A Universal Basic Income deserves to be implemented fast but carefully, little by little.

Sir, Lex writes:“Either the Universal Basic Income (UBI) has to be unrealistically low or the tax rate to finance it is unacceptably high. Suppose the US provided its 327m inhabitants with $10,000 a year. That would be less than the 2018 official poverty threshold of $13,064. But it would cost 96 per cent of this year’s federal tax take.”“{Universal basic income: } money for nothing” May 20.

Let’s face it, the UBI, being an unconditional payment, eats into the franchise value of the redistribution profiteers, and so there are many out there wanting it never to be launched or, if it is, to be unsustainable. The usual way to sabotage it, is precisely arguing that if it is too small it does not solve anything, or if it is too large, it is fiscally unsustainable.

In my mind UBI, the basing building block for the decent and worthy unemployments we need before social order starts to break down, and therefore such an immensely valuable social experiment, deserves to start small, but fast, and grow, slowly, to where the future will and can take it. 

The tricks for a successful launch of a Universal Basic Income are:

1. That it helps all to get out of bed but that it never is so big so as to allow anyone to stay in bed. In other words that it is a stepping stool that helps everyone to reach up to whatever there is in the real economy.

2. That it starts small enough and grows little by little so as to guarantee its absolute revenue sustainability. It should never be an UBI for the current generation paid by future generations.

3. That its revenue sources should as much as possible be aligned with other social interests, like a carbon tax that helps fight climate change; or sources aligned with the new times, like taxes on robots, intellectual property and exploitation of citizens’ data.

Sir, the UBI should have as little as possible to do with government and politics, that because it should foremost be as a citizen to citizen’s affair.

PS. In countries blessed with high natural resource revenues, these should feed a much larger UBI, but that is because of the importance of reducing the concentration, in the hands of a centralized government, of income that does not come from taxes paid by citizens.

@PerKurowski

What cultural insight could anthropologist Gillian Tett, or any neo-Cannibal Club colleague of hers give in order for me to better understand bank regulations that seem so loony?

Sir, Gillian Tett, commenting on Marc Flandreauan economic historian’s 2016 book “Anthropologists in the Stock Exchange”, writes about the “Cannibal Club, a so-called anthropological society that, its members hoped, would explore far-flung cultures in order to uncover what made humans tick” “It is primitive to ignore what links finance and social science” December 2.

When Tett refers to that “By the middle of the 19th century, much debt was turning sour due to defaults, corruption and fraud (some perpetrated by British swindlers who misled investors about opportunities on offer). Sovereign loans in places such as Venezuela kept delivering nasty shocks.” I would then have liked very much to be able to ask those anthropologists whether if all, or any, of those failed financial assets had been ex ante considered risky. 

Today I would also like to ask any neo-Cannibals why they think current bank regulators could want banks to hold more capital against what is perceived as risky? To me that is a mystery. Is it not when something perceived ex ante as very safe turns out ex post as very risky, that one would really like banks to have the most of it?

On Venezuela’s defaults, Tett suggests “thinking about this historical link between capital markets and culture, and between finance and social sciences” I would add the fact that Venezuela’s main export revenues, oil, currently 97% of these are centralized in its government. If that’s not enough to know that things will, sooner or later, go utterly wrong, I do not know what is.

@PerKurowski

Any jury, given the facts on how Venezuela works, would in seconds, unanimously condemn Mr. Mauro Libi for corruption.

Sir, John Paul Rathbone writes: “As protests and violence engulf Caracas, the country is beset by shortages and endemic corruption. Amid the chaos, Mauro Libi has built a huge food business empire but his critics want to know how.” “Profits from empty shelves” FT, Big Read, Venezuela, July 14.

His critics want to know how? In a country in which a government centralizes 97% of all export revenues, and foreign currency is thereafter allotted not by free market operations but by mechanisms that require the approval of individual government bureaucrats, can there be any doubt that the fortune Libi derives from imports of food to Venezuela, as described by Rathbone, can be anything but the result of corruption?

FT, I am sure you would not dare try to justify any other possibility, and this even if the only consequence you could suffer from it was being laughed at?

Rathbone writes: “Mr Libi’s story, as he tells it, is of a resourceful businessman working against the odds… He even claims to be exporting oatmeal to the US”

Those readers of papers like FT, who can read statements like that, and do not feel like vomiting, prove themselves to be intellectual and immoral accomplices of the death of the many Venezuelans who are suffering from lack of foods and medicines. 

Western civilization world, if something like Venezuela happened in your country, would you like the world to behave as indifferent as you do?

Western civilization, “We did not know” might have worked previously, but is nowadays a completely unacceptable excuse.

@PerKurowski

Should/will the holders of Venezuela’s “Hunger Bonds” have priority over the hungry?

Sir, John Dizard, in reference to the current financial difficulties of the state of Illinois points out that Judge Joan Lefkow of the Federal District Court in Chicago made the point of “Bondholders do not have priority over welfare recipients”. That according to a muni portfolio manager would signify that the judge “is starting the process of reprioritizing the primacy of debt service under state law and the state constitution.” “Illinois’ journey to junk credit is sending shockwaves through the muni industry” June 17.

Let me apply that to Venezuela. Would that judge order that those many Venezuelans, including children, who die because of lack of food and medicines would have the same pari-passu rights as the holders of what Ricardo Hausmann has named “Hunger Bonds”?

It really does not sound so farfetched, or unjust, considering that the holders of those “Hunger Bonds” must be, as reflected in the risk premiums, perfectly aware of the tragedies in Venezuela resulting from widespread corruption and violations of human rights, including the current violent repression of those demonstrating against the government.

Sir, many have argued that the world urgently needs a Sovereign Debt Restructuring Mechanism, SDRM. I agree but for more than a decade I have held that must start by defining clearly what credits are clearly bona-fide, doubtful or plain odious.

Dizard writes: “One of the key questions to ask about distressed sovereign credits is whether the paper is owned by locals. Even during Nigeria’s troubles in the 1970s and 1980s, the central bank continued to pay its promissory notes, even as its bank loans went into default. Nigerian officials owned some of the notes.”

Clearly in a case like Venezuela the Venezuelans should have a right to know exactly who were the financiers of their malign regime, and of how they came into holding these credits.

The “need” for holding Venezuelan paper so as to conform to some Emerging Market portfolios might have entrapped some investment funds. In such cases no much shame falls on them but of course they should voluntary submit their investments to a debt to food and medicines conversion program, and the product donated to the poor.

Personally I am trying to motivate a constitutional reform in Venezuela that would assign the property of its natural resources directly to the citizens. I wonder what judges would then authorize the embargo of a tanker that carried oil to be exchanged for food and medicines for the hungry owners of the oil.

I do that not for the purpose of getting away from onerous financial commitments but for the much more important mission of not having future Venezuelan governments to have a chance to do, ever again, what this XXI Century Socialistic revolution has done to my homeland.

Whether this would make it “more difficult and expensive to sell bonds if the state wants to fund pension obligations or fix its highways” is of little or no concern to me. In fact, the more I look around in the world and read of unfunded pension obligations that might be satisfied with debt to be paid by future generations… those limitations sounds like great news.

@PerKurowski

If a citizen of an oil-cursed nation, like Nigeria, would you like a FT lending support to its central besserwissers?

Sir, you write “If the government were to reduce its stakes in the oil joint ventures to a minority it would not only raise some $20bn towards achieving other objectives. It would liberate the oil companies to invest, providing the country with a more realistic chance of raising production” “Nigeria’s recovery plan gives grounds for hope: A burst of reform will help Africa’s most populous nation to fly again” March 9.

Is that really so? Could it not be that its government would then just waste the $20bn obtained now against the loss of future oil revenues; and that a future populist could easier come to power exploiting a re-nationalization platform? By the way, for how long is the extraction of a non-renewable natural resource be described as “production”

Sir, you know that Nigeria, like Venezuela, are oil cursed nations in which oil exports represent 90% or more of all the exports, and the revenues governments receive from oil 70% or more of all fiscal revenues. And yet you seem to indicate that with a correct recovery plan, which means centralized government bureaucrats still calling the shots, perhaps with somewhat less ammunition, there is “grounds for hope”. 

Sir, if you were an oil-cursed citizen, I am sure you would not like a renowned international financial paper lending such support, to those powerful local oil bureaucrats, vulgar redistribution profiteers, that insist they should manage oil revenues, since they are much more experts and therefore know much better than you what good for you and your family.

Or is it perhaps that you are too beholden to all governments that do the oil-revenues spending?

@PerKurowski

Compared to the poor of Venezuela, PDVSA’s bondholders, as a group and over time, have benefitted way too much

Sir, Eric Platt and Robin Wigglesworth write that PDVSA’s Rafael Rodriguez, Mr del Pino’s chief of staff, appealing to the investors to take part in the proposed swap said: “We hope investors will support PDVSA in the same way that we have supported them for many years”, “Caracas piles on pressure for $5.3bn bond swap” October 19.

For the poor of Venezuela, who demonstratively might not have received more than 15 percent of their per capita share of Venezuela’s oil revenues, that is an insult. I don’t care one iota about these bondholders; as a group and over time they have benefitted way too much.

As an example, Elaine Moore and Simeon Kerr when recently reporting on an upcoming international bond issue of Saudi Arabia wrote: “a banker not involved in the (US$ 20bn) deal, estimates that Saudi Arabia will price at 150bp above US Treasuries for a five-year bond and 160 to 165 for 10-year debt”. “Saudi debt pitch focuses on youth and reform” October 18. Sir, compare that with what the land that advertises itself to have the largest oil reserves in the world, has to pay.

Sir, very high risk premiums paid by a sovereign debtor, might evidence that a government and its financiers, are in cahoots for some mutually benefitting corruption.

And please do not tell us PDVSA is not Venezuela, as like if Aramco is not Saudi Arabia.

@PerKurowski ©

“Capitalism for hyenas” might be a more accurate description than “capitalism for friends”

Sir, I refer to Chrystia Freeland’s “Puttin’s populist bluster belies the loneliness of the cynic” December 29.

If for instance Andres Schipani would like to write an up to date report on Venezuela and Maduro, he would have to change almost nothing except for some names and regional references… especially now when even Cuba, as was to be expected, has also turned out to be a fair-weather ally.

But, when referring to the crony capitalists that flock around the leaders, I would perhaps disagree with the term “capitalism for friends”. In Venezuela at least, it is really not friends who are sharing those oil revenues which now represent 97 percent of all this nation's exports… it is much more something like “capitalism for hyenas”

To find a solution to Venezuela, you have to be clear about its problem.

Sir, John Paul Rathbone, Andres Schipani and Mark Frank write “Venezuela: In search of a solution” March 3.

I am sorry, that neither Venezuela nor your reporters can identify the real problem, just shows how hard it is to develop a solution to its problems.

Let me just ask… what would you believe the real problem of the Britain would be, if your government was receiving, as income, to dispose of in any way it liked, over 98 percent of Britain’s exports?

Financial Times, are you communists?

Sir, you end “Chaos in Caracas” mentioning that “Eventually, voters will let the PSUV know what they really think of its economic amateurism”.

Am I to interpret that as Financial Times believing that if only, a country where 97 percent of fabulous export revenues goes straight to the coffers of the State, was run by economic professionals, then everything would be fine and dandy? Are you communists?