It is often said that we are nine meals away from anarchy.
This is true. One week, many years ago, I was in Paris interviewing a wind turbine business. One of these French labor strikes was going on. It seems that the farmers were being mistreated in some way and the truck drivers stopped work in sympathy.
For the first day, it didn’t matter so much. The eggs were sold out, so you had a croissant. The second day, there was a baguette. But that night, you noticed that many of the cafes didn’t open. And the ones that did had a limited menu.
The next morning, the store shelves were depleted and people were getting testy. A small store on the next block had been broken into. It was at that point that I made a hasty retreat back to civilization.
The Joys of Socialism
If a dire situation can erupt suddenly in the serene streets of Paris, imagine what life is like under the socialist utopia of Venezuela. The New York Times writes:
With delivery trucks under constant attack, the nation’s food is now transported under armed guard. Soldiers stand watch over bakeries. The police fire rubber bullets at desperate mobs storming grocery stores, pharmacies and butcher shops. A 4-year-old girl was shot to death as street gangs fought over food.
Venezuela is convulsing from hunger.
Hundreds of people here in the city of Cumaná, home to one of the region’s independence heroes, marched on a supermarket in recent days, screaming for food. They forced open a large metal gate and poured inside. They snatched water, flour, cornmeal, salt, sugar, potatoes, anything they could find, leaving behind only broken freezers and overturned shelves.
Venezuela used to export corn and sugar. Now they import it — but not enough, nor in good quantity. A recent study declared that 87% of Venezuelans say they do not have money to buy enough food. A different poll found that 72% of monthly wages are being spent just to buy food.
Venezuela has the largest oil reserves in the world. But years of mismanagement and government theft through nationalization of industry have robbed the country of its most productive class. Those with the means to leave left years ago.
Price fixing, arbitrary government decrees, and the printing press have destroyed what managed to survive. And yet Maria Gabriela Chavez, the daughter of the former leader Hugo Chavez, is Venezuela’s richest woman with $4.2 billion. It should be noted that before he died, Hugo Chavez famously declared that “being rich is bad” and during his lifetime railed against the wealthy for being lazy and gluttonous.
And so it goes. From the 1950s to the 1980s, Venezuela was the richest country in Latin America. Now it is destitute.
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We Stand on a Knife Edge
The nature of economic collapse is such that it slowly erodes the foundation over long years, but when the end comes, it comes at once. A series of Federal Reserve-induced free-money bubbles can’t keep up the illusion forever.
The United States went from being a creditor nation to a debtor nation on September 17, 1985. As of 10:27 a.m. on June 20, the U.S. national debt is at $19,283,281,875,578… This is up from $5.7 trillion just 15 years ago.
It wouldn’t be hard to write a script where a Venezuela-type economic collapse happened in the United States.
The worse the economy gets, the more likely voters seek out politicians who will give them the illusion of safety. The Socialist-Democrat Bernie Sanders almost won the Democratic primary, and would have if not for backroom deals by the DNC. Young people don’t remember the bread lines of Soviet Russia. Fifty-three percent of people under 30 have a favorable view of socialism.
But that’s nothing. Like the 1985 debt milestone, another line was crossed last year. For the first time on record, there are more businesses closing in the U.S. than are being born. Small companies are the backbone of this country. They are Jefferson’s yeoman farmer.
But it’s not just the little guy who is done. As I told you last week, four investment billionaires are out of the market or selling short. The P/E ratio on the S&P 500 has rarely been higher. Warren Buffett’s favorite indicator, the market cap-to-GDP ratio, is at 117%. It has only been higher once since 1950. That was in 1999, right before the dot-com crash. It was at 108% before the debacle in 2008.
Furthermore, real wages are falling. Most Americans can’t cover a $400 emergency. Climbing interest rates would kill heavily indebted government, companies, real estate, carmakers, higher education, and individuals.
The $15 minimum wage trend will remove the bottom rung of workers and foster the rise of robots. Look to the Middle East if you want to see what a host of young, unemployed people will do for society.
All of us are nine meals away from chaos. Next week, I’ll tell you what you can do about it, and it’s not what you think.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
