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Venezuela’s Inflation Is at 4000%. Here’s Why

 2 min read / 

Venezuela’s currency, the bolivar, has lost 96% of its value this year. As the currency becomes near worthless, imported food and medicine are in short supply. A humanitarian crisis is unfolding.

The government and state-owned oil company, PDVSA, owe bondholders $60bn alone and have recently defaulted on debt repayments. More defaults could mean investors seizing their stake in Venezuela’s oil.

Why Is Venezuela in Debt?

Acting upon the country endowment of natural resources made it an economic success in the mid-2000s.

Yet, while the price of oil skyrocketed during the late-2000s, former President Hugo Chávez matched this with Venezuelan public debt.

Once the price of oil dived in June 2008, lenders stopped extending credit to the country.

Oil – price per barrel; Source: Macrotrends.net

Venezuela’s Inflation

The recent defaults have caused Venezuela’s inflation to rise astronomically.

Defaults on government bonds are largely to blame for this inflation.

In 2016, OPEC found that oil reserves accounted for 95% of the country’s exports, while the oil and gas extraction combined made up 25% of its GDP.

Venezuela’s overdependence on oil and lack of saving during its heyday are the leading causes of the current crisis.

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America

UN Drug Treaties Need to Rethink Cannabis

 7 min read / 

UN Cannabis

Europe, in general, is less concerned with religion and the personal morality of others (pre-marital sex, adultery) than the United States, according to a Pew Research Center poll. So why is cannabis legalisation facing a more difficult time in Europe than in the US? Perhaps because they also trust the government more and cannot petition to overturn or change unpopular laws as they can in the US.

An unasked question is whether governments or the people can or should violate international agreements – such as the Single Convention on Narcotic Drugs, which prohibits non-medical sales of marijuana – unilaterally, and what the consequences might be. We may soon find out. Canada is poised to start selling recreational marijuana on July 1, and Uruguay already has.

A Right to Marijuana?

While the US government hasn’t legalised marijuana, approximately 30 of its 50 US states – plus Washington, DC – have legalised putatively medical marijuana, and eight also have legal recreational marijuana. Almost all won those rights not through the local legislative process but instead by a voter referendum.  Most European citizens don’t have that power, perhaps because they aren’t as suspicious of the government as the US, or aren’t as fanatic about personal liberty and responsibility as the government taking care of them. Free speech (it’s much harder to be convicted of libel in the US), the right to own and bear arms, and even resistance to universal healthcare are examples of this US mindset.

This mindset also means that change in the US usually begins at the local state level. That’s why the late US Supreme Court Justice Louis Brandeis famously referred to the states as ”laboratories of democracy” in 1932. Sometimes state laws become federal laws by a decision of the Supreme Court, such as abortion and same-sex marriage.

Marijuana Harms Vs. Benefits

In the US federal law still prohibits all uses of marijuana, medical or not, because of marijuana’s inclusion on Schedule 1 of the 1961 Single Convention on Narcotic Drugs. That means it is officially considered highly addictive, unsafe for any use and with no medical benefits. Marijuana is similarly included in the 1971 Convention on Psychotropic Substances, and the 1988 Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.

That is stuff and nonsense. At the very least cannabis is safer and less addictive than many legal drugs, including alcohol and the prescription drugs driving the opioid epidemic. Unlike those deadly but legal substances, no one has ever overdosed on marijuana, and it is arguable whether or not it is physically addictive.

In Texas, though half of the US Drug Enforcement Agency offices consider marijuana the number one threat, it had zero associated overdose deaths. The drug that the other half name, methamphetamine, had 715 deaths attributed to it in 2016 alone, so it’s clear which rehab centres in Texas should be most concerned about.

Cannabis also has demonstrated anecdotal health benefits for many conditions, including chronic pain, post-traumatic stress disorder, and even opioid addiction. Its very illegality makes accumulating rigorous scientific evidence, or even getting approval for such studies, almost impossible.

Marijuana’s probable benefits (versus its low risk) are why so many US states have legalised medical marijuana, despite its illicit nature. That the US so widely violates those treaties in regard to marijuana (as well as federal law) seems ironic since many believe marijuana is included in the treaties largely because the US government wanted it there.

US Government Still Opposes Marijuana

Apparently, it still does. US Attorney General Jeff Sessions, a legalisation opponent, has made threatening noises about enforcing the federal marijuana laws for months. In early January he rescinded two memos that had encouraged federal law enforcement to defer to state law so long as certain guidelines were met (no access to minors, no shipping across state lines, etc.).

Even in the face of Sessions chomping at the bit to enforce federal marijuana laws, more states are considering legalisation. Missouri, Oklahoma and Utah could pass medical marijuana laws this year, and Michigan and New Jersey seem almost certain to pass recreational laws.

Certainly, the tax revenue derived from marijuana sales is one draw. Colorado, the first state to enact recreational marijuana laws, reported $193.6m in tax and fee revenue from marijuana in 2016. California, which began recreational sales this month, anticipates at least $1bn in tax revenue annually.

Some opponents, without much evidence, claim the costs of legalisation will mostly cancel out these revenues, but most studies find little or no change. Maybe more people will seek treatment at luxury rehabs in California.

At least one item still dissuading Sessions from following through on his threats is the Rohrabacher–Farr Amendment, which prohibits the Justice Department from spending funds to enforce federal marijuana laws in states that have legalised it. It is part of the budget resolution that the Congress keeps kicking down the road, most recently to January 19 (and they may kick it again). Sessions wants Congress to remove it.

Justin Strekal, political director for the National Organization for the Reform of Marijuana Laws (NORML), says that wouldn’t end marijuana use in those states, merely return it to the black market, which could put $7bn back into the hands of drug cartels.

Barriers to Legalisation Remain

Those three international drug treaties might be the most significant barrier to total marijuana legalisation in the US and elsewhere. Even if the US Congress chooses to change the law to make marijuana legal, or the executive branch removes marijuana from Schedule 1 (either by moving it to another, less restrictive schedule or deleting it altogether), those treaties still stand. Changing them would require an international effort and cooperation.

Violating the terms unilaterally might encourage other governments to act similarly, maybe with more harmful drugs such as heroin. The US is arguably the biggest supporter of these treaties. If it doesn’t comply with them, even in the narrow case of marijuana, the door will be open to other exceptions. (The Single Convention already has granted a major exemption to Bolivia for its tradition of chewing coca leaves, from which cocaine is derived, in 2013.)

On the other hand, Uruguay made marijuana completely legal to its citizens on July 19, 2017, and it is also a signatory to the Single Convention on Narcotics, but the sky hasn’t fallen yet (though it and the US have been under United Nations investigation since at least 2015).

Even if the US does nothing, maintaining the status quo, the effects of such a treaty violation may be felt when Canada’s legalisation law goes into effect later this year. The federal government in Ottawa says the provinces will receive 75% of tax revenues derived from cannabis sales, expected to be between $400m and $1bn annually.

Treaties Can be Changed

Canada could have withdrawn from the treaties completely. That requires a year’s notice, and sales are scheduled to begin July 1, 2018. Instead, Canada seems likely to stay with the treaties but just disregard them as far as marijuana is concerned. That might hurt its international reputation in general, and its attempt to get on the UN Security Council in particular, but other penalties seem unlikely.

There are ways around the treaties – the Transnational Institute suggests several in a 2016 briefing paper here – or of changing or writing new cannabis-only treaties. Stanford University’s Keith Humphreys, a Professor of Psychiatry, thinks it would be relatively easy for the world community to write a cannabis-specific treaty without unravelling the entirety of international drug treaties.

Mexico has legalised medical cannabis nationwide and is set to legalise marijuana-based medicines, foods, drinks, cosmetics and other products this year. A poll in the International Journal of Drug Policy found that 40% of respondents in Chile and Colombia favour legalising marijuana too.

With some form of marijuana available in almost all of North America, it’s time to amend not only US law but the international drug treaties to reflect reality, decriminalise cannabis and study its real harms and benefits.

Keep reading |  7 min read

Americas

Bitmain Considers Canada Move

Bitmain Canada

The Chinese bitcoin miner is looking to expand abroad and is eyeing up Canada.

Editor’s Remarks: Although Bitmain has not confirmed that it is seeking an overseas relocation because of China’s recent announcement that it will clamp down on cryptocurrency trading, it is unlikely to be a coincidence. Just a few days ago, the company said it had also opened a new branch in Switzerland, which would play an essential role in its further global expansion. Now, it has publicly said that it is considering an expansion to Canada’s Quebec region, which will give Bitmain access to cheap hydropower to power its mining operations, leading a number of crypto miners to move there.

Read more on Bitcoin:

Keep reading |  1 min read

Americas

US Healthcare: Income Disparity and the ‘$1trn Toll’

 6 min read / 

US Healthcare
Income disparity is arguably one of the top issues facing societies today. This is especially true in the United States where income concentration exceeds all relevant peers in the developed world.

Valued at $18.62trn, US GDP ranks third in purchasing power parity behind China’s $21.29 and the EU’s $19.97trn. Considering China’s population of 1.38 billion, the EU’s 516 million and the US’s 326 million inhabitants, US production is impressive. But what those goods and services yield to society is what matters. In the US, over $3trn of the GDP is derived from healthcare. Of this total, at least $1trn is a regressive toll; a tax that exacerbates income disparity, stifles creativity, hurts competitiveness, and returns negative yields to society. It is unsustainable.

The toll is the difference between what the US spends on healthcare per GDP compared to western counterparts.

Healthcare expenditures in the United States as a percentage of GDP peaked in 2010 at 17.9% before falling to a current level of 17.1%. Despite this downward trend, US outlays easily remain the highest in the modern world.

Other countries’ healthcare expenditures as a percentage of GDP are: Sweden 11.9%, France 11.5%, Germany 11.3%, Cuba 11.1%, Canada 10.4%, Japan 10.2%, Australia 9.4, U.K. 9.1%, Israel 7.8%, Russia 7.1%, Iran 6.9%, China 5.5% and India 4.7.Averaging western powers Australia, Canada, France, Germany, Japan, and the U.K. comes to 10.31% of GDP—meaning the U.S. spends a staggering 65% more than its peers.

The Issues with Comparisons

Parallels can be problematic. Comparing nations’ healthcare costs and outcomes is not the equivalent of comparing apples to apples. Each country has unique attributes: obesity levels, median age, youth dependency, elderly dependency, total dependency rates and more. However, contrasting nations is not apples to oranges; it’s more like comparing two different types of apples.

Thus, costs and outcomes can be reasonably assessed. What is so unnerving about the US is that the median age and elderly dependency ratio, both key drivers of overall healthcare costs, are lower in the US than all its western competitors. At 43.3%, Japan’s elderly dependency ratio is nearly double that of the US.

No matter how one slices and dices key metrics, healthcare costs to US citizens are disturbing. Obscene adult obesity levels plague the nation. Maternal death rates run 1.5 to 3 times higher than direct competitors. Infant mortality rates run closer to Russia’s pathetic healthcare outcomes than US allies. Lastly, life expectancy in the US is one to five years less compared to the UK, Germany, France, Canada and Japan.

Many argue the premium that America spends on healthcare funds ground-breaking research, leading technology, and revolutionary drugs. Yet, for the majority of the lower and middle-class, these investments have failed to generate expected returns. The reason is the underlying financial model employed by the United States. While most modern societies utilize some form of universal insurance, the US rejects it—labeling it socialism.

Instead, America administers an inferior structure designed to generate revenues from a plethora of tests and dispensed medicines after disabling diseases, chronic ailments and incapacitating disorders are on set. The arrangement explodes costs and diverts monies from wellness and preventive care. If best-practices were implemented, more efforts would be directed to proven strategies prior to an illness that lead to positive outcomes.

More importantly, budget-busting end of life decisions would become more rational and humane – saving countless billions over time. Instead, Americans have been brainwashed to accept negative yields from their healthcare investments in the name of capitalism.

The Conservative View

Most conservatives scoff at these suggestions and believe that a return to pure capitalism would cure America’s healthcare crisis. The problem is free-markets tend to lean towards profits calculated in dollars, not outcomes. Equally, the good old days of healthcare delivered under free-market principles is a fallacy. The capitalistic principles in America’s healthcare have been defiled since WWII. The most egregious example is employer healthcare costs subsidized by federal and state governments that encourages massive fraud and abuse. These write-offs totalled $235bn in 2017 and are by far the single largest tax expenditure in the budget.

A prime example of the power of universal insurance is national defence. It protects all citizens equally. The free market then allows individuals to scale upon that – i.e. 2nd amendment rights. To achieve the best relative returns in healthcare, the same concepts should be applied. Base blanket coverage should be offered for all citizens with free-market alternatives available for those who want supplemental benefits. The additional coverage should be available for purchase from any insurer in the world—at true risk-adjusted market rates—without any tax implications.

In summary, to reverse the growing menace of income disparity, the most effective initiative the US can implement is universal healthcare. If provided, positive effects would be immediate. Employment costs would plummet, enabling companies to hire additional staff. For the majority, the soul-crushing financial costs and unknowns of healthcare would be lifted. The multiplier effect would be supercharged as incomes expanded and expenses pared. Mental health would improve and further reduce healthcare costs. The gains are incalculable.

Unfortunately, without a Democratic supermajority, the prospect of universal coverage is a pipe dream. America beware. If current levels of income disparity continue or even widen as anticipated by the new tax bill, expect the upper class to become complacent and the disenfranchised to disengage – it’s human nature. The consequences: up and down society, competitive spirits will be subdued. American hegemony will be jeopardized.

Conclusion

Implementing universal care is not the be-all-end-all answer to what ails America. But doing so will reduce costs and redirect monies to other social products and services that better serve society. Then, regardless of wealth or status, everyone will be afforded one of the necessary pillars to thrive in a competitive world—good health. What is more valuable than that? If the proverb “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime,” is accepted as gospel, then providing basic fundamental healthcare cradle to grave should be too. Status quo is not an option. If income disparity is left unchecked, the United States risks entering a death spiral—it’s called an “American Spring.”

Keep reading |  6 min read

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