As Wall Street comes to grips with the first quarterly loss for the S&P 500 since Q3 2015, we turn our attention to more serious problems in two countries that are destroying people’s day to day lives.
In Venezuela, quadruple-digit inflation and shortages of food and medicine has brought the country to its knees. Venezuela’s inflation is over 4,000% annually. To put that into perspective, that would be like a $2 gallon of milk here in the United States now costing about $80. Venezuela’s central bank announced a devaluation of more than 99% of its official exchange rate with the launch of a new foreign exchange platform. But, the new rate is still dwarfed by the black market rate for greenbacks, currently at 228,000 bolivars per dollar. The situation is so bad that local communities are printing their own paper to barter for goods because there are so few bolivars to go around.
On the other side of the globe, by summer, four million people in the city of Cape Town—one of Africa’s most affluent metropolises—may have to stand in line surrounded by armed guards to collect rations of the region’s most precious commodity: drinking water. Population growth and a record drought, perhaps exacerbated by climate change, is sparking one of the world’s most dramatic urban water crisis.
Future Wealth’s View
Venezuela’s problems are simply a function of mismanagement at the highest levels. Almost all of their government income was coming from oil. The Chavez government was spending it on services and subsidies and cronies. When oil prices crashed that money was no longer available. And the government began printing money to cover some of this up and started the vicious cycle of inflation. While there is no easy answer, the real solution could be to adopt the dollar like Zimbabwe and Ecuador, but losing control of the currency will bring down the Maduro government. Venezuelans are unlikely to shed a tear if that were to happen.
Cape Town’s problems are slightly different. A crisis of this magnitude in such a cosmopolitan city had been almost inconceivable. But overdevelopment, population growth, and climate change has upset the balance between water use and supply, not just in Cape Town but in cities in globally. Increasingly, these cities face threats of severe drinking-water shortages.
Already, many of the 21 million residents of Mexico City only have running water part of the day. Several major cities in India don’t have enough water. Sao Paulo is down to less than 20 days of water supply. Jakarta is running so dry that the city is sinking faster than seas are rising.
Why are these stories relevant? It is, because, it is a reflection of the inability of our political institutions and elected officials to take a long term view of securing a good life for, not just the current generation, but for generations to come. In Cape Town’s case, it was the repeated denial of climate change until the wells ran dry. In Venezuela’s case, it was simply hubris against sensible government until the coffers ran dry.
As our President – Donald Trump delights in executive swagger and retreats from alliances and policies that once made the U.S. president the world’s most powerful person, it begs the question, “Is it too much to ask that the government not insult our intelligence?”