Longstanding fears of a Venezuela debt default crystallized Wednesday, as the political crisis engulfing the sinking OPEC state deepened with a meeting set at the UN Security Council and the EU eyeing an arms embargo.
Investors were bracing for what looked to be an inevitable “credit event” that analysts said could arrive within days — before a “refinancing and restructuring” of the debt called for by President Nicolas Maduro.
While the country’s isolation means the risk of contagion to international financial markets is limited, a default could trigger a global rush to seize assets owned by the Venezuelan government and its state oil company PDVSA, and plunge the struggling nation into a full-blown humanitarian emergency.
They claim this isn’t contagious because Venezuela is economically isolated, but I think it could be contagious regardless, at least a little. The idea that money loaned out might not come back is the chemotherapy for the current degeneracy into r-selected wastefulness and all of the mortgaging of the future to try and keep the party going one more day. Right now we are still in an r-mindset, where threats can’t be seen, and every thought is about how to avoid being deprived of the free resources which everyone else is enjoying.
For the investors who are loaning money to states to keep it making more money, Venezuela will be a case where a state is going to tell them that their loaned money is gone. Now maybe that won’t happen with the US, or Italy, or Spain tomorrow. But clearly what was unlikely enough that it didn’t even happen with Venezuela yesterday, will be a little more likely tomorrow because it will have happened with Venezuela, and the question then will be where will it happen next.
Who will loan Puerto Rico money then? As that fear triggers a withdrawal of credit to dangerously unstable governments, it could trigger collapse of those governments, and then the contagion could spread, and advance up the line, eventually affecting the trust in first world debtors.
I think the shift from r to K will be swift, and probably unforeseen, because first the environment will change as resources constrict. But human psychologies will not shift until threats and consequences have had time to remodel the amygdalae of the financiers whose bad decisions are keeping things afloat. By the time those amygdalae have remodeled, and their psychologies have become more K and threat-aware, conditions will be substantially worse than need be to support a real shift to practical K-selection.
When those far more K-environmental conditions finally meet psychologies that see threat and are driven to pull their excess resources out of the system and horde, then the collapse will be swift. But it will be difficult to predict when it will happen because it will all depend on predicting when the economic conditions will decline sufficiently to K-ify the moneymen, and how much of that it will take to K-ify the money men who are keeping things afloat. Then you’d need to know exactly where those two graph lines, of increasing K and declining resource availability, crossed to combine effects sufficiently to produce the Apocalypse. But once you hit that point, the K will skyrocket, as the hording crushes resource availability, and each feeds the other explosively.
The only thing I think is undoubtable is that the decline now is irreversible. We are just arguing the timing.