Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Venezuela Refuses to Default, and Few People Seem to Understand Why

bloomberg.com

Post reply on HN
Print view View original

51–60 of 142 posts

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#51

Post by AnimalMuppet »

danharaj wrote: post #47
AnimalMuppet wrote: post #30

Earlier quoted context omitted.

> Violent dictatorships are seldom rational. Well, they're often rational within their own framework (either an ideological framework or merely the framework of violence and power). That looks irrational to the rest of the world, but it has its own logic. > This article is also written with the tacit acceptance of neoliberal ideology: The only rational choice for an impoverished nation is to submit to foreign capital…

> Will submitting be better or worse than the current situation in Venezuela? If anyone claims that it will be worse, I'd like to see their justification for that statement. The current situation is shit. Paths forward should be judged against their alternatives and their possibilities. Global powers love that they can coerce the impoverished into decades-long deals of economic servitude and their ideology pushes it…

What's your better option?

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#52

Post by krapp »

AnimalMuppet wrote: post #50
krapp wrote: post #42

Earlier quoted context omitted.

Part of this discussion seems to be whether or not the Treasury should have done what Iceland did, and I'm just trying to point out that they had valid reasons to do anything but that.

Clarification: Do you mean the US Treasury? If so, yes, I agree with you. And yes, that has been part of the discussion.

Sorry, yes I meant the US Treasury.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#53

Post by woodandsteel »

Alupis wrote: post #5
brianlweiner wrote: post #3

Earlier quoted context omitted.

But Venezuela has already seized and nationalized foreign-owned assets. Surely that burnt plenty of bridges? I'm more likely to believe that influential Venezuelans are exposed to the current bond market and are seeking to delay the reckoning.

> But Venezuela has already seized and nationalized foreign-owned assets. Surely that burnt plenty of bridges? They seized/nationalized Exxon's assets, which certainly burnt that bridge (Exxon promptly filed for arbitration). But Exxon is only one foreign company. Perhaps Venezuela sees a future of no foreign petroleum companies, but rather use foreign investments/loans to build their own internal petroleum operation…

From what I understand, Chavez was a marxist-socialist-nationalist who wanted to keep foreign investment out, and instituted policies that did this quite effectively, and Maduro has the same intentions.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#54

Post by woodandsteel »

Alupis wrote: post #12
saryant wrote: post #10

Earlier quoted context omitted.

After nationalization Venezuela told all PDVSA workers that they either had to be loyal to Chavez or quit. Many of the best left, knowing they could take positions with the supermajors or service contractors in other countries. PDVSA was left with a hodgepodge of lackeys and hacks who don't know what they're doing. That problem is compounded by the fact that Venezuelan crude is a pain in the ass to deal with. Some of…

I believe you are making my point. Venezuela's future will depend on and require foreign investments and expertise. Burning that bridge (or not burning it) is a calculated risk.

>Venezuela's future will depend on and require foreign investments and expertise.

Well yes, but you seem to be assuming Maduro is rational on economic matters. But if that was so, the Venezuelan economy would not be in such a terrible mess.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#55

Post by krapp »

SilasX wrote: post #49
krapp wrote: post #40

Earlier quoted context omitted.

>Not sure how that's an argument in favor of paying the Danegeld though. Because not paying it would likely have tipped an already precarious global economy further towards depression, and that's not acceptable. So you pay the Danes off until you can actually kill them without killing yourself in the process.

Just so we're on the same page, do you understand the logic behind not paying extortionists? The "later" doesn't come, and the payment only makes them better at extorting you, and draws in more people to try the same. You typically won't get a better opportunity. If you come up with a rationalization for how you absolutely must defer the reckoning today , why won't you come up with one tomorrow as well?

The US government could have done something about the banks after having bailed them out without wreaking havoc, but they didn't. Not because the government didn't have the power to, but because it apparently didn't have the will.

Simply letting the US banking industry collapse and take the country with it as a power play of refusal to give in to "extortion" would have been insane.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#56

Post by rhino369 »

AnimalMuppet wrote: post #32
krapp wrote: post #23

Earlier quoted context omitted.

No offense to Iceland, but the world economy is far less affected by the loss of Icleandic financial institutions than American ones.

But you're moving the goalposts on this discussion. The question wasn't the impact on the global economy; it was the impact on the national one. So the Iceland example is directly relevant.

The reason is that the global financial institutions are arguably more important than national ones. If Icelandic banking institutions fail, their economy can still be serviced by global banking institutions.

Technically that is true for America too. American economy could be serviced by foreign banks.

However, the American banking industry is big enough to knock out the entire global financial system. Iceland's isn't. Just one bank, Lehman Brother, almost caused the whole house of cards to come down.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#57

Post by Shivetya »

roymurdock wrote: post #25

The second "conspiracy theory" explanation presented in the article seems the simplest and most plausible: Close associates of the administration are major holders of the country’s bonds and...the government fears it’d lose their much-needed support if the payments stopped coming in. Efforts to obtain comment from government press officials on this and other aspects of the story were unsuccessful. Either that, or deb…

I tend to like the pride argument more. To default is to lose face in the international world and at home. Better to sacrifice to uphold one's promises.

A false pretense when there is little respect outside of those receiving payments beyond their borders. Perhaps they think they would be admitting defeat and that would cause the coup to occur overnight?

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#58

Post by JumpCrisscross »

Alupis wrote: post #8
Analemma_ wrote: post #7

Earlier quoted context omitted.

> Burning those bridges now could cripple Venezuela permanently. There's not a lot of evidence for this. It's not like no country has ever defaulted before, it happens all the time, and they were able to borrow again once they got themselves functional. Defaulting is bad but certainly not a death sentence. It's especially weird when, as the article points out, bondholders are practically expecting default - and charg…

> What if they use it to get some functional power plants? The massive brownouts right now are hobbling the economy; there would be much better growth prospects if people had reliable power. Very good point. However, it's likely in order to build and maintain such infrastructure, Venezuela would need foreign investment and expertise... If they burn all the bridges, this may not be possible to accomplish. Perhaps they…

> If they burn all the bridges, this may not be possible to accomplish

The bridges were burnt more thoroughly by Chavez's expropriation as well as his and Maduro's price-control and rationing policies. I would put a dollar in Greece or Puerto Rico before Venezuela, despite the formers having defaulted and the latter not.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#59

Post by ArkyBeagle »

roymurdock wrote: post #25

The second "conspiracy theory" explanation presented in the article seems the simplest and most plausible: Close associates of the administration are major holders of the country’s bonds and...the government fears it’d lose their much-needed support if the payments stopped coming in. Efforts to obtain comment from government press officials on this and other aspects of the story were unsuccessful. Either that, or deb…

Just as a first-order guess of your second half, what you describe sounds highly illegal.

The first part makes more sense - and it's not a conspiracy theory - they want to keep access to bond markets.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#60

Post by SilasX »

krapp wrote: post #55
SilasX wrote: post #49

Earlier quoted context omitted.

Just so we're on the same page, do you understand the logic behind not paying extortionists? The "later" doesn't come, and the payment only makes them better at extorting you, and draws in more people to try the same. You typically won't get a better opportunity. If you come up with a rationalization for how you absolutely must defer the reckoning today , why won't you come up with one tomorrow as well?

The US government could have done something about the banks after having bailed them out without wreaking havoc, but they didn't. Not because the government didn't have the power to, but because it apparently didn't have the will. Simply letting the US banking industry collapse and take the country with it as a power play of refusal to give in to "extortion" would have been insane.

>The US government could have done something about the banks after having bailed them out without wreaking havoc, but they didn't.

That's exactly what's under dispute, especially given the multiple meanings of the term "could" here.

The problem with paying the Danegeld is (among other things) that the extortionist becomes more capable; that means it's less true that "we 'could' shut them down".

In this case, it means the banks have bought time to extend their influence, get more people to expect them to be around forever, borrow bigger amounts of money on the assumption that they can't die, make more acquisitions on the assumption of returns to TBTF status, make politicians more dependent on their campaign contributions, etc.

It's the exact mentality that "oh, they won't call our bluff because Everyone Knows that would be reckless" that allows this abuse to exist in the first place.

And what's worse, having given in, you now have to worry about non-bank orgs similarly positioning themselves!

There's a reason people have to be taught about the dangers of the Danegeld: because they all think they can just "fight for real later".

Post reply on HN