Tuesday, July 8, 2014

Debtor nations have fewer choices

Venezuela is running short of drinking water. It seems funds that could pay for services at home must now be diverted to pay bondholders who finance the nation's debt.

And Bloomberg news notes that drinking water isn't the only thing in short supply in Venezuela:
By putting off the local companies responsible for supplying everything from diapers to cancer medications, Maduro can preserve access to debt markets and protect oil shipments that would be vulnerable to bondholder seizure, said Alejandro Arreaza, an analyst at Barclays. Even if that means fanning the world’s fastest inflation and inflaming protests over shortages that have left at least 42 people dead since February. 
“The government’s priority is to pay the sovereign debt,” Alejandro Arreaza, an analyst at Barclays Plc, said in a telephone interview from New York.
Wasn't too many years ago, many a Leftist was praising Venezuela's socialist revolution, its free spending on social programs. They touted its path to social justice.

Even just six to eight months ago, many a Lefty was still convinced tales of Venezuelan economic woes were more a product of anti-socialist propaganda than anything of substance.

Now drinking water is hard to come by, electric service, at best, spotty.

Take heed America.

The United States national debt is now exceeds 17.5 trillion dollars and continues to rise in rapid fashion. Much of it has been incurred on feel-good social spending.

Eventually, debt has to be repaid. Someday, like in Venezuela, drastic cuts at home will be necessary just to service interest on the debt we've incurred.

No comments:

Post a Comment