What happens if Venezuela’s economy collapses?

Venezuela Protests

We’re living in an age when countries that should be doing okay financially are falling apart. Greece is the easy example to point to, but Venezuela faces a much harder fall. It’s not that their economic woes are so much worse. It’s that they don’t have the EU or the United States to bail them out. They chose to align with Russia and China, two countries that have their own economic troubles brewing.

How did the country with the world’s largest oil reserve get to the point that they may not survive another two years? One can point to their leadership in general, but it really comes down to one word: socialism.

The difference between socialism and fiscal conservatism is that under socialism, everything has to line up perfectly and indefinitely. That’s why it has never worked and will never work regardless of the economic clout of a country. The world economy isn’t just unpredictable. It’s bound to ebb and flow and socialism does not allow for sustained down times. Now, the people are carrying around bags of currency that is on pace to be completely worthless in a couple of years at best. It might even collapse entirely in a matter of months.

To combat this, they’ve started selling off their gold.

This isn’t being done in order to help the starving people. It’s just for the sake of paying of their massive debts that are coming due next year. After $45 billion in loans from China and promises of strength from Russia, they’re still so deep in this hole that the future looks almost certainly catastrophic.

So, what’s going to happen to Venezuela and the rest of the world as a result?

We will likely not see an uprising like the 2002 coup d’etat. The people are too weak and the resources simply aren’t available for a military solution.┬áProtests have gone badly and the middle class is already seeking new homes elsewhere. This means that the poor will be fending for themselves and that’s where it gets really bad.

Chaos is going to compound on chaos and they will start to flee. The problem is that the situation in other countries isn’t terribly better and tensions are too high. The only viable solution at this point is for the government to either beg for help from their friends in Russia and China or to find new friends. Not matter what happens, this is likely not going to end well for the people of Venezuela.

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