I wake this morning, thankful I don’t live there.
From this week’s Economist, this amazing story:
…Venezuela is suffering from the combination of years of mismanagement and corruption, and the collapse in the price of oil, which accounts for almost all of its exports. (Hugo) Chávez, an army officer, was the beneficiary of the greatest oil boom in history. From 2000 to 2012, Venezuela received around $800 billion in oil revenue, or two-and-a-half times as much in real terms as in the previous 13 years. He spent the money on “21st-century socialism”.
Some went on health care and low-cost housing for the poor, who hailed Chávez as a secular saint. Some has gone on infrastructure: a few new roads and metro lines were built, years behind schedule. Another chunk was given away in the form of cheap oil to Cuba and to other Caribbean countries, assuring Chávez loyal allies. Perhaps the biggest slice was frittered away or simply stolen. Filling a 60-litre tank with petrol costs less than a dollar at the strongest official exchange rate. Unsurprisingly, petrol worth $2.2 billion a year, according to an official estimate, is smuggled to Colombia and Brazil, with the complicity of the armed forces.
As well as rewarding supporters with state jobs (the public payroll has more than doubled in 16 years), Chávez expropriated or nationalised 1,200 companies, from steelworks to a maker of cleaning products. Most now lose money and require government loans just to meet their payroll, according to Víctor Alvarez, Chávez’s industry minister in 2005-06. The state subjugates the still-large private sector through price controls, which discourage investment and production. The result is that Venezuela imports much of the food and consumer goods it used to produce, though not enough to meet demand.
Under Mr (Nicolas) Maduro (whom the Economist calls Chávez’s inept and unloved successor), the controls have become more draconian. Blaming retailers for the queues outside their shops, this month the government arrested the bosses of a big pharmacy chain and a supermarket company, both of which it has commandeered. Then there is the labyrinth of exchange controls. Until it was modified this month, there were three separate official exchange rates, ranging from 6.30 to the dollar for food and medicines to 50 for many other imports. On the black market, a dollar will buy 180 bolívares. (Since the largest denomination is only 100 bolívares, currency transactions involve fat wads of banknotes.)
This system is an invitation to fraud: the well-connected who are assigned cheap dollars send them abroad or cash them on the black market. Some $20-25 billion was swindled in this way in 2012 alone, according to Jorge Giordani, who as Chávez’s economic guru was the architect of the system. Chavismo’s biggest achievement has perhaps been the creation of a new elite of oil rentiers, dubbed the “Bolibourgeoisie”.
Even before the oil price collapsed, “21st-century socialism” had become unaffordable. Instead of saving windfall oil revenues, as prudence would dictate, the government racked up debt. Between them, the government and PDVSA, the state oil company, issued more debt than any other emerging economy in 2007-11. The fiscal deficit is heading for 20% of GDP this year, according to independent economists.
The economy probably contracted by 4% in 2014 and will shrink by more than that this year (see chart 1). In 2013 a third of Venezuelans were living in poverty, up from a quarter the previous year, according to the UN Economic Commission for Latin America and the Caribbean. Inflation climbed to 64% in the year to November.
Read the entire sad story here.
4 trends enticing Americans to start their first business: From The Week magazine:
There’s never really an “ideal” time to start a small business. It’s time-consuming, pressure-filled, and risky. No one wants to see a pet project fail for any reason, but especially not because the economic conditions just weren’t right. And for years, they certainly haven’t been.
But potential small business owners with solid ideas on the back burner might be wise to jump in now, for a whole host of reasons. Here are four promising trends that are encouraging Americans to jump in and start a business of their own.
1. Small business optimism is at an eight-year high. The National Federation of Independent Business reported that its optimism index jumped to 100.4 in December, an increase of 2.3 points. It’s the highest reported reading since October 2006, which also means the index has crept back up to its pre-recession average.
Small business owners are feeling so good about the economy that many even reported to NFIB that it’s a good time to consider expanding their staffs.
2. Small businesses are leading the economic recovery, adding 1 million employees in 2014. That’s an average of 90,000 per month, an increase of 10,000 per month from the 2013 rate.
It’s easy to see why optimism is up. Not only are small businesses participating in the recovery, they’re leading it. Granted, small businesses we sometimes don’t consider truly “small” are at the forefront of that trend, with companies of 20 to 50 employees faring better, on average. But, keeping in mind that the smallest of small businesses won’t ever hire the most workers, the statistic looks good for everyone.
3. Small business owners gained representation in the 114th Congress. The economic factors working in favor of small businesses are important, but they’re not everything. Business owners must also have their voices heard in Washington, something that has potential this year. More than a dozen new legislators with experience running their own businesses were sworn into Congress for this session.
However, the NFIB report does caution that true political change isn’t guaranteed to follow Main Street’s Election Day success:
Any election euphoria that persists will soon be snuffed out if Congress cannot lay out a positive plan and make some progress on the top problems facing small business owners including: health insurance costs, uncertainty about economic policy, energy costs, the cost of regulations and red tape and the tax code which is too confiscatory, too complex, and changed too often.
Already, we’ve seen the potential legislators’ impact when it comes to ObamaCare. The House wasted no time in passing two modifications to the law that stand to help small businesses.
The first would except veterans hired by small businesses from the 50+ rule: Businesses with more than 50 employees must either provide health insurance to them or pay a penalty. A Senate committee then unanimously approved it with no amendments.
The second, which President Obama is unlikely to sign should it pass the Senate, is meant to up the number of hours a week an employee must work to receive health insurance, from 30 to 40. The bill would allow small business owners to increase manpower without having to provide insurance, a costly benefit.
Even if neither bill becomes law, the measures still show lawmakers are looking out for small businesses owners.
4. Pop culture is making small businesses look sexy. In recent years, we’ve seen an abundance of reality shows featuring small businesses and glorifying entrepreneurs. Shark Tank features all sorts of ideas, ranging from the amazing to the awful. There also seems to be a show dedicated to renovation and revitalization for just about every type of business out there: Bar Rescue, Restaurant Impossible, Tabatha Takes Over, you name it.
TV acclaim isn’t limited to reality shows. Take Portlandia, where the feminist bookstore In Other Words has enjoyed national attention. It’s literally helped them stay in business. That’s an extreme example, but a whole host of real businesses — with senses of humor — have benefited from air time on the show.
Of course, pop culture attention most helps the select few businesses lucky enough to find their way onscreen. But inherently, that focus comes with a certain degree of praise thrust on the industry as a whole. Patronizing a local business seems approachable and fun.
Read the entire story here.
I printed the above story because I believe that your “perfect” investment — this blog is all about The Search For the Perfect Investment — is owning your own business.
The news from Starbucks
A Jewish man was sitting in Starbucks reading an Arab newspaper. A friend of his, who happened to be in the same store, noticed this strange phenomenon.
Very upset, he approached him and said: ‘Moshe, have you lost your mind? Why are you reading an Arab newspaper?’
Moshe replied, “I used to read the Jewish newspapers, but what did I find? Jews being persecuted, Israel being attacked, Jews disappearing through assimilation and intermarriage, Jews living in poverty… I got so depressed!
So I switched to the Arab newspaper. Now what do I find? Jews own all the banks, Jews control the media, Jews are all rich and powerful, Jews rule the world. The news is so much better.”
Harry Newton. who needs a day to catch up on things, like paying bills, visiting the dentist and chasing some vendors. I’ll see you tomorrow.
