POITOU, FRANCE ­– Barely two weeks ago, 2,117 people took Chile’s medical licensing exam.

What was noteworthy about this year’s test was that more than one-third of the people taking it were not Chilean. Nearly 800 of them were Venezuelans.

This is just one indication of what is happening in Venezuela – everybody is leaving.

“You can kill a chicken, but you can’t lay an egg,” we explained to our grandchildren this morning.

They arrived yesterday, bringing the family total to nine people here.

“What did granddad say?” they asked their father, wiping the jet lag from their eyes.

“Don’t worry about it…”

Strangling the Chicken

It’s summer vacation season here in France. Businesses have closed. People have headed to the country, leaving Paris to sit quietly, like a taxicab waiting for a paying fare.

Here in the farm belt, the work continues. The bakeries are still open. But many of the shops and restaurants have signs in the window: “Fermé Pour les Vacances.”

In church, two weeks ago, the priest asked for our prayers “for those who would be unable to leave Paris this summer.” No kidding.

And yet…

“This is when I like Paris best,” says a friend. “It’s empty. Except for the tourists. And they don’t come in my neighborhood.”

Here at the Diary headquarters, however, we are still at our post. We read the news. We try to connect the dots. Rain or shine.

And down in Venezuela, the poor creoles are not exactly enjoying the beaches. And there are few quiet streets in Caracas.

Demonstrations are almost a daily occurrence, with 100 people dead so far. Folks are fed up.

What’s the problem? What are the Venezuelans so miffed about? Why are they leaving?

To make a long story short, the government strangled the chicken. Now, the people have no eggs.

Dramatic Decline

It was only a few short years ago that many intellectuals and politicians thought former Venezuelan President Hugo Chávez was onto something.

He seized his country’s vast oil revenues and used them to buy support from the common people. This was the “wave of the future,” they said.

When even the oil money was not enough, Chávez borrowed heavily using the nation’s oil reserves – the world’s largest – as collateral.

Anyone could have told Mr. Chávez that this was a bad idea. Real wealth doesn’t come out of the ground. Real wealth comes from private win-win deals.

Destroy them and you destroy your economy. Just ask the Russians. Or the Chinese. Or the Cubans.

All it took was a sharp decline in the price of oil, and the dots suddenly came together.

Venezuelan oil export revenue fell by $1,500 per capita. There was still money coming in but not enough to support the giveaways… import food and medicine (not to mention other things)… and service the country’s foreign debt.

Today, in terms of its capacity to pay, Venezuela has the highest external debt in the world. Its hospitals have almost no supplies. Its babies die for want of basic medicines. Its grocery stores have few things to eat in them.

Sinking Deeper

Looking on the bright side, as we always do here at the Diary, the average citizen has lost 20 pounds in the last two years!

The Venezuelan currency, the bolivar, has lost weight, too. In May, $1 bought about 1,000 bolivars.

Now, on the black market – the only thing that is still functioning properly there – $1 will fetch about 20,000 bolivars.

And the economy has sunk deeper than the U.S. during the Great Depression. Here’s Harvard economics professor Ricardo Hausmann writing at Project Syndicate:

Venezuela’s economic catastrophe dwarfs any in the history of the US, Western Europe, or the rest of Latin America. And yet these numbers grossly understate the magnitude of the collapse…

Clearly, a 40% fall in per capita GDP is a very rare event. But several factors make the situation in Venezuela even bleaker. For starters, while Venezuela’s GDP contraction (in constant prices) from 2013 to 2017 includes a 17% decline in oil production, it excludes the 55% plunge in oil prices during that period. Oil exports fell by $2,200 per capita from 2012 to 2016, of which $1,500 was due to the decline in oil prices.

These are huge numbers, given that Venezuela’s per capita income in 2017 is less than $4,000. In other words, while per capita GDP fell by 40%, national income, inclusive of the price effect, fell by 51%.

What can we learn from this?

Nothing that we didn’t already know. Chávez – a self-proclaimed Trotskyist – destroyed the real economy of the country.

He nationalized key industries, expropriated private property, set prices, controlled trade, and created a vast, wealth-consuming welfare state. But the problem with socialism, as Maggie Thatcher put it, is that, eventually, you run out of other people’s money.

Venezuela ran out when the oil price collapsed in 2011.

Now, its insiders – the people who took power away from previous insiders in the name of “the people” – use their power to keep the people from taking the power away from them.




Editor’s Note: With more than two decades in the field of high tech, colleague Jeff Brown is our go-to expert for technology investments. Today, he shares an emerging trend that is poised to revolutionize an iconic American industry.


Technology Insight: The Future of Cars Is Here Now

By Jeff Brown, Editor, The Near Future Report

bill bonner

Autonomous driving technology is about to completely upend the global automotive industry, which shipped 73.9 million vehicles in 2015. That represents a more than $2 trillion market. And that is just the beginning.

As you can see in the chart below, the $2 trillion market for vehicles is multiples larger than the consumer market for televisions, personal computers, or smartphones.

Now, you might think that self-driving cars won’t be here until far off in the future. I wouldn’t blame you, either. In a Wall Street Journal article I read recently, it quoted a professor from Duke University who stated, “We’re a good 15 to 20 years out from [self-driving cars]…”

I’ve also heard similar comments at industry conferences that I’ve attended from executives who work for the “old school” automotive companies.

But you may, in fact, be surprised to hear that the technology is actually available today, in production, and being used by tens of thousands of people.

Around where I live, in Silicon Valley, I typically see one or two of these vehicles driving around every single day. Yes, cars without a driver in the front seat. Every day.

These vehicles are produced by Alphabet, formerly known as Google. They are used to shuttle around employees from location to location. There is no driver at all. Just room for two or three people to sit in the back of the car.

Very few understand how quickly this autonomous driving technology is advancing. It will come as quite a surprise to most to see a fully autonomous Tesla passenger car on the market in 2017.

The innovation that has taken place in semiconductors, specifically graphics processing units (GPUs, camera vision, radar, sensor technology, and machine learning), is responsible for enabling what is truly exponential growth in technology development.

2016 was also a record year for funding early-stage automotive technology companies primarily focused in and around autonomous vehicle technology and related systems. Eighty-seven deals took place at a value in excess of $1 billion.

This is such an exciting time. Every month that passes brings major improvements in autonomous technology, more data, and more proof that the technology is already several times safer than human drivers.

Fully self-driving cars are on the verge of mass adoption. Not 10 years from now – right now. In 2017.

So get ready… The future is here.

Jeff Brown

P.S. This is just a short rundown of the autonomous car industry. There’s far too much to cover here. That’s why I put together a special online presentation to examine all the truly incredible things that are going on in this space – not to mention how I’m helping readers find the most profitable investment opportunities… It’s not Tesla or Alphabet. Click here to watch.

Featured Reads

Passive Investing Is “Devouring Capitalism”
Passive investment vehicles like exchange-traded funds (ETFs) have become increasingly popular in recent years. But are ETFs destroying capitalism as we know it? Read on here.

What Does Venezuela Mean for Oil Prices?
As Bill mentioned, Venezuela has the largest supply of oil reserves in the world. Here’s how an all-out crisis could impact the price of oil.

Financial Martial Law Is Coming
Most people don’t realize it, but banks have become an arm of the federal government. Editor at Large Chris Lowe reveals what government restrictions could mean for your life savings.


In today’s mailbag, yesterday’s Diary, “America Is on the Verge of a Thundering Debt Crisis,” has gotten some readers thinking.

Your letter today indicates a very poor return from the stock market going forward for a decade or more. Does this assume currently held stock only at high valuations, or would investments made after a correction see a similarly lethargic growth?

– Frank P.

As a former subscriber to Richard Russell’s Dow Theory Letters, Richard also used to say that the Fed would never acknowledge the error of their ways and would always follow the “Inflate or Die” path.

Their initial attempts to inflate have mainly affected those goods sought after by the wealthy such as diamonds, art, big city real estate, stocks, bonds, yachts, and other such toys. It has failed to rekindle the economy for the mainstream. Workers have been excluded and from what it appears, will continue as the wealthy will now be embracing robots and artificial intelligence to maintain the production they require. The American majority will likely continue their slide into third world status.

– Kevin M.

Meanwhile, more discussion on Trump… and Bill.

People have sometimes said that you are a “closet Liberal.” I’m starting to believe it. You may also be a card-carrying member of the “Deep State” which you speak of often.

I recently was reading your mailbag. One reader stated that President Trump had told 29 lies in 26 hours. Where on earth would he get such a statistic except from a “Fake News” source or just out of thin air? I would ask is this “fantastic information” verifiable? I think not. The Diary should always be about TRUTH.

– Bill M.

I find it scary to compare Hitler and Trump. They both ran on scare tactics focused on a minority, putting down their opponents with personal attacks and promising a great and glorious future if they got elected.

The German supporters still were pro-Hitler long after WWII and couldn’t see through his deception and lying. We now have Trump going after Mexicans and other minorities and not offering any details about how to make America great again except to tear down everything Obama got done.

He lies, cheats at golf, supports his failing golf course with government money, has fake Time magazine covers of him hanging in his golf clubs, lies about phone calls from the Mexican president and the head of the Boy Scouts and will not release any of his financial data. Why? Yet he still has a lot of supporters and apologists.

– Paul L.

In Case You Missed It…

Our friends at Casey Research have developed a system to find tiny stocks poised for predictable, outsized gains of 700%, 800%, and 900%, with 91.4% accuracy… whether stocks are in a bull market, bear market, or trading sideways.

They recently identified the next stock with the potential to shoot higher… and you can find out what it is just by attending this FREE event. Click here to find out more.