Dateline: Seoul, South Korea
South Korea has one of the world’s largest markets for skin care and beauty products. In fact, even South Korean men spend more than $25 per capita on beauty products, giving it far and away the biggest market share for cosmetics in the world.
Similarly, South Korea has the world’s highest rate of plastic surgery. Just getting a job here often requires some form of surgery to “get the right look”.
Of course, this trend is quite prevalent in the Latin world as well, with countries like Brazil focusing on plastic surgery tourism for image conscious South Americans.
According to some recent reports, women in Venezuela are a bit upset over the lack of brand-name breast implants for their plastic surgery procedures.
The US brands have become rather pricey, and many surgeons are now being forced to turn to cheaper Chinese brands that are deemed of lower quality.
As usual, the issue comes down to a simple reason: Venezuela’s currency collapse and currency restrictions.
For years, image-conscious Venezuelan women relied on $600 a pop breast implants with FDA clearance. However, currency restrictions and runaway inflation in Venezuela have made it nearly impossible for women to get their hands on the things.
All because the government couldn’t control its currency.
For years, US companies loved doing business in Venezuela, thanks to Caracas’ overvaluation of the bolivar currency.
Everyone from airlines to food companies to logistics firms benefitted from low competition and a favorable exchange rate to turn bolivares back into dollars. Some companies were lapping up hundreds of millions of dollars a year in profits without breaking a sweat.
Venezuela’s sixty percent inflation rate didn’t hurt their conversion, either, as brand-conscious consumers paid the price.
But now the cost of importing goods has become too great, and Venezuelans are being cut off from the rest of the world as a result of their currency’s collapse. Businesses, too, are feeling the pinch, as analysts say the “phantom profits” companies booked using shady currency tricks.
But no party goes on forever.
We’ve seen this situation before. In Argentina, the government worked so hard to prop up the value of the peso, but couldn’t stop double digit inflation from all but wiping out many of its citizens.
In recent years, Argentines have used any means possible to get their money out of the rapidly collapsing peso and into US dollars. Black market exchange rates were worse than half the government’s official exchange rate.
Of course, practically every empire that has come and gone throughout history has suffered some kind of similar fate.
Venezuelans let their government run wild with socialist policies that confiscated wealth, redistributed assets, and caused the money supply to run wild. For awhile, it all seemed to work out just fine.
As long as consumers could get breast implants from the US, they didn’t really care what else was happening with the real economy.
Of course, the Venezuelan government – just like any other – couldn’t hold back the flood gates forever. Years of artificially toying with their currency’s value has now led to a disaster that will leave Venezuelans not just without breast implants, but without more essential items like toilet paper.
Venezuela has been through this type of thing before. Countries in the west, however, have not.
Consider that the growing power of BRICs nations like China and Russia is threatening the US dollar’s stranglehold on world reserve currency status. Resource-rich nations like Russia and Brazil realize they are finally able to put a dent in the petrodollar and do their own thing.
And considering the US government has responded to anyone who questions its role in the world with sanctions, there are plenty of emerging enemies to challenge its reserve currency status and entire economic way of life.
The US dollar has been propped up merely because it is the reserve currency. Just as the governments of Venezuela, Argentina, and elsewhere used smoke and mirrors to make their economies look better on paper than they actually were, so are the governments of the west doing the same thing to totally hide their incompetence.
And for good reason. Because the wheels are coming off of their central planning approach. I wrote earlier about the total failure of Abenomics in Japan, the new “land of the setting sun”.
Just yesterday, the European Central Bank upped its cheap cash policies in an attempt to breathe some life into the stagnant economies of Europe. As the euro declines even more, the politicians are flipping backward a few pages to the same idiocy that caused the problem just a few years ago.
And as we frequently discuss here, the easy money express in The Land of the Free is still running at full steam, even as the so-called experts claim it will slowly come to an end soon.
The problem is that the US economy, like that of Venezuela, is based on a different kind of smoke and mirrors. Anything the guys in the US do to clean up their mess requires a growing economy, which a bunch of cooked books show is taking shape while the on-the-ground reality says otherwise.
Venezuela took the socialist route and tried to distort their currency. No amount of oil could save them from the currency collapse and restrictions that are now boxing their citizens in and depriving them of their economic freedoms.
The US dollar and the euro benefit from a different kind of distortion that artificially props up their value. Once the bloom is off the rose, what’s happening in Venezuela now will be heading north.