Car buyers in Venezuela—a country of 30.85 million people—bought 387 vehicles last month. No, not 387,000 cars… 387, according to Bloomberg.
It’s a 99.6% crash from the country’s auto sales peak in 2007.
If you’ve followed oil’s price over the last decade, you’ll notice an interesting correlation between Venezuelan car sales and the price of oil…
Oil peaked in 2008 at $147.27 per barrel. It was still trading at over $100 per barrel in early 2014. Since then, oil’s collapsed over 70%. It’s pummeled the Venezuelan economy.
That’s because oil exports account for over 50% of Venezuelan gross domestic product (GDP). Oil comprises 95% of the country’s total exports.
Between 1998 and 2008, Venezuela earned over $325 billion in foreign exchange reserves from the oil trade.
Now, most analysts expect the country to default on its bond payments this year.
Regular Daily readers know Tom visited Venezuela in December to see the economic (and human) catastrophe firsthand.
The country’s suffering hyperinflation of 180.9%. Violent crime, kidnapping, and theft are rampant.
Here’s what Tom wrote about the country in his February issue of The Palm Beach Letter:
I experienced hyperinflation in Venezuela. It’s one of the rarest phenomena in economics. Hyperinflation is when prices increase very fast. Ten percent, 20%, even 100% increases per day. But it’s not why I went there… Here at The Palm Beach Letter, our thesis is simple. The global economy has entered a period we’ve labeled “The Great Unwinding.” It could be the most important trend change in the modern financial era… possibly since the Great Depression. I went to Venezuela because it provides us a glimpse into the future. What’s happening in Venezuela is about to happen—to some extent—all over the world… including in America. |
The Great Unwinding is the largest “cleansing” of the world economy in over eight decades. It’s a gigantic credit contraction sweeping the entire globe.
The effect is a strong and rising U.S. dollar. And that means almost everything priced in dollars—like oil—costs far fewer dollars than before.
Bottom line: Venezuela is a harbinger of further economic contraction throughout the world economy. What happens there will give some insight into what may be coming elsewhere… including the U.S. (as we’ll see in our next item).