IMF Says Venezuela’s Inflation Rate May Rise Beyond 2,300% in 2018

(Bloomberg) Venezuela’s triple-digit annual inflation rate is set to jump to more than 2,300 percent in 2018, the highest estimate for any country tracked by the International Monetary Fund.

 

An intensifying political crisis that’s spiraled since 2014 has weighed heavily on economic activity. Gross domestic product is expected to contract 6 percent next year, after shrinking an estimated 12 percent in 2017, the IMF said in its latest World Economic Outlook report published Tuesday.

 

While Venezuela’s central bank stopped publishing inflation data in December 2015, the IMF argues the country’s consumer prices are estimated to leap 2,349.3 percent in 2018, the highest in their estimates, followed by the Democratic Republic of the Congo’s 44 percent. As oil production declines and uncertainty increases, unemployment is forecast to increase to about 30 percent in 2018, also the highest and followed by South Africa’s 28 percent and Greece’s 21 percent.

The Bolivarian Republic isn’t current with most of its key economic statistics, leaving economists scant data to crunch. Before Venezuela’s new legislative super body took over the functions of the country’s only remaining opposition-run institution this year, the sidelined National Assembly had started publishing its own inflation index due to the lack of official data. Bloomberg’s Cafe Con Leche Index puts the annual rate at 650 percent.

Be honest, if you were Maduro, would YOU publish the awful economic data coming out of Venezuela? Steven Hanke pegs Venezuela’s annual inflation rate at 2,276% as of September 26, 2017.

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Here is Venezuelan dictator Nicholas Maduro singing “Ain’t socialism grand?” 

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Venezuela’s 10Y Sovereign Yield Hits 34.1% (6 Mo CDS Hits 15,500)

Venezuela’s 10 year sovereign yield just hit 34.1%, the highest in the world.

Venezuela’s sovereign yield curve (green line, denominated in US Dollars) is steeply inverted. Venezuela’s SR CDS (and Petróleos de Venezuela SR CDS) are both showing extrememly high levels for the next 6 months (right-hand axis).

Socialism sounds wonderful (to politicians) when crude oil is selling at over $100 a barrell. But not so much when oil is under $50 a barrell.

With annual inflation running at over 2,000%, you know you’ve got trouble in oil city. 

Well, at least some Venezuelans have toilet paper and food.

Unlike these shoppers. And you wonder why annual inflation is over 2,000%?

 

Venezuela’s Inflation Rate Just Hit 2,061% (6 Mo CDS At Almost 13,000)

Yes, the US economy like Europe and Japan are suffering from chronically low rates of inflation (unless you count things like home prices,. rent, college tuition, healthcare, etc).

But not Venezuela! They just surpassed the year 2017 in terms of their inflation rate: 2061%!

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Venezuela’s sovereign curve remains steeply downward sloping with short-term rates in excess of 50%.

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And Venezuela’s CDS curve is similar in that it is downward sloping with 6 month CDS at almost 13,000.

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“Look amigo, I can spin the basketball just like Steph Curry!”

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China Plans Yuan-Priced Crude Oil Futures Convertible To Gold

The global de-dollarization trend continues with China launching a crude oil futures contract priced in yuan and convertible into gold.

DENPASAR, Indonesia — China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.

The contract could become the most important Asia-based crude oil benchmark, given that China is the world’s biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in U.S. dollars.

China’s move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

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Yuan oil futures are expected to attract interest from investors and funds, while state-backed oil majors, such as PetroChina and China Petroleum & Chemical (Sinopec) will provide liquidity to ensure trade. Locally registered entities of JPMorgan, a U.S. bank, and UBS, a Swiss bank, are among the first to have gained approval to trade the contract. But it is understood that the market will be also open to retail investors.

Concerns about the US Dollar remain as the purchasing power of the US Dollar has fallen 60% since July 1983.

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Here is the longer term deterioration of US Dollar purchasing power since the creation of The Federal Reserve. As in a 96% loss in purchasing power.

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A Christmas present to the banking industry? Absolutely!

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Venezuela’s 2 Year Sovereign Yield Rises 499 Basis Points To 71.6%

Venezuela’s financial crisis keeps getting worse and worse.

The 2 year sovereign yield for Maduroland rose 499 basis points to 71.6%.

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Venezuela’s 10 year yield rose 108 basis points to 31.84%. This is producing a steeply downward sloping sov yield curve.

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“But, but, Venezuela is beating Yellen and The Fed in terms of inflation.”

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Venezuela’s 2Y Sov Yield Hits 62.30% As Riots Spread During Election

Venezuela is a mess. The Guardian has this article on the sham elections in Venezuela where President Nicolas Maduro claims a victory for his policies, such as 844%.inflation and chronic shortages in this command economy.

Riots are spreading thoughout Venezuela which Maduro claims is excitement over his enlightened economic and monetary policies.

And then there is the problem that the US is weighing sanctions against Venezuela that could severely restrict the OPEC nation’s crude exports and starve its government of hard currency.

(Bloomberg) — U.S. sanctions against Venezuelan officials include a key figure in some of the oil-for-cash deals with China that are central for the survival of Petroleos de Venezuela SA.

Simon Zerpa, vice president of finance for PDVSA, is the only current official of the state-owned oil company among 13 Venezuelan nationals who were sanctioned by President Donald Trump Wednesday. A self-taught diplomat and socialist financier, he’s managing the debt of one of the most distressedborrowers in emerging markets. Zerpa, 33, also helps direct the $45 billion that Venezuela has borrowed from China to boost crude production.

The sanctions come at a time when PDVSA is struggling to make ends meet. Oil production is slumping, despite the world’s largest proved reserves. The company has an upcoming debt payment of $3.2 billion this year, most of it due in October and November. Earlier this month, Zerpa sought to improve communication with investors through invitation-only conference calls, after Goldman Sachs Group Inc. was grilled for buying Venezuelan “hunger bonds” that, according to the opposition, helped to keep president Nicolas Maduro in power.

“It’s a huge blow in terms of new financing to Venezuela,” Alejandro Grisanti, director of the Caracas-based consultancy Ecoanalitica, says by phone. “After all, Zerpa manages all the finances not just for PDVSA but also for the Venezuelan government.”

The result? Venezuela’s 2 year sovereign yield now tops 62%.

Meanwhile, the Venezuela basket (oil) remains depressed relative to neighboring Colombian oil prices.

Here is President Nicolas Maduro claiming that there is nothing to see here in the elections.

The Heat Is On! Venezuela 10Y Yield Spikes to 30% (2Y Yield at 60%!)

In the immortal words of the late Glenn Frey, “The Heat is on!!”

And its not Arizona-type heat. But protesters outraged at President Nicolas Maduro with threats of a new constitution and staggering inflation. And no toilet paper.

Venezuela’s 10 year sovereign yield just spiked to 30%.

And near 60% at the 2 year mark.

Now that the Dodger’s ace Clayton Kershaw is on injured reserve for a while, here is a possible replacement from Venezuela. I mean, this dude throws fire!