Venezuela's Downward Spiral

To absolutely no one's surprise, Hugo Chavez continues his march toward the economic ruin of Venezuela:

CARACAS, Venezuela (AP) --Venezuelan President Hugo Chavez on Thursday threatened to nationalize the country's banks and largest steel producer, accusing them of unscrupulous practices.

"Private banks have to give priority to financing the industrial sectors of Venezuela at low cost," Chavez said. "If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits."

Chavez also warned the government could take over steel producer Sidor, which is majority controlled by Luxembourg-based Ternium SA.

In a free economy, banks have no obligation to provide low cost financing to anyone. They do have an obligation to make investments that benefit the their owners, shareholders and insure a good return for their own investors and depositors, which means they had better invest their money prudently - or else they go out of business. el Presidente Chavez apparently doesn't like the fact that the banks of Venezuela consider his state run enterprises to be poor financial risks and don't want to risk extending loans to them. Given the behavior of the Venezuelan government recently, the banks are probably concerned that any money lent will never be repaid either because the state enterprises lose so much money they can't afford to pay it back, or because the government simply nullifies the debts, leaving the banks with a loss.

So Chavez's solution to their lack of fate in his financial management is to threaten to simply steal the banks and all of their assets from their owners. Just like any good little thug (read socialist for the 21st century). Faced with this threat, Venezuelan banks will likely cave in and invest depositor money in Chavez's state run ventures. And those ventures will go the same way as "state run enterprises" all over the world, namely straight to bankruptcy. Then the banks will collapse and Venezuelan depositors will lose their savings. At which point Chavez will blame the bankers, speculators, middle class, internationalists and capitalists (and almost certainly the U.S) - everyone but himself for forcing the banks to invest in his sinking socialist ship. With each passing day, the news out of Venezuela resembles more and more the plot of Ayn Rand's Atlas Shrugged.

Just for the record - and to remind those neoconservatives who think democracy is the panacea for all human ills - Chavez is the duly elected leader of Venezuela, winner of two national elections. The people of Venezuela knew what he was and voted him in anyway. And they are going to get what they deserve. But good and hard.