When the shield turned into a sword: El Petro will trigger a new global economic crisis

When the shield turned into a sword: El Petro will trigger a new global economic crisis

A long time ago Venezuelan President Nicolas Maduro was a bus driver, who only graduated from high school. Today the South American country, whose leader he is, threatens to plunge the global economy into a new economic and financial crisis. So where is this fine line, crossing which the shield becomes a sword?

The fact that many countries with serious economic problems considering cryptocurrency as a tool that can accelerate economic growth… if not as a panacea. For this position there are some significant economic arguments. Of course, the main one is the anonymity and decentralization of digital assets. Moreover, blockchain technology make it possible to transfer huge sums quickly and without loss of transactions. Financial regulators and politicians have no power over the tokens. Cryptocurrency payments are not controlled by intelligence agencies. And so on.

All this can create the illusion that with the help of this versatile financial tool to circumvent economic sanctions and revive the market. So it might seem at first glance. For example, following the principle of Occam’s razor, which States that “do Not multiply things without necessity”, the Venezuelan President chose the most trivial positions, he has released a new virtual currency El Petro, backed by its current and future oil reserves. According to Maduro, ICO El Petro brought about 4 billion dollars to the state Treasury.

Let’s understand this in more detail. It is not about how much money they managed to obtain with the release of virtual assets. The problem is deeper. The principle of Occam’s razor does not always work in the economy. Virtual currency, despite all the advantages attributed to her, doesn’t look like the system assets. In Venezuela this tight. Inflation in 2018 reached a catastrophic level in 24,600%. The prices of food products increased by 40%, health 20%, the fare increased by 25%. And all this is according to official figures. From the prices on the black market generally blows. The country lacks everything. The oil production, the main asset of the country, decreased by 29%.

Why did this happen?

Venezuela’s economy is 95% dependent on exports of black gold. In an era of high prices, the government missed the opportunity to modernise the commodities complex. Nicolas Maduro inherited a terrible “inherited” from Hugo Chavez. The decline of the oil industry has accelerated the international sanctions. Accordingly, oil production has fallen to a critical level, and even high oil prices could not save the country’s economy. In fact, El Petro is getting cheaper every day.

“In fact, most people don’t even know how to use them — tells Java developer company Ogangi albert Cortez from the city of Merida — the Crisis has changed the people of Venezuela. 70-80% of the population is trying to get gas and electricity for their homes. We have no time and energy to think about some kind of cryptocurrency. Unfortunately, there is no trust to the authorities. And I wouldn’t invest in a virtual currency controlled by the government”.

Nicolas Maduro, as President, acted as the bus driver chose the easiest and neurality way. Which, incidentally, can lead to catastrophic consequences for the world market.

Analysts at the Brookings institution (Washington), one of the largest research centers in the U.S., explained to the world economic community so why not rejoice in the emergence of new virtual currency provided by oil.

They believe that El Petro not only will not keep Venezuela afloat, but will pull it down the whole world economy. A precedent of a dangerous relapse. The governments of other countries -“derelicts” — Iran, North Korea and the other wants to, or already trying, to do the same. For a short time, the virtual currency will help to circumvent the sanctions. But we have to consider the fact that to produce such currency will be mostly country with a sharply deteriorating economy. This will lead to the emergence of a toxic digital assets. They, in turn, “destroy” excessively volatile cryptocurrency market.

Everyone knows the story of the straw that broke the camel’s back. When one Bedouin decided to move from one oasis to another. He became shipping on the camel all their belongings: carpets, utensils, chests with clothes and camel kept everything. Already before getting under way, the Bedouin remembered a beautiful blue feather that was given to him by his father. He went back for it and also put on the camel’s back. But he suddenly fell and died — the burden was too heavy.

“My camel demolished the weight of the bird feather”, thought the Bedouin.

The global economy already on the brink of crisis. The decline in production in China, the endless middle East war, the collapse of the Iranian program — none of this improves health of the world market. In addition, the virtual market has such problems, so toxic cryptocurrencies. The stock market might be small and not as noticeable as the global financial and economic processes, but, as we remember the crisis of 2008 began with the collapse of only one American mortgage company.

I would like to think that those who are in power in countries under international sanctions, refuses for national ICO. You can’t shoot your own foot when trying to go forward!

News tags
Let's Disqus