difficult issues in South America now
(copy of email to Calif friend gold investor inquiring about Venezuela and the Cuban troop participants amidst growing chaos)
earlier this year, I concluded that the entire continent would implode financially and economically
so far, exactly that, with outright defaults and bankruptcies coming
what happened in Argentina and Uruguay will be repeated in every other nation
Brazil simply cannot keep current on its insanely structured installment note national debt
we in the USA securitize it, leaving the risk with investors
Brazil and Argentina set it up as installments, easily defaulted, then kaput economy
not to mention entire banking system
now the Brazilian Real currency has dropped so much in value that repayment is out of the question
the total loan balance has risen 3-fold from currency translation alone
in fact, all South American debt to US banks has risen 3-fold at least
all SA sovereign debt now acts like junk bonds, but with a sharply rising loan balance
one by one, each SA debt will default, no way out
as for Venezuela in particular, I think this serves as an excellent crucible test
one cannot foresee continental economic implosion without political consequences
socialism has always done a great job in equitably dispersing scarce wealth among citizens
with misery as a universally present side effect
communism has done a creditable job in stealing human rights amidst socialist sharing methods
so the misery is accompanied by a slave state atmosphere
so Venezuela's communist participation only makes sense, fits right in
Chavez is a symptom of the continent's distress, not a cause
he and his ilk will not go away, but rather will spread like economic locusts
the Cuban troops only act like a national guard
in their case, the Cubans might be hated, while recognized for what they are
in USA, national guardsmen are not hated, while corrupt leaders act behind closed doors
my good buddy from Digital days now lives in Rhode Island, a gorgeous little state
he has five brothers (and no sisters), with one in south Florida working in real estate development
this RE brother talks incessantly about the mass exodus of South American wealth
from Venezuela, Columbia, Brazil, Argentina, Uruguay, and others (those are biggees)
they are leaving behind a continent with every non-Andean economy in throes of destruction
that is a critical distinction -- all Andean economies are more backward and healthy
all non-Andean economies are built on Western debt models, and have failed
these escaping wealthy SAmericans are purchasing $500k homes all across south Florida
Uruguay was explained to me by my new sisterinlaw from Buenos Aires
she said Uruguay is to South America, what Monaco is to Europe's Mediterranean coast
a hotbed of beaches, wealthy homes, banks, hotels, resorts
well Uruguay is half dead, and dying fast
that $3 billion bailout loan in August wont last much longer
the Argentine situation is not well reported here in the USA
this woman left Buenos Aires, but only with 10% of her life savings
this is testimony to the "fractional banking system" whereby 10x the money is lent by banks
deposits represent a mere 8-10% typically of the total bank loan portfolios
so when a run on the bank occurs, guess what? you get only 10-12% of your money out
right now, I believe the Argentine banks are all closed !!!
their economy has returned to a stone-aged barter system
this is likely to spread across the non-Andean economies in South America, every one
why does it matter that Chavez is hated?
the only component that matters is the loyalty of the military
the Soviet Union communists were equally hated, but lasted 80 years
I hear the Chavez Military cohorts will not attack the unionists until blood is shed
so whenever you hear of bloodshed there, you know that Chavez will have a firmer grip
only if violence, chaos, deaths rise to extraordinary levels will the govt be threatened
no, makes perfect sense to me
the continent will see many more Chavezes, not fewer, as the economies falter
this is all part of the debt collapse scenario in the US & Europe
poor South America accepted absurd terms, like car payment structures
the "walkaway" rate from car loans is reaching tragic proportions, largely unreported
that rate in Boston now is the highest in over 30 years
recall that cars are a depreciating asset
so is the South American economy
/ jim |
