Venezuela Threatens Harvard Professor for Default Comment

[Zorro]

Source: Bloomberg

Venezuelan President Nicolas Maduro instructed the attorney general and public prosecutor to take "actions" against Harvard Professor Ricardo Hausmann, saying the economist sought to destabilize the country by suggesting the government default on its debt.

Maduro lashed out at Hausmann during a televised address last night, calling him a "financial hitman" and "outlaw" who forms part of a campaign "that has been initiated around the world against Venezuela." He didn't specify what actions he had asked the attorney general and prosecutor to take.

Venezuelan bonds tumbled earlier this week after Hausmann co-wrote an opinion piece Sept. 5 with a Harvard colleague arguing the country should consider defaulting because it had already imposed hardship on its people by racking up billions of dollars in import arrears that caused widespread shortages and fueled the world's highest inflation rate.

Maduro's speech was "the despotic diatribe of a tropical thug," Hausmann said by phone today. "He uses his position as head of state to intimidate people who think differently."

Read more: http://finance.yahoo.com/news/venezuela-threatens-harvard-professor-default-135958268.html

[7962]

1. Another CIA paid Harvard Prof, I guess! The fraud of VZ continues.....

[christx30]

2. No wonder the CIA has such a big budget.

Their payroll department must dwarf the populations of small countries!

[davidpdx]

6. Didn't you get your CIA check this month?

I thought we were all on the payroll.

[juxtaposed]

3. does Ricardo Hausmann get a check from mit, cia, stockholders, or all 3?

we know he suckles the harvard tit

[geek tragedy]

5. Doesn't change the fact that the US has the first amendment, and

that little Nicky can huff and puff all he wants, but he can't silence his critics with thug tactics here.

The rightwing asshole prof was trolling him, and it worked brilliantly.

[Archae]

4. Gee, a former bus driver turned dictator know more than an economist?

How about that!

But the "Maduro can do no wrong" people are hard at work already, making stupid excuses for Maduro's whining...

[juxtaposed]

9. you need to get on track and start making parts....worker

[MFrohike]

11. A thought

The events of the last decade or so strongly indicate that literally anyone is probably more knowledgeable about the actual economy than an economist. There are a few exceptions to that rule, on the economists' side, but there's not a chance in hell of a shortage of economists who are completely incompetent when it comes to their chosen profession.

That's not a defense of Maduro, it's an attack on economists.

[cheapdate]

7. Pretending reality is not real isn't going to help.

But, what else would you expect? The same thing happens in crashes everywhere. When it gets bad enough that academics start to point out that the party is over, the powers that be blame the academics for "causing a panic".

[quadrature]

8. simple solution...issue a new currency

everybody wins

[FrodosPet]

10. Venezuelan Bitcoins

Issue 30,000,000,000,000 v.b, and then everyone in Venezuela will be a millionaire. There is definitely no more poverty if everyone's a millionaire.

[christx30]

12. "Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender,

But, we have also run into a small inflation problem on account of the high level of leaf availability. Which means that I gather the current going rate has something like three major deciduous forests buying one ship’s peanut. So, um, in order to obviate this problem and effectively revalue the leaf, we are about to embark on an extensive defoliation campaign, and um, burn down all the forests. I think that’s a sensible move don’t you?"

[7962]

13. Brilliant!! Why dont we try that HERE?? Cant believe Maduro hasnt done it!

[Nye Bevan]

14. I think Venezuela's economy is plenty unstable enough as it is.

Instead of throwing a hissyfit because of what a professor wrote, perhaps Maduro should focus his attentions on improving the situation.

[happyslug]

15. I suspect Maduro is going to do what the professor called for....

Thus why the complaint, for it reduces the effectiveness of a default if people anticipate a default. Thus Maduro complaint MAY not be that the professor told him to default, but that the Professor said so PUBLICLY.

In simple terms Maduro is planning a default as this professor SUGGESTS, thus the complaint for such defaults to be the most effective, must come as a surprize.

Venezuela suffers from what is called the "Dutch Disease", when a country has excessive exports do to the demand for one item in that economy (generally some form of Energy, this was first reported as to the Netherlands and they export of Natural Gas in the 1950s) that it undermines the rest of the economy.

http://en.wikipedia.org/wiki/Dutch_disease

Venezuela has suffered from the "Dutch Disease" for decades, going back to the first discovery of oil around 1900. As the economy became more and more concentrated on oil revenue, the rest of the economy went to hell.

http://www.americasquarterly.org/node/2436

The biggest problem is NO ONE WANTS TO ADDRESS THE REAL PROBLEM OF Venezuela and that is OIL. The best suggestion was just give the money away, i.e. divide the revenue from oil to everyone.

The problem with that solution is to many people have their fingers in the pie, and that includes the opposition. Chavez made attempts to build up the social structure of Venezuela and he has reduce poverty in Venezuela more then any other country, but the net result was a greater demands for imports, while the currency of Venezuela stays high do to oil exports.

In many ways a debt default would drop the value of the Venezuela currency and give the other sections of the economy a boost (less imports more domestic production). Thus the best thing Maduro could do would be to default, leave the currency fall, use whatever oil revenue he has to minimize the down side on the poor (increase subsidies for school and housing for example) and see the economy turn around a few years. That is what this professor is advocating. As a whole NOT a bad plan. I suspect a plan Maduro is thinking about, but he wants to control when it occurs NOT be forced on him by someone else mentioning it.

[quadrature]

16. the currency is unstable.

the rest of the economy is stable.

the whole country,
except for the oil industry,
is a giant slum.

some revenue from oil is used to
pay for imported-rice to be given to the people.
the rest of the money is stolen

[happyslug]

17. Every time I read "the rest of the money is stolen" I think of the movie "The Last Hurrah".

In the last Hurrah an urban Irish Democratic Mayor runs one last time for Mayor of his city. In one scene he is reported to have millions in South America. His nephew, who is working for the City newspaper calls the accusation false, and that the paper had been printing it for decades, just changing where the money was hidden at.

The Editor then wants to fire the reporter, but he had a byline that was picked up by other papers and a steady source of revenue for the paper, i.e. if the editor fired the nephew, the paper would lose a source of revenue, and the Nephew might even make more money.

It is in glorious Black and White but show how Politics were done as late as the 1950s (and shows the effect of Television was having on campaigns even in the 1950s).

I bring it up for I get sick and tire of baseless accusation of corruption. These accusations are mostly made by people who are upset for someone honest is in power and thus they can NOT steal what they stole in the past. Chavez is reported to have stolen millions, but I do NOT see reports, by non partisan reporters, that he did so. I have read reports by the opposition of his corruption, but no actual evidence of such corruption. So if you can CITE EVIDENCE, not accusations, but evidence of such corruption maybe I and other will listen, but just to say X is corrupt is just another way of saying I hate X for what X is doing openly and in the eyes of the Public, but because it is what the people want I can NOT oppose it so I am going to yell "he is a theft". It is as bad as the old accusation "Are you now or have ever been a Communist?"

Sites facts, not accusations.

One of my favorite on Chavez when it comes to "Corruption" was the report that his Adult Children stayed in the Presidential Palace long after he died and treated it as their home. Many families take a long time to come to accept that a love one is gone. When Truman succeeded FDR, he did not kick out Eleanor, but left her stay in the White House till she was ready to leave. The same with LBJ, he left Jackie stay in those parts of the White House where she and JFK lived (Jackie moved quickly for the simple reason she had other homes to go to, the White House was NOT her primary residence even when JFK was President, they lived in the White House, but she had other places to take her children to).

My point was it took a while for Eleanor Roosevelt and Jackie Kennedy to move out of the White House. Yes it appears Chavez's adult children stayed a lot longer but they also do NOT have the money the Roosevelts and Kennedys had.

Now I am not saying they is NO corruption in Venezuela, for if you understand the "Dutch Disease" such corruption is common in countries suffering from that economic problem. I am pointing out your "poem" implies Chavez was corrupt and I can NOT find any support for that position.

http://en.wikipedia.org/wiki/Hugo_Ch%C3%A1vez#Political_rise:_1992.E2.80.931998

[quadrature]

18. here is the evidence

Vz has the percapita gov't revenue
comparable to Switzeland,
but living standards comparable to
Somalia.

[happyslug]

19. That is NOT evidence of corruption...

If a society is corrupt, the money STAYS in the country and thus helps the economy. Corruption, unless it is transmitted out of the country, has no negative effect on the economy. If I have to bribe X to sell something, that additional costs is added to the price and someone pays it. That is a zero sum for the economy as a whole. Yes, I will have less of a profit then if I had NOT paid the bribe, but the person I bribe has to spend that money somewhere, and that helps the economy. If the person I bribe is a native, the money stays in the country (if the money is to a foreigner then you have economic problems but no one is saying FOREIGNERS in Venezuela are corrupt, but that the government officials are corrupt).

Your points show the effect of the Dutch Disease, Switzerland currency is based on what it can export and what it needs to import. If those two things get out of balance, the currency of Swizeland will go up or down to make those to things balance (and as the currency goes up or down, domestic production goes up as the currency declines, domestic production declines as the currency increases in value).

Venezuela can NOT do that for it sells oil. What it gets in dollars for its oil is set by buyers of that oil, thus Venezuela can NOT increase exports by cutting its currency, nor decrease exports by increasing the value of its currency. It is stuck in a rut.

Venezuela is like the old coal patches of Pennsylvania. When people were buying coal, they had jobs, but when people STOP buying coal the economy went to hell. You can NOT get out for you need the money from the coal to pay for the things you need. When they is no demand for coal, you starved. Do to the dominance of coal, any other activity was undermined. If you had a boom period, no one wanted those other jobs for they all paid less, when the demand for coal was zip, no one had any money to pay for the things those jobs provided and thus those jobs disappeared along with the coal and coal mining jobs.

That is the problem with Venezuela, not corruption, it is to dependent on ONE product and that product is OIL. When you become to dependent on ONE source of economic development, all other forms of economic development suffer (as did any other development of the coal regions of Pennsylvania). That is NOT a product of Corruption but poor handling of wealth, a problem Venezuela has had since at least the 1920s.

Also remember one of the side affect of the "Dutch Disease" is increase corruption. Do to the high income produced by exporting the raw material, everyone tries to get in on the profits. No one stops them, for it is often cheaper to pay the bribe then fight the people demanding the bribe. Corruption increases as a RESULT of the Dutch Disease. Given that the economy has been badly managed for decades you have corruption. Corruption is a symptom of bad economic planning (going back to the 1920s) not the cause of the bad economic planning. That is the difference between Switzerland and Venezuela. Venezuela is corrupt for it is dependent on exporting oil, which Venezuela can export at a high profit. Switzerland is NOT corrupt for the Swiss economy is NOT dependent on exporting just one product at a high profit thus any of its exporters can NOT afford to pay bribes (i.e. if bribes are demanded, exports die and the value of the currency declines, that is the reason the Former Soviet Union and today's Russia has a problem with exports, to many people have they fingers in the pie of exports. With oil, Russia can afford such corruption, but it is hurting the rest of the Russian Economy).