I'm just a local business and finance nerd looking to help people get educated about small business, marketing, and personal finance! I write about anything and everything that I can tie into those themes. I'm also Central Florida's only Kilted Realtor, so I write about Real Estate too! Check out my About Me page to see the origins of Cash Flow Celt.
Conquering Your Financial Empire
If you’ve been following the news at all, you may have seen a multitude of articles about the crisis in Venezuela. It’s absolutely tragic over there with no food, 500% inflation, a declining government, and most recently, no electricity as government mandated blackouts sweep the country. An average day begins with walking down the dangerous, dark streets to spend the morning standing in line waiting for a bit of oil, tortillas, and a bit of canned food. After braving the lines, you make your way to the barren grocery stores, duffel bags full of worthless cash, in an attempt to find something that can supplement the government rations. After that, you head home. After all, the government has decreed that the work week shall be two days a week.
Venezuela has had this carnage looming over the horizon for some time now. Venezuela has been one of the largest suppliers of oil and still owns the world’s largest proven reserves (proven reserves are oil deposits that are able to be recovered economically with today’s technology). With the last decade of $100 a barrel oil, they should be incredibly wealthy. But they’re not. In fact, they don’t even have enough money to print more money.
Sadly, Venezuela will be an economists dream for the next few years. A crashed country looking to rebound for the foreseeable future is the perfect place to run models and attempt to prove theories about political economy. But why let the economists have all the fun. What can the average consumer learn as well?
For all of Venezuela’s oil, they actually use an incredibly small amount of it. Over 60% of the country’s electricity through hydroelectric power. This was an economic move in order to sell as much oil as possible. The oil proceeds were supposed to be reinvested into non-renewable energy sources to ease the burden on the dams during droughts – the same droughts that have are sending dam water levels to critical lows – as well as supplying subsidies to the people of Venezuela. Therein lies the problem. In order to stay in power, the now deceased Hugo Chavez increased the subsidies to the people each year; a tool their current leader Nicolas Maduro is using. However, the energy sources never got developed and the money forever disappeared to corruption and mire. Venezuela faced a spending and cash flow problem that will top the history books.
Now that oil prices are sub $50 and the market is flooded with Saudi and American oil, Venezuela’s revenues have been crippled due to their reliance on the oil exports. Oil is their only export and because, outside of oil they are incredibly resource poor, they import nearly everything else they consume. Now the country has no money to pay for the imports, let alone the subsidies their citizens have benefitted from; and rather than cut the subsidies, Maduro has gone to rolling blackouts and asking women to not use hair dryers. That’s no joke either. The country is in such a problem the president has actually asked women to only use hair dryers for “special occasions” and to line dry all clothing. To top it all off, the blackouts are forcing the oil rigs to slow down production. The country is currently only producing at 25% capacity! Their economy is quickly turning into a death spiral.
As I mentioned, economists will be studying Venezuela for a very, very long time. Luckily for us though, there are some very concrete things that we can learn right away from this tragedy.
I encourage everyone to read more about Venezuela. I felt some very powerful emotions reading the articles and seeing the pictures of the destitute and frustrated. While America is a long way off from ever facing the magnitude of plight current hitting Venezuela, it’s not something that should be considered impossible here.
Readers, have you been following this news story? What other things could we learn from the economic climate facing Venezuela? Be sure to share in the comments below. And don’t forget to “like” and share my articles with your friends on Facebook. Show them you’re on track for financial prosperity!
Bologna: The Deli Meat That Could
Valentine’s Day 2017: Pick-up Lines for Champions
Albert Gallatin and his Influence on America
Identity Theft – Awareness is Safety
Single Payer Healthcare and the Repeal of Obamacare
Military Contract Bonuses: Government Claw Back Edition
Sleepover at the Sheriff! What I learned About Professional Hardships
Restaurant Tipping and all of its Inefficiencies