talk about it. We agreed to resume these consultations," Putin said. What Changed? - Ukrainian resolve?
- Ukraine is bankrupt and the IMF made it clear it won't fund wars?
- Rebels are now winning?
- Ukraine finally realizes war is a losing game?
- Russian sanctions starting to bite harder than Ukraine admitted?
It's hard to say what, but something changed. Most likely a combination of things. It will be interesting now to see what demand the rebels place for a ceasefire.They wanted one on August 10. Do they want one now? At what price? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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