Thursday, May 22, 2014

Risk premiums and ethic ratings

And again, for the convenience of those who do not have sufficient political leadership, the government of Venezuela, and PDVSA, announced new bond issues, in order to pay for social "investments" today ... leaving the bill to the Venezuelan youth of tomorrow.

And all this while the Financial Times of London described that soaring interest rates paid, for example by Venezuela, "tempts investors to ignore the fears of civil war, crippling inflation and legal battles."

And indeed Venezuela ( PDVSA and ) pay for ten year credit interest rates that are about 10% higher rate about 10 % than the U.S.. 8% more than Mexico ! That means in essence that already after the first year we have paid the creditor an additional 10 % ... and still owe him 100% of the loan. And that means in essence that at end of the tenth year, when we have already paid the creditor additional 100% ... our children still owe 100% of the principal. This is simply something abominable.

In fact, when a sovereign country is required to pay an interest rate that exceeds by more than 4% the rate of those who pay less, the risk premium, I consider we are in the presence of an economic crime against humanity being committed, fragrantly, against future generations.

And we citizens of the world should do something about it ... for example:

All stock exchanges of the world should suspend trading of all sovereign debt that show a risk premium higher than 4%... (as that would indicate a basic incapacity of the government)

Besides credit ratings, we should develop and use a system of ethic ratings.

All those who purchase sovereign bonds carrying a risk premium of more than 4% risk, and which do not meet minimum ethic ratings, should be exposed publicly as financiers of Sovereign Evils.

We the people should refuse to pay taxes while our sovereign bonds pay a risk premium higher than 4% and do not possess some minimum ethic ratings... and that should be a clause explicitly included in all bond issues.

PS . Whoever believes that China treats us Venezuela as accommodating as we treat Petrocaribe, is a dreamer.

You, who are about to finance Pdvsa, are you sure crimes against human rights are not committed in Venezuela? Ask your children!