Shorn Goldylocks

Since the bolibanana revolution is a big fairy tale, sure enough Goldilocks ought to follow Cinderella.

The announcements on the gold policies of Venezuela have created quite a stir, giving us articles by people that actually took seriously the announcement as if some economical principle were to be of concern.  Well, it is not.  As all things chavista, it is all political.

See, things must really worse than what we think they are when the regime is quickly dispatching the remains of "management" and "democracy" that may still linger here and there.  As usual, the key to understand these is always the same : the regime cannot surrender power peacefully because too many of its "dignitaries" would find their asses pushed to jails.  As such it is already taking the necessary measures to avoid such a fate were the opposition odds of winning in 2012 to become too good for comfort.

I will not go into the politics, which include fictitious law suits against the opposition as a whole and generals announcing that they will not respect an unfavorable decision in 2012.  Those deserve a full post.  Today, let's just look at how little of management is left, and discarded.

First, it is gold week, for some reason.  Apparently the feverish mind of Chavez titillated by chemo drugs, has made him see the increased price of gold as a bonus and he seems to have decided to control all of Venezuela's gold under his bed.  Or something like that, close enough in his mind.  So he decides to nationalize the unproductive vipers nest of Venezuelan gold mines where Venezuela has already a majority interest in.  No change in gold production is thus expected, hoping that enough gold will be mined to make at least wedding bands for Venezuelans.

More promising for Chavez is to bring back to Venezuela its gold reserves in part stocked elsewhere.  That was a wise measure due to the historical instability of politics around here.  So, having, say, half your gold in a handful of countries made sense.

But this really was never an issue because the world has moved a long time ago from the gold standard and today the value of a currency is based more on the potential of a country than anything else.  In Venezuela, it has been more than a half century that our gold standard is black and runny.  Even if we were to lose suddenly all of our gold, we would suffer high inflation at first but people would still keep lending us after a while.  In exchange of black gold, of course.  A little bit of good management and productivity and we could rebuild these reserves or, well, do without them altogether.

Let's just say if you do not understand my point that is is certainly nice to have some gold to back your currency, but that countries like Switzerland need gold more than Venezuela to have a viable currency.

Thus we must understand, as more and more experts seem to understand, that the reasons to bring back gold from outside to Caracas is of another nature.

First, Venezuela is about to lose some major rulings that it does not want to pay, and cannot pay if it wanted to, anyway.  Seizing Venezuelan gold in a New York safe is an easy way to recover your loss.  Once Venezuelan gold is in Caracas, the only thing left is Citgo and that cash is not as easy to come around fast to your checking account. Let's hope that this is the real reason for the move, as it seems to be good mafia management, at least.  Cold.

Second, for an even wilder reason instead of keeping all the gold in Caracas, as it should be, there is talk to send some to Venezuela's biggest lenders: China, Russia and Brazil.  What a coincidence, ain't it?  I count at least two bears there. Warm.

In third we could point out that Chavez is aware how fast dictators have recently seen "their" gold and other financial assets frozen by more democratic countries.  A Chavez who is seriously thinking going out of the international democratic system at the latest by December 2012, having as much of Venezuela's assets at home, or in supposedly friendly hands, is now a necessity.  Hot.

Maybe someone should tell him that the Russians never returned the Spanish gold sent to them for safekeeping during the Civil War.  The more so that those Sukhois and gold mines concessions to Russians have to be paid back.

Immediate effects for Venezuela?  None as our economy is already tanking with or without gold reserves.  And no one is really investing today unless it has a contract on Venezuela's balls.  And I do not mean a notarized piece of paper.

Possible medium term effects?  If Chavez starts selling gold to pay for his campaign then inflation will get totally out of control and the country will come to crashing stop as most providers of Venezuela will refuse to work with CADIVI and demand payment upfront, in USD or Euro, your choice, before any container is loaded for Venezuela.

¡Saldremos trasquilados de verdad verdad!