alt Hacker NewsPutting aside, for a moment, a lot of important questions around (gestures broadly at the political situation in the US), what are the economic implications of a conflict between the US and Venezuela?
Is this likely to increase inflation? And what does this mean for FX -- are we likely to see a further weakening of the dollar, particularly against ex EUR?
Replies
It won't help with oil. The Permian's breakeven prices have crept upwards and, because VZ crude grades are high-sulfur, the US refinery complex can't absorb it without retooling away from the plants specialised for the low-sulfur Permian output.
Possibly dragging supply down, with no net effect at best.
US moves on Venezuela, China moves on Taiwan. With no chips, all AI speculation goes to ..? We live in interesting times!
Probably not much. If Maduro is kicked out, you still need time to establish a new government and ramp up oil production. That's bullish, but it's far from guaranteed; there could be coups, instability, etc. If Maduro isn't kicked out, things get murky. Will the US intervene with boots on the ground? Will they just keep sanctions in place? For how long? Will there be resistance?
Actually, thinking about it more, this makes little sense. There's very little upside (and it's far off), while there's plenty of short and long-term downside. Great geopolitical strategizing out there.
Doesn't move the needle at all. FX to be determined by what bond markets think about the supply/demand of treasury bonds.
I don't think you can meaningfully answer this without knowing the military goals or the ultimate outcome.
The worst-case outcome for the US is that it gets pulled into another unpopular, long-term conflict that undermines its international standing and allows assorted rogues to advance their goals (Ukraine, Taiwan, who knows what else).
The best-case outcome is that this is a successful regime change operation which nets the US a resource-rich trading partner, undermines Russia, and scares Iran. How you assess the likelihood of these outcomes sort of depends on your priors.
I would say, however, that the recent history of US military interventions doesn't inspire a lot of confidence. Venezuela is nowhere near being the cluster---- that we've dealt in Afghanistan, Iraq, Syria, etc, but who knows.