A Different View of Venezuela’s Energy Problems

It would be easy to write a story about Venezuela’s energy problems and, in it, focus on the corruption and mismanagement that have taken place. This would make it look like Venezuela’s problems were different from everyone else’s. Taking this approach, it would be easy to argue that the problems wouldn’t have happened, if better leaders had been elected and if those leaders had chosen better policies.

I think that there is far more behind Venezuela’s financial and energy problems than corruption and mismanagement.

As I see the story, Venezuela realized that it had huge oil resources relative to its population, back as early as the 1920s. While these oil resources are substantial, the country misestimated how high a standard of living that these resources could support. To try to work around the issue of setting development goals too high, the country chose the path of distributing the benefits of oil exports in an almost socialistic manner. This socialistic approach, plus increased debt, hid the problem of a standard of living that could not really be supported for many years. Recent problems in Venezuela show that these approaches cannot be permanent solutions. In fact, it seems likely that Venezuela will be one of the first oil-exporting nations to collapse.

How the Subsidy from High-Priced Exported Oil Works 

Oil is a strange resource. The cost of oil production tends to be quite low, especially for oil exporters. The selling price is based on a world oil price that changes from day to day, depending on what some would call “demand.” The difference between the selling price and the cost of extraction can make oil exporters rich. In a sense, this difference might be considered an “energy surplus” that is being distributed to the economies of oil exporters. The greater the energy surplus being distributed, the greater the quantity of goods and services (made with energy products) that can be purchased from outside the country with the hard currency that is made available through the sale of oil.

In fact, the existence of such a profitable resource tends to crowd out development of other, less profitable, enterprises. Thus, Venezuela has tended to be a country whose economy revolves around oil. There is a small amount of agriculture and quite a bit of services, but for the most part, the goods used by the economy must be purchased from outside the country. Furthermore, nearly all of the revenue that is available to purchase these goods comes from the sale of oil exports. Thus, the economy tends to follow the fortune of oil sales.

Figure 1 shows a rough estimate of the benefit that Venezuela’s oil exports have provided in inflation-adjusted US dollars. Based on this approach, the per capita benefit from oil exports seems to have peaked very early, in about 1981.

Figure 1. Venezuela per capita value of oil exports, calculated by multiplying Venezuela’s year-by-year quantity of oil exports by the price in 2017$ of oil, and dividing by estimated population. Both price and quantity determined using BP 2018 Statistical Review of World Energy. Population based on 2017 United Nations middle estimates.

The people of Venezuela did not realize that the amount of benefit that oil exports would provide would start falling very early. Instead, leaders set their sights on living standards that would be affordable if the level of subsidy that the economy could obtain from oil exports were to remain as high as during the 1973 to 1981 period.

Figure 2 shows how much energy the population, on average, consumed over the 1965 to 2017 period. This figure shows that energy consumption per capita rose dramatically between 1973 and 1981. In this way, citizens were able to benefit from the huge rise in per capita oil export revenue, shown in Figure 1.

Figure 2. Energy consumption per capita for Venezuela, based on BP 2018 Statistical Review of World Energy data.

This higher level of energy consumption meant that the economy readjusted in a way that added more goods and services using energy. For example, the economy added paved roads, airports, schools, electricity generating capacity and healthcare. People came to expect this higher standard of living going forward, even if the level of subsidy that oil exports had been adding was rapidly disappearing.

The way the amounts in Figure 1 “work” is that they depend both on the quantity of oil exported and the market price for that oil. If Venezuela’s oil exports are not rising quickly enough, or if the price of oil is not high enough, the level of oil subsidy fails to rise enough to support the economy. Also, rising population becomes an issue because as population rises, more homes, cars, electricity, streets, and other goods (requiring energy consumption) are needed. Because Venezuela must import practically everything other than oil, it must either (a) export an increasing quantity of oil per year, or (b) get an increasingly high price for the oil it exports, if it wishes to support its rising population at its chosen standard of living.

It became evident very early that Venezuela had set its sights on a living standard that was far higher than it could really support. In the period since 1965, Venezuela’s first debt crisis took place in 1982, as the subsidy suddenly started falling. Later debt crises occurred in 1990, 1995, 1996, 1997, 1998, 2004, and 2017. Clearly, as soon as the per capita subsidy started falling in 1982 (see Figure 1), Venezuela’s economy became very troubled. It could not really support its chosen standard of living.

How could Venezuela hide the problem of an unsupportable living standard for over 35 years?

I see three major ways the insupportable living standard could be hidden:

(a) Pushing the problem off into the future using added debt

Nearly everyone is willing to believe that oil prices will rise as high as is needed to extract oil resources that seem to be available with current technology. Would-be lenders are also willing to believe that oil resources can be extracted as rapidly as needed to support the economy. Given this combination of beliefs, Venezuela has had little difficulty adding more debt, even in periods not long after it has been forced to restructure previous debt.

Recently, the biggest lender to Venezuela has been China. With this arrangement, Venezuela has been able to obtain the economic benefit of part of its oil resources, before the oil has actually been extracted. Unfortunately, this arrangement makes Venezuela more quickly susceptible to the adverse impact of a downturn in oil prices. To make matters worse, the debt to China appears to include a provision that creates a lower repayment level (in oil) if prices rise, but creates a higher repayment level (in oil) if oil prices fall. This provision no doubt looked favorable to Venezuela, back in the time period when it was believed that oil prices could only rise.

As far as I know, Venezuela is the only oil exporting country that has used debt as extensively as it has. Some oil exporters, such as Saudi Arabia, have taken the opposite approach, setting aside reserve funds to use in the event that oil prices fall. Needless to say, Venezuela’s use of debt has tended to make its economy very vulnerable to restructuring or defaults if oil prices fall.

(b) Pursuing economic simplification 

A complex economy is one that is set up, as much as possible, to keep up with growing technology. A significant share of expenditures go both toward making new capital goods and maintaining existing capital goods. There are considerable differences in pay levels, to make certain that those who are providing technical expertise are adequately compensated for their efforts. Business leaders also are adequately compensated for their contributions.

A much simpler economy, which is what most of the Venezuelan leaders have been aiming for, is an economy in which everyone gets a basic level of housing, transportation, and healthcare, but virtually no one gets very much. There is also not much investment in new technology and new capital goods because nearly all of the hard currency being obtained by selling oil exports is being used to purchase imported goods and services to support the basic level of goods and services (such as roads, electricity, education, and food) being provided to the many citizens of the economy. Since the external value of oil exports sets an upper limit on the quantity of goods and services that Venezuela can import, this leaves virtually no capacity to purchase imported goods and services needed to support new capital investment and research.

In Venezuela’s economy, the cost of both oil and electricity have been kept very low–below the cost of production. This helps keep citizens happy, but it also cuts off funds for new investment in these areas. This, too, is part of the simple economy approach.

One disadvantage of a simple economy is that the low wages for engineers and other professionals encourage these professionals to move to other countries, where compensation is more adequate. Another disadvantage of a simple economy is that it encourages bribery, because graft is a way of adjusting the system so that those who “can make things happen” are adequately compensated for their efforts. The simple economy approach also tends to discourage research and investment in new areas, such as natural gas production and improved methods of heavy oil extraction.

A simple economy can be kept operating for a while, but it quickly reaches limits in many ways:

  • The limited skill level of residents who have not emigrated for higher wages elsewhere makes the completion of complex projects, such as new electricity generation facilities, difficult.
  • The inadequate level of oil export revenue puts a limit on the amount of spare parts and other goods needed to maintain the infrastructure, such as electricity transmission.
  • As existing oil wells deplete, little funding (in hard currency needed for imports) is available to make investments in new wells for extraction.
  • Research on new techniques for oil extraction is also inhibited.

(c) Neglect of current systems becomes an increasing issue, as the lack of hard currency revenue from oil exports becomes a bigger issue. 

Venezuela can, in theory, buy what it needs from abroad, but there is a limit to the total amount of goods and services that can be imported, based on the amount of hard currency funds it obtains from selling crude oil. If the price of oil falls, then Venezuela must, in some way, cut back on goods and services that it had previously supplied. One of the least obvious way of doing this is by cutting back on maintenance and repairs.

The recent long electricity outage in Venezuela seems to be at least partially related to neglect of usual maintenance activities. It seems that Venezuela’s state-owned electrical company failed to keep the brush cleared under electric transmission lines leading away from the very major Guri Dam. It now appears that one of the causes of Venezuela’s recent long electricity outage was damage to transmission lines caused by a brush fire within the Guri complex. This could perhaps have been prevented by better maintenance.

Figure 2 shows that energy consumption per capita has been falling, especially since 2011. This would suggest that standards of living have been falling. Needless to say, if Venezuela’s oil exports drop further, a further reduction in standard of living can be expected.

Why Is America Issuing Sanctions Against Venezuela’s Oil Company PDVSA?

On January 28, 2019, the United States imposed sanctions against Venezuela’s state oil company, PDVSA. The reasons given for these sanctions are the following:

  • To hold accountable those responsible for Venezuela’s tragic decline in oil supply
  • To restore democracy
  • To help prevent further diverting of Venezuela’s assets by Maduro, and thereby preserve those assets for the people of Venezuela

These reasons sound good, but I expect that the primary real reason for the sanctions was to try to take Venezuela’s oil production offline and, through this action, force oil prices higher.

World oil prices have been far too low for oil producers since at least 2014.

Figure 3. Historical inflation-adjusted oil prices, based on inflation adjusted Brent-equivalent oil prices shown in BP 2018 Statistical Review of World Energy.

Many people, thinking about the oil price situation from the consumers’ point of view, are completely unaware of the problem that low oil prices can cause for producers. Oil producers may not go out of business immediately because of low oil prices, but eventually the low prices will cause a cutback in investment, and thus production. Countries that have sold some of their oil production in advance, such as Venezuela, are especially vulnerable.

Figure 4. Venezuela’s energy production by type, based on data of BP 2018 Statistical Review of World Energy.

Figure 4 shows that oil production for Venezuela has been dropping for a very long time. Its highest year of production was 1970, the same early high year as for the United States’ oil extraction. Natural gas is mostly “associated” gas, which is made available through oil production. Hydroelectric is small in comparison to oil and gas. Hydroelectric production has been generally falling since 2008.

There is a widespread belief among oil executives and politicians that reducing oil production will force oil prices up. I expect to see, at most, a brief spike in oil prices. The major issue is that the world economy is a networked system. Prices for oil and for electricity cannot rise higher than consumers, in the aggregate, can afford. If there is too much wage disparity around the world, the low wages of many workers will tend to hold oil prices down, because these workers cannot afford goods such as smartphones and automobiles made with oil and other energy products. These lower oil prices reflect the fact that the economy has been changing in ways that leave less surplus energy to distribute to oil exporters to operate their economies.

The way the networked economy works is determined by the laws of physics, whether we like it or not. As far as I can see, the end of oil extraction comes because oil prices cannot be raised high enough to make extraction profitable. Once oil extraction becomes unprofitable, oil exporting nations will start collapsing. Venezuela is the “canary in the coal mine” in this collapse process, because of the extensive use it has made of debt.

What If Oil Prices Can Be Forced Upward? 

If somehow oil prices could be forced up by reducing Venezuela’s exports to practically zero, this would have a double benefit:

  1. More oil from around the world, including the United States, could be profitably extracted, because oil resources that are more expensive to produce would suddenly become profitable.
  2. Venezuela’s oil could be more profitably extracted.

If prices actually rise, and if the United States remains in control of the situation, the US could theoretically expand Venezuela’s oil production. Venezuela has the largest oil reserves of any country in the world. Its expected cost of production is relatively low, if the exports of oil are not expected to support essentially the whole economy. The cost of pulling the oil out of the ground in Venezuela seems to be about $28 per barrel, if we believe a 2016 estimate by Rystad Energy.

Figure 5. Cost of producing a barrel of oil and gas in 2016. WSJ figure based on Rystead Energy analysis.

The cost of supporting the entire economy with the revenue from oil exports is far higher. Figure 6 shows that back in 2013-2014, the cost of oil, including the subsidies needed to maintain the operation of the rest of the economy, amounted to about $110 per barrel. I would expect that with all of Venezuela’s debt, the real cost might be even higher than this.

Figure 6. Estimate of OPEC break-even oil prices, including tax requirements by parent countries, from Arab Petroleum Investments Corporation.

If the US doesn’t plan to support all of Venezuela’s population with the export revenues from oil extraction, it can theoretically extract the oil more economically than the $110 per barrel price that is needed to support the whole economy. Thus, it could get along with a price closer to $28 per barrel.

Furthermore, the investment capabilities and technical expertise of the United States could, at least in theory, ramp up Venezuela’s oil production, if this is desired at some future date. Similarly, “non-associated” natural gas production could be ramped up, if desired, because this seems to be available, but has been neglected.

I expect that all of this development would be more difficult and expensive than a simple comparison such as this seems to suggest. The ultimate problem is that a whole economy needs to be in place to make the extraction possible. Even if a cursory examination suggests that substantial savings are possible, the cost associated with maintaining necessary support services would make the total cost of energy extraction much higher.

Conclusion

Venezuela seems to be the canary in the coal mine with respect to where oil exporters are headed. Other countries will want to push them out of oil production, so as to try to raise prices for themselves. Debt defaults and lack of availability of debt may also become issues.

One item of interest is the fact that in Venezuela, lack of oil revenues can adversely affect electricity supply. Thus, we should not be surprised if electricity supply fails at about the same time that oil production falls. Even electricity supply provided by hydroelectric plants seems to be at risk.

Another item of interest is how Venezuela’s attempt at even distribution of goods and services, using a somewhat socialistic approach, is working out. This approach (which is now being advocated by some political candidates) seems to have some short-term benefits, because it tends to keep the population happy–almost everyone seems to have a minimum standard of living. But, over the long term, this approach leads to the loss of the ability to maintain today’s high-tech economy. This approach doesn’t prevent collapse either, because a lack of investment and expertise eventually causes important parts of the system to stop operating.

 

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,454 Responses to A Different View of Venezuela’s Energy Problems

  1. Harry McGibbs says:

    “Germany’s manufacturing slump deepened this month amid tensions in global trade. IHS Markit’s Purchasing Managers’ Index for the sector fell to 44.7, the lowest since 2012 and well below economists’ expectation of 48. That’s the third consecutive reading below 50, which indicates contraction. Gauges for new orders and employment declined.”

    https://www.bloomberg.com/news/articles/2019-03-22/german-manufacturing-sinks-deeper-into-contraction-in-march

    • Harry McGibbs says:

      “Uh oh, are the wheels starting to come off again? The prints here are rather poor as they all fall into contraction territory (below 50.0). Markit notes that French business recovery is running out of steam in the face of deteriorating demand and that “there is definitely a risk of renewed downturn in France”.”

      https://www.forexlive.com/news/!/france-march-flash-manufacturing-pmi-vs-514-expected-20190322

      • Harry McGibbs says:

        “The pound had its worst day in two months as traders suddenly awoke to the prospect of a no-deal Brexit. Sterling plunged as much 1.5 percent against the dollar Thursday as U.K. Prime Minister Theresa May gambled on getting her plan over the line with just over a week to go before the exit. Cable crumbled after the European Union told May that she can only have a short extension to delay Brexit if Parliament ratifies the divorce deal in a vote she wants to hold next week.”

        https://www.bloomberg.com/news/articles/2019-03-21/no-deal-brexit-possibility-suddenly-comes-alive-for-the-markets

        • Harry McGibbs says:

          “One of the UK’s major toilet tissue importers has been stockpiling to ensure it can maintain supplies in the event of a no-deal Brexit. German-owned Wepa has stockpiled an extra 600 tonnes of finished product, or about 3.5m rolls, in UK warehouses.”

          https://www.bbc.co.uk/news/world-47640908

          • Dan says:

            My wife and son go through that much in a week.

            Side note – On the podcast “Things You Should Know” they had an entire segment about TP – on average it increases a reliable 2% a year in good tmes and bad..

            • Jan Steinman says:

              TP – on average it increases a reliable 2% a year in good tmes and bad

              And worse: Sears is bankrupt!

              When I was a kid, the Sears catalog went into the outhouse.

              It was printed on very thin, strong, and somewhat soft “kraft” paper, not the heavy, clay-coated paper used with coloured inks these days… assuming you can still find a mail-order catalogue at all!

              (Try wiping your but on an e-commerce site… 🙂

            • doomphd says:

              i preferred the Sears catalog over the alternative of a bucket of dried corn cobs.

        • That was indeed quite interesting turn of events suddenly.
          Just for the fun, even many of the bookies stopped offering brexit bets, or paused for very unusual length of time at that point. That’s usually one of the best signs something systemic brewing on when the casino parlors go dark..

          On national level it smelled like someone doing constant daily re-balancing act realized the threshold is here – it’s not worthy risking complete political realignment (public beyond ‘pizzed off’), i.e. loosing levers of power, so instead lets deliver the brexit now (before summer), and obviously readjust (con again) afterwards..

          Very volatile times, looking in rear view mirror from say ~2025-7 vantage point, lot of things are going to change substantially.

          • Harry McGibbs says:

            My suspicion is that we will be using rear view mirrors, if at all, for starting fires and perhaps long distance signalling by 2025-7.

            Let us hope that the global slowdown has not become irretrievably self-reinforcing and that the central banks’ return to ‘dovish’ policies can still stop the rot.

            ““Let’s be very clear what Wednesday’s full-frontal capitulation by the Fed means: It’s coming. The next recession that is. It’s just a matter of the how and the when… the Fed will never, ever overtly tell you a recession is coming. They can’t. Their underlying primary mission is to keep confidence up… but their actions speak loud and clear.”

            https://www.marketwatch.com/story/the-feds-total-capitulation-is-a-bad-omen-for-the-stock-market-2019-03-21

            • Excellent review Harry, thanks – the market is telling us the truth, but it takes time.

              The fact is that growth has stopped and has been negative if you believe John Williams at http://www.shadowstats.com/alternate_data which conforms to my projections described in Chapter 13 of my book: The New Emergent Economy”.

              I propose that USA is already in recession (and has been ever since 2000) – just check out GDP figures published by John Williams at: http://www.shadowstats.com/alternate_data/gross-domestic-product-charts which is why the 95% are suffering a severe depression but the elite are fudging the stats and SNAP etc avoids the food queues. My timing is restricted to the 2020s because EROEI is driving the global economy to slow down quicker than expected.

            • On the CBs note, I guess it was Farage, yesterday, who spilled the beans on Carney (BoE) ‘secretly’ with his entourage visiting the Brussels HQ in some sort of hasty negotiations trip there..

  2. Harry McGibbs says:

    “Fulfilling the world’s growing energy needs summons images of oil pipelines, electric wires and truckloads of coal. But Michigan State University scientists show a lot of energy moves nearly incognito, embedded in the products of a growing society.

    “In this month’s journal Applied Energy, MSU researchers examine China’s flow of virtual energy—the energy used to produce goods and products in one place that are shipped away. What they found was that virtual energy flowed from less-populated, energy-scarce areas in China’s western regions to booming cities in the energy-abundant east.

    “In fact, the virtual energy transferred west to east was much greater than the physical energy that moves through China’s massive infrastructure investment, the West-To-East Electricity Transmission Project. China is a powerful model of energy use, having surpassed the United States. In 2013, nearly 22 percent of global energy use occurred in China.”

    Read more at: https://phys.org/news/2019-03-energy-stealthily-hitches-global.html#jCp

    • The fact that energy hitches a ride on physical transfers is what makes the measures of carbon used in carbon taxes completely false. Carbon taxes tend to send goods production to less industrialized countries. These countries tend to be bigger users of coal. The transfer of manufacturing very much stimulates all aspects of these economies, including road building and home building (with concrete homes, in the case of China). The outcome is completely the opposite of the intended result.

  3. Harry McGibbs says:

    “Argentina’s economy sharply contracted in the fourth quarter while unemployment rose, potentially hurting President Mauricio Macri’s approval ratings as he seeks re-election later this year.

    “Gross domestic product fell 6.2 percent from a year ago, the country’s statistics institute said on Thursday. It was the worst quarterly performance since 2009 after the global financial crisis…”

    https://www.bloomberg.com/news/articles/2019-03-21/argentine-economy-shrinks-the-most-since-global-financial-crisis

  4. Harry McGibbs says:

    “The IMF, central banks and politicians have warned about the proliferation of collateralized loan obligations (CLOs) and the threat they pose to the global financial system. Currency markets may be battered by breakneck volatility if a slowdown in global economic growth triggers a collapse in this fragile market.”

    https://www.dailyfx.com/forex/fundamental/article/special_report/2019/03/22/Currencies-May-See-Wild-Swings-if-Slow-Growth-Breaks-CLO-Market.html

  5. Jan says:

    IEA expects according to Aspo Germany a supply gap of 35 MM barrels until 2025. In the best scenario with huge investments they expect a gap of still 11 MM barrels per day. According to Forbes Venezuela’s highest-ever oil production peaked at 3.5 MM barrels per day (1998), double of the current output. So it seems as if even with huge US investments in Venezuela the supply crunch can only be moderated but not avoided.

    http://aspo-deutschland.de/dokumente/100MioBarrelOil.pdf
    https://www.forbes.com/sites/rrapier/2017/05/07/how-venezuela-ruined-its-oil-industry/#6f20c22d7399

    • I think that the idea of a “supply crunch” that most people have is wrong. In a networked economy, lack of supply can reveal itself as excessive wage disparity and collapsing debt bubbles. It looks like an impending recession or depression.

      The idea of a “supply crunch” comes from trying to model a multidimensional economic system in too few dimensions. Huge numbers of people believe these models, but they fundamentally are not correct. ASPO has been a leader in promulgating incorrect models.

      Of course, part of the confusion lies in the fact that Venezuela is part of a world economy. Even if the Venezuelan system is not sustainable, for a time, it can keep going based on the way the rest of the world is willing to supply goods and services that it cannot really afford. This, too, is part of the multidimensional system that it is impossible to model correctly. Economists simplify the modeling by assuming that the future will be like the past; all that is needed is curve fitting to past relationship, and that will provide the correct answer. That approach sort of works, for a while, but it misses turning points.

      • Excellent points Gail, thank you, and I do agree with you and take the view that the economies of the world are, as you say, networked together in so many ways that they form a complex adaptive system, much like a natural complex organism or perhaps a weather system or the stock market. If this is the case, then they are subject to non-linear growth and contraction, rarely remaining in stasis for long. Complex adaptive system theory therefore applies here.

        On occasion, again you mention a tipping point, which in physics is a phase shift or critical point such as when water turns to ice or vehicles congest on a motorway for no good reason,- it happens all of a sudden. I feel that we are approaching such a point in the global economy, but ‘feel’ is all I have, I can’t support this feeling with modelling or calculations.

        All I do know is that the statistics and models that academia are using do not reflect the real world and there is a deliberate faking of the numbers across many sectors..John Williams at:
        http://www.shadowstats.com/ exposes this at his alternate data tab. And people do know, deep down, that their lives are not going on as well as the elite would have them believe. Even the Fed is guilty of sugar-coating their reports to keep a feel-good factor in play.

        I think this is all wrong and the people should be told the truth, regardless of the consequences, because it will happen anyway at some time so the sooner we can get through it the better, allowing populations to live at a standard comensurate with the natural constraints inherent in the world. Brexit is a classic example of our leaders being unable to fulfill their responsibilities which exposes their incompetence in glaring ways and their inability reflect the wishes of their electorate. After all this is what representative democracy is meant to be all about Or is this me just whistling in the wind – sort idealistic wishfulness?

        • Artleads says:

          Excellent post. I agree especially with the last paragraph. People should be informed about where we truly and what we can expect.

  6. Pingback: A Different View of Venezuela’s Energy Problems - Deflation Market

  7. Xabier says:

    Our Sir Harry, with his assiduous reporting of ominous news, reminds me of an artillery officer I once read about: salvo after salvo hit his battery, but at the end he alone stood, unbowed and unwounded! Facing into the storm of steel, we salute you! 🙂

  8. Carlos Leiro says:

    What is the cost of producing a barrel of oil in the US, both the “unconventional” or the “conventional”
    What proportion does the petroleum extraction “Non-conventional” with respect to the “conventional” oil?

  9. SuperTramp says:

    The bond market is flashing its biggest recession sign since before the financial crisis
    Jeff Cox | @JeffCoxCNBCcom
    The spread between 3-month and 10-year Treasury notes has fallen below 10 basis points for the first time since 2007.
    An inverted yield curve, where short-term yields are higher than their longer-term counterparts, is considered a reliable recession signal.
    The Federal Reserve this week said the U.S. economy is still strong but is facing challenges from global weakness
    To be sure, the dire warnings coming from the bond market have been coming over the past year or so, with still no recession in sight. Some market veterans are betting that this may be an example of the stock market getting it right and the fixed income side being too cautious.

    “Could it be that the yield curve is signaling weak global economic growth and low inflation without necessarily implying a recession in the US? We think so, and the US stock market apparently supports our thesis,” Ed Yardeni of Yardeni Research said in his morning note Friday. “So why are global stock markets also doing so well? Perhaps there is too much pessimism about the global economic outlook.”

    There’s also some indication in the market that the Fed’s move Wednesday to telegraph a decidedly dovish stance could help widen the spread somewhat.

    However, the challenges for the economy remain.
    https://www.cnbc.com/amp/2019/03/21/a-key-recession-indicator-just-did-something-that-hasnt-happened-in-12-years.html

  10. Duncan Idaho says:

    1519 — México: Cortez brings a sample of Western Civilization to the New World in the name of his King & Catholic faith: looting, killing, subjugating, raping & massacres in his “March of Death.”

    • raul says:

      Typical Catholics.

    • Artleads says:

      Spain has a level of responsibility for Latin American commensurate with the other colonial powers. But what can it do, or what can any of them do now, in their reduced circumstances, to help us to help them?

    • SUPERTRAMP says:

      Time out for some Mello tune version of Neil YOUNG
      Cortez the Killer Solo & Unplugged Tour 2003 Neil Young

      “Cortez the Killer” is a song by Neil Young from his 1975 album, Zuma. It was recorded with Young’s band Crazy Horse. It has since been ranked #39 on Guitar World’s 100 Greatest Guitar Solos and #329 on Rolling Stone’s list of the 500 Greatest Songs of All Time.[2]

      “Cortez the Killer”
      Song by Neil Young
      from the album Zuma
      Released
      November 10, 1975
      Recorded
      June 16, 1974 – August 29, 1975
      Genre
      Hard rock, blues rock
      Length
      7:29
      Label
      Reprise
      Songwriter(s)
      Neil Young
      Producer(s)
      Neil Young
      David Briggs[1]
      Young has stated in concert that he wrote the song while studying history in high school in Winnipeg. According to Young’s notes for the album Decade, the song was banned in Spain under Francisco Franco. According to El País and book author Xavier Valiño, the album Zuma was released in Spain in full following Franco’s death, with the song renamed to the less inflammatory title “Cortez.”[3] from Wikipedia

      Peace is a theme of this song. From verse six: “But they built up with their bare hands, what we still can’t do today” indicates that even in the most barbarian times there was still peace, and in present day, as sophisticated as it may be, there is anything but peace. The Aztecs were peaceful, representing sort of a utopian nonviolent society. Cortez and the Spanish brigade used trickery to beat the Aztecs, people who had never committed any offensive acts towards the Spanish. The Spanish could represent the status quo society, completely antonymic from the amicable Aztecs.
      https://www.songfacts.com/facts/neil-young/cortez-the-killer
      Neil Young’s song brings an interesting alternative viewpoint to the history of Cortez’ invasion. While not a complete history of Cortez or the Aztecs, it’s title alone gives you a very good idea of how Young viewed the invasion. Young’s romantic imagery near end of the track highlight the emotional toll (lost romance, etc.) of the invasion

      Ah, now that it an artist in the truest meaning..

      • Sheila chambers says:

        “The Aztecs were peaceful, representing sort of a utopian nonviolent society. ” WHAT?

        From what I have read about the Aztecs, they were a very militaristic people, too bad you can’t ask the tens of thousands of their neighbors who were captured then killed in dedications to their temples & each year at the winter solstice as sacrifices to the “gods” to thank the gods for the return of the sun.
        They had racks full of skulls from past sacrifices, thousands of victims were taken to the tops of their pyramids, placed on their backs on a stone & their hearts cut out as a sacrifice to the “gods” & the bloody bodies cast down the blood soaked steps of those pyramids.
        Far from “utopian” or “nonviolent”.
        The Mayan were almost as bloody, they had their priests dance while wearing the skins of sacrificial victims.
        Only the Spaniards were worse in the magnitude of their killing but then they had better weapons, steel armor, horses & vicious dogs.

        • TIm Groves says:

          The Aztecs sound like a great role model for the modern Greens led by the Cortez’s great great great great granddaughter, who seems determined to sacrifice and rip the heart out of everything that keeps most modern Americans rich enough that they don’t have to live in tents and hunt bison for a living.

          Incidentally, Neil Young also wrote a nice ballad about Elizabeth Warren!

          • SomeoneInAsia says:

            Depends what shade of green you’re talking about. And we all know we’re headed for a state of affairs where modern Americans will be lucky if they have any tents to live in and bison to hunt at all, and it’s not the fault of the greens, many of whom are in fact trying to prevent this eventuality.

        • SUPERTRAMP says:

          Sheila….calm down… It all depends on how one sees it…like so….

          I’m not certain if Neil actually wrote the above about “peaceful” or what context…but the Aztecs, initially at least, did not harm Cortez or the Spanish and viewed them as God’s.
          Read the link I posted
          This song is about Hernán Cortez, the Spanish conqueror of the Aztec Empire. The Aztecs lived in what is now considered Mexico, and Cortez had an army of 600 sail from what is now Cuba to the Aztec town of Tobasco (yes, where the hot peppers and the name of the sauce originally came from). The Aztecs thought Cortez was a god and bowed before him. They let his army roam free. Cortez, however, became wary of their good nature and took their leader hostage. He then captured and killed many of their people. He also unwittingly brought new diseases to the Americas, which the natives had no immunities towards. On top of all this, he built what is now Mexico City with slave labor. He returned to Spain a hero.
          Neil revealed the inspiration of the lyrics
          During a show in Manassas, Virginia on August 13, 1996, Young told the audience that he wrote this song after eating too many hamburgers in high school. “One night I stayed up too late when I was goin’ to high school. I ate like six hamburgers or something. I felt terrible… very bad… this is before McDonald’s. I was studying history, and in the morning I woke up I’d written this song.”
          PEACE!

          • Sheila chambers says:

            Great post & I’m chill, but still scared to death at what I see coming.
            Yes, the Aztecs thought those Spaniards could be the return of their “god” Quetzalcoatl & not being stupid, they wanted to “feel” out those strangers, by the time they realized they were just humans, it was way too late.
            I’m glad we “civilized” people don’t burn people at the stake or hang them because we believed they were “witches” or unbelievers but the veneer of civilization is thin & will soon be lost when times get hard for all & thousands more migrants fight to enter the country illegally.
            There have been large crop loses in the central states of the US, thousands of cattle & their calves have been lost, even crops in silos were destroyed, we can expect food prices to rise this summer as flooded fields can’t be planted.

            I don’t understand why the prairie states are called the “mid west” when their no where near the west & certainly not in the middle of the west, their not even half way to the west.
            How on earth did these central states get to be called the “mid west”?
            I won’t call them the “mid west” instead I call them the central states, the prairie states or the grain belt. Yeah, I’m picky, I like names that make some sense.

            Outside, I can here the birds singing, the sound of spring.
            I wonder how much longer will we hear birds singing?

            • SUPERTRAMP says:

              Hi Ms Chambers, sure it’s a messed up social setup…Hey, posting this cool version of Neil’s song with pictorial outtakes and lyrics…the original soundtrack version.
              Ya, he took artistic license, but it was a symbolic backdrop, I suppose..

              You planted in the Central States are you? Man, taking a beating weather-wise.
              Beautiful region and to think I had a romantic notion of settling in Winona Minnesota!
              Boy, I dodged a bullet going there! Nice place to visit…Four months out of the year!
              Betcha the Bluffs will see another snow storm or two before May!
              Poor me, toasting in South Florida …sunny 🌈, warm and lovely. Too nice and now beyond crowded….time to head out of Dodge…before Cortez lands….

            • Tim Groves says:

              When people came up with the term “Middle West” or “Midwest”, the US was much smaller geographically than it is these days. The western frontier moved progressively further west as the country expanded, but for a long time what is now the continental US was envisaged as the civilized East and the wild West with a region between them that was west of the civilized part of the country but not quite as far west as the untamed wild West. The Midwest was populated by small farmers living in little houses on the prairie and cowboys who had sent the local injuns packing, and occasionally visited by new school ma’ams, carpet baggers and snake oil salesmen.

        • Xabier says:

          The Aztecs thoroughly merited extermination. The Spanish were very vulnerable to Aztec sling-shots though, which could concuss even an armoured man.

          I have a Spanish rapier in my collection, a beautiful thing giving a long reach, 3.5 ft long in all. ‘The Spanish gentleman: small in stature, but with a big heart, and an even bigger sword!’ 🙂

          A burial pit containing the bodies of captured Spaniards who were sacrificed was dug up a few years ago, and to everyone’s surprise it contained lots of native Indians, from the tribes who had allied with the Spanish in order to bring the Aztecs down, so much were they hated.

          Without the native allies, they wouldn’t have survived.

          • The Serbs also merit extermination for causing World War I.

            • Tim Groves says:

              I think you are overstating the Serbs’ culpability and ability to get Queen Victoria’s grandchildren to go at it hammer and tongs at each other’s empires. The Aristocracy always need whipping boys, and the Serbs make excellent whipping boys.

          • SUPERTRAMP says:

            Sure, the Aztecs deserved it…just like you know who deserves what’s coming…
            BTW, don’t remember reading the Aztecs inviting Cortez and his men as Guests!
            Boy, those sling shots sure did them harm…
            But bad omens are worse…
            Bad Omens

            During the reign of King Montezuma II, the Aztecs had seen several bad omens. According to Aztec religion, these omens meant that something bad was going to happen. There were eight bad omens that were recorded later by a Spanish missionary.
            Fire in the sky
            The temple of Huitzilopochtli burned down
            A lightning bolt struck one of their temples
            They saw fire across the waters
            A lake appeared to be boiling
            They heard the sound of a weeping woman at night
            A strange animal was caught by some fishermen
            And …Cortés arrived with around 500 men, 16 horses, and some cannon. He founded a small settlement that would eventually become the city of Veracruz. He also began to get to know the natives. He brought along an American Indian woman named Dona Marina who worked as his interpreter. Cortez created alliances with some of the local tribes including the Totonac and the Tlaxcalans.
            Divide and conquer…
            Interesting Facts about the Spanish Conquest of the Aztecs
            Cortés became worried that some of his crew would steal his ships and desert him so he sunk his fleet before marching to Tenochtitlan.
            After Montezuma II was killed the Aztecs elected Cuauhtemoc as their new king. Cortés eventually had him executed.
            The Aztecs were severely weakened by diseases that the Spanish brought such as smallpox, influenza, and malaria. Over time, around 80 percent of the people living in the Valley of Mexico died from these diseases.
            Cortés founded Mexico City on the ruins of Tenochtitlan. Today it is the capital of Mexico and one of the largest cities in the world.
            The night that Cortés and his men escaped from Tenochtitlan is often referred to as “La Noche Triste” or “The Sad Night
            https://www.ducksters.com/history/aztec_empire/spanish_conquest.php

            Yep, History is written by the Victor’s…God Bless Spain!

          • SomeoneInAsia says:

            Why did the Aztecs thoroughly merit extermination? Because they did things like ripping people’s hearts out to sacrifice to their gods?

            If so, what about the Europeans of the colonial era, considering what they did around the world? The misdeeds of the Aztecs were at least limited to their turf.

            • jupiviv says:

              You see, what matters is that “both sides have faults”. The early Christians condemned the sexual freedom enjoyed by the Roman elite, which was anti-liberal/feminist. Therefore Diocletian’s persecutions were somewhat justified.

            • DJ says:

              At least europeans are decent people.

            • Xabier says:

              The Aztecs would have had you on the chopping board pretty quick, so why defend them?

              I take your point though; but, on the whole, the whole colonial period was nothing compared to what the natives were doing to one another with gusto when the Europeans arrived: for instance, the life of a peasant in Mughal India was sheer hell as the empire collapsed, and the Brits did (despite themselves) actually improve things in that respect.

              Empires rose and fell long before Europeans arrived in Asia and Africa.

              Ever heard the saying common in Iraq when the Brits left: ”Wicked Imperialism has gone! Now WE can crap in our own back yard!’ Iraquis laughed because they knew the truth of it.

              The other thing I hold against the Aztecs, apart from their corrupt blood-thirsty priesthood and imbecile belief that blood would bring the sun back each day, is their simply ghastly art. There is no excuse for that. 🙂

            • SUPERTRAMP says:

              Now if they only burned victims at the stake, that would be acceptable in the eyes of the Spanish?
              What was medieval heresy?

              A: Heresy was an opinion about the teaching of the Catholic church, which was condemned by the church as inconsistent with it.

              From the early 11th century, many people accused of heresy were burned at the stake as a result. In 1022, people who were considered heretics were burned for the first time since antiquity.
              Q: How many people were burned for being heretics?

              A: Again, impossible to say, but we do know that on many occasions heretics were burned in large groups – sometimes 200 at a time. That gives you an idea of the scale
              : Is heresy comparable to the witch craze?

              A: Yes – no one now believes there’s any basis in the fear of witches. We know it’s something dreamt up. I say it’s the same with the Cathars.

              In the case of witches, between the 15th and 18th centuries people were put to death all over Europe, usually by burning, on the basis of a belief that they were agents and worshippers of the devil.
              the case of witches, between the 15th and 18th centuries people were put to death all over Europe, usually by burning, on the basis of a belief that they were agents and worshippers of the devil.
              https://www.historyextra.com/period/medieval/in-case-you-missed-it-your-60-second-guide-to-heresy/

              YEP, WONDER WHAT THE NEXT FANTASY will be to exterminate others?
              https://www.historyextra.com/period/medieval/in-case-you-missed-it-your-60-second-guide-to-heresy/
              But I’m quite sure it will most efficient and civilized. Hint ..concentration camps WWII

            • Jan Steinman says:

              YEP, WONDER WHAT THE NEXT FANTASY will be to exterminate others?

              While not exactly “extermination,” people are being thrown in jail for leaving food and water out near the Mexican border.

              My crystal ball won’t tell me exactly what will happen, but I’m betting it will have something to do with immigrants. As the twin pincers of resource depletion and climate change kick in, people are going to be moving all over.

            • resource depletion has always caused conflict and movement

              only the scale of it is up for discussion

              this time it’s the biggie

          • jupiviv says:

            Come on, nobody truly believes that hatred of an empire justifies genocide. Besides, the Indians who sided with Cortes were just looking for more resources and wrongly believed the Spanish would keep their end of the deal.

          • Sheila chambers says:

            “The Aztecs thoroughly merited extermination.”
            Perhaps but then going by that logic, the Germans after WW2 should also have been exterminated for what the German Nazis did.
            The Russians too deserved extermination for what Stalin did to the Ukrainians.
            The Americans deserve extermination for what we did to the native peoples.
            Most of us have skeletons on our closet we would rather forget.

            • Tim Groves says:

              Hit-ler was an Austrian, Stalin was a Georgian, and everyone else was just obeying orders. So that lets the Germans and Russians off the hook.

              Americans are nice folks but unfortunately, they are the most propagandized people on earth according to no less an adept than Gore Vidal, so I guess we can commute their sentence on the grounds of diminished responsibility. Their sin is being Americans and it is also their punishment.

              And given the above precedents, we can hardly condemn the Aztecs for being a bloodthirsty lot. The Spanish did the right thing in civilizing them, Christianizing them, and turning them into the Mexicans we know and love today.

              However, Mexico, Central America and the Caribbean is still overall the most violent region on Earth outside of actual hot war zones. Whether this is due to the people’s genetics, the climate, the Aztec Mayan cultural heritage, the Conquistadors, the Church, the United Fruit Company, the poverty, or to all the tortillas, hot chilly peppers and hallucinogenic mushrooms they eat is anyone’s guess.

              Skeletons in cupboards notwithstanding, most of us aren’t exactly Jeffrey Dahmer.

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