Episode 282 - Venezuela Collapse Explained by Patrick Bet-David
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Summary
Venezuela is the leading producer of crude oil in the world, and they are one of the most important countries in the history of the world in terms of oil reserves and production. So why is it that a country with that much oil is going through a mess?
Transcript
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30 seconds. One time for the underdog. Technician sequence start. Let me see you put them up. Reach the sky, touch the stars up above. Cause it's one time for the underdog. One time for the underdog.
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I'm Patrick Bedevi, host of Value Team and today we're going to talk about the collapse that's taking place in Venezuela and go a little bit deeper behind the reasoning of that taking place.
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Before we get into my 10 points I have here, I first want to lay the groundwork for us to see some of the numbers. So we just see facts, data, what's really taking place, right?
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So first thing I want to pay attention to is oil reserve leaders around the world. What countries? This number that says 266,455, this is in millions barrel.
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So if I put millions, I would need to add six more zeros. So go figure. This is, they're the leading country in the world with the most barrels, right?
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Leading countries in the world with the most barrels in reserves. You look at U.S. at the bottom at 39,230, right?
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Times million, which means 39 billion, right? You look at Libya, 48. You look at Russia, 80. You look at United Arab Emirates, 97.8.
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Kuwait, 101. Iraq, 142. Iran, 158. Canada, no one talks about 169. Saudi Arabia, which is what everybody talks about.
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They're the biggest. When you think about oil, you think about Saudi Arabia, Sheikh, you think about Prince.
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These are the guys that have all the oil, right? Right? It is the Middle East, right? Nope.
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Number one in the world is Venezuela. You ready? 300,878 times a million barrels.
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They are number one. U.S. is number 10. So why is it such a big mess?
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How is it that a country with that much oil is going through a mess today?
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What took place? There's two numbers we have to look at.
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One is oil prices. The other one we have to look at is inflation.
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Let's first look at oil prices. This is not just Venezuela oil prices.
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But why oil prices? What does oil cost per barrel?
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And is there a trend or something that we ought to pay attention to between Chavez and Maduro?
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Because when Chavez was president, people were happy.
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Some people said, wait a minute, we were getting a lot of free programs.
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I mean, why is it that under Maduro it's not working?
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Today, a barrel in 2019, give or take, as of yesterday's pricing, is $52.87.
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So, when Maduro first got elected, Venezuela was still kind of okay.
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They had some problems, but they were kind of okay.
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The moment oil prices dropped more than 50%, they could no longer fund all the public programs.
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Because 50% of Venezuela's GDP is what pays for all the free public programs that Chavez came up with years ago.
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When Chavez got elected, oil prices, $19.95 per barrel.
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And they are the number one leaders in the world in oil reserve.
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So he could give all these free programs away while oil prices were going up.
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Venezuela's economy is controlled by oil prices per barrel.
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So what happened when oil prices kept going up?
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But when the oil prices went down, a whole different story.
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From 2012 until today, what does inflation look like?
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The IMF predicts this year, Venezuela's inflation will crack 10 million.
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There is inflation, then there is hyperinflation.
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What Venezuela is going through is hyperinflation.
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Let me explain to you what hyperinflation is based on what an economist said.
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If the economy increases inflation 50% a month consecutively, eventually it becomes hyperinflation.
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That means what costs a dollar today on January 1st, 12 months later on December 31st, whatever costs a dollar, now costs $130.
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Except Venezuela has hyperinflation on steroids.
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Let me give you some comparisons with other countries' inflation.
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Venezuela has the worst inflation in the world, right?
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They have crisis, but their inflation is 47.6%.
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The top three is Venezuela, South Sudan, Argentina.
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I want you to be paying attention on what's going on there, right?
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So here are 10 things I think we can learn from what's taking place in Venezuela.
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It is an absolute crisis what's taking place over there.
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But we all have to pay attention to this because sometimes these things can come back and affect you.
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Number one, number one thing, if your country solely relies on a natural resource and that natural resource is pricing you don't control.
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Other factors around the world can dictate what the price of your oil is going to be per barrel.
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When it goes from $93.17 to $48 the next year and 50% of all the social programs, because Venezuela is a socialistic nation,
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50% of the social programs are funded by oil, what do you do when that takes place?
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This is why they went and borrowed money, $110 billion they owe,
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because they have to keep borrowing money to be able to fund all these social programs, right?
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There are some countries around the world that solely rely on their natural resource.
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You've got to find other things to rely on except outside of just that.
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Number two, when there's no food, when there's no medicine,
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the nicest person in the world can commit crime if that person has a kid.
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You are burning trucks that are coming through the border to bring food and medicine.
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And all the money in the world can't buy a medicine that doesn't exist.
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Any parent will do anything to put food in the belly of their kids.
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Anyone is capable of crime when the economy goes.
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Number three, look, you go to dinner, your dad pays the bill.
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You go to dinner, you pay the bill for your dad.
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You go to dinner, somebody pays your bill, because that person's a millionaire.
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Every time you go out with this guy that's partying,
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I got the bill on the house, bar on me, order your drinks, club on me, bottle services, table,
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One, the problem is, that guy who now has 50 people with his entourage that go to clubs,
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the day money goes, those 50 people disappear like this.
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You know what's the worst thing that's worse than this?
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The people that are partying with him, who are being paid all their bill,
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If you can't pay your own bill, and you solely rely on somebody else to pay your own bill,
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eventually the ability to pay your own bill goes away.
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Your muscles become so weak that all of a sudden, when it's pulled, it's a crisis.
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Bills being paid, bills being paid, bills being paid.
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So what happens to a country like Venezuela, just like it happened to other countries,
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like I'm from Iran, the job creators, those that know how to make money, who work very
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hard, they leave to other places, Colombia, Bogota, U.S., all over the place, because they
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know they're going to go find a place to make money because they know how to work hard.
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They'll go to other places, and the economy takes a big hit.
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Never, ever rely on somebody to pay your bills for the rest of your life.
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Number four, one of the most manipulative words.
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How can we be the richest country in the world?
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How can we be the richest country in the world?
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Just because America is rich doesn't mean we have to give free programs away to everybody.
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Just because Venezuela is number one in oil reserves doesn't mean they have to give it
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Be very careful with the word free, especially when politicians say it.
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Every time you hear the word free, replace it with the real F word.
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Every time you hear the word free, just think about they're saying the other word.
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If you replace it, politics would actually make more sense to you if you replace the word
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Even if the most noble, spiritual, whatever church-going person takes over and you say,
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He changes the constitution, is what Chavez did.
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He creates his own house, which is what Chavez did.
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He takes control of the military, the executive branch, judicial, legislative, everything he
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I like him because he's giving me free programs.
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Like, listen, we got to replace to get somebody else to balance it out.
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Listen, Obama gave birth to Trump, but Bush gave birth to Obama.
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This goes back and forth because we need to balance each other.
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It's almost like an eagle's flying every four to eight years.
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He needs to kind of go like this a little bit to balance it out.
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Don't ever do that because then you lose your ability to choose.
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There's a lot of people that follow by telling me you're not living in America.
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No matter how noble the leader looks like at the top, still don't give 100% trust to the
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Number six, many American politicians praised Venezuela in the 2000s.
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When he kept saying socialism works in Venezuela, he's not telling you the whole story.
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It worked because oil prices went from 19 to 94.
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And all you hear is the average voter looks at it and says, wow, I guess he's right.
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We should take the money and redistribute and give it to everybody else.
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It is unfair what Amazon's going to be doing to New York.
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Amazon was bringing $150,000 a year salary to 25,000 workers in New York.
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New York was going to give Amazon $3.2 billion.
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A lot of companies get a billion dollar payout.
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A lot of companies get big payouts because they're moving their market to a city.
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But New York was going to make $20 billion over the next decade, decade and a half.
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Because she said, because if they come due to competition, rent prices will go up.
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And the governor of New York is saying, what are you talking about?
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We have the most powerful influential company that wants to come to New York.
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New York used to be the number one city in the world for the most Fortune 500 company headquarters to be there.
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It is not going to be there for too long because a lot of people are going to pay attention to it.
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So you can't put too much of that trust into the socialistic, noble concept that, oh my gosh, it sounds really good, but it doesn't work.
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Next, number seven, pay close attention to your taxes.
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One of the lines I've heard for years is there's two guarantees in life.
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So if you're going to die, you've got to study death.
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And if you're going to be taxed, you better study taxes.
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Because it's just what's going to be taking place.
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And when it comes down to taxes, that takes me to point number eight is the power of incentives.
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Incentives, a country, whatever they create as an incentive, that's what people go after.
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Meaning, if Venezuela says, no incentive, don't worry about it.
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We'll give you an income, we'll give you food, we'll give you this, we'll give you a house, and we'll give you all this stuff.
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If America says, we'll give you incentive if you create jobs, we'll give you all this other incentives, and Americans do it, then people get advantage of it.
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A lot of people say, why isn't that company paying as much taxes as this other person?
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So, immediately, emotionally, you're like, wow, that kind of makes sense.
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That company, they made this much money, how come they're not paying any taxes?
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Because that company created 400,000 jobs in America.
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Okay, let's take those taxes away, let's take those incentives away.
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400,000 jobs at a $60,000 salary, how much taxes are being paid?
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Pay very close attention to incentives at a company.
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A company will say, if you do X, Y, Z, you get promoted.
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We give you an incentive in X, Y, Z, people create jobs.
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If the incentives are proper, innovation goes high.
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If the incentives are not, innovation doesn't go high.
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Number nine, sometimes a crisis wakes up a nation.
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Look, one of the reasons why I totally feel for the people of Venezuela and what they're
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going through with this is because when you have so much power with oil, when you are
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number one, oil reserves, everybody, you're like the beautiful girl that every man wants
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Because there's like, oh my gosh, she is so sexy.
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Venezuela, you are so sexy because of all the oil you got.
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Ding, ding, ding, ding, ding, ding, ding, ding, ding, right?
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In Iran, the city called Abadan, they found oil.
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They realized, oh my gosh, there's not just a little bit of oil.
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And the person in Iran at that time, they're like, I don't really know how to handle this.
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They came in and they said, oh, listen, we can help you orchestrate it because we know how
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And Iran doesn't know how to do it at that time.
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Today came in and they said, look, we want to team up with you.
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They called the company APOC, Anglo-Persian Oil Company.
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You know what it's called today, by the way, APOC?
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BP, British Petroleum, was once known as APOC, Anglo-Persian Oil Company.
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Go verify it for your own self so you can see the history of it and what took place.
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Then next thing you know, U.S. and U.K. teamed up together.
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So I understand the fear of Venezuelans when they see EU and U.S. and Mike Pence getting
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Because they're like, oh, what are we going to do here?
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I was speaking at an event a couple weeks ago and I talked about what's taking place in
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That a lot of Venezuelans, when they can't feed their family, when they don't have medicine,
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they're willing to do anything at that moment to get back into survival mode.
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Maybe create an arrangement because I do know a lot of eyeballs are going to be on how sexy
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Venezuela still is because the oil is still there.
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And in order for the structure to change, it's going to be a little bit ugly.
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It's going to be at the hands of many people dying.
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Unfortunately, this is just kind of what happens with oil, money, power, and socialism.
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But this ought to be something for a lot of us.
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And this leads me to point number 10, which is who's next?
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I know a lot of us are looking at it from the outside.
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Oh my gosh, I feel so bad for people in Venezuela.
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That a lot of times we look at somebody else going through a divorce, cancer, crisis issues,
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We look at other people and not us because we're amazing.
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The moment you forget that incentives create hard work, create effort, create movement,
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create everybody paying the price and paying their own bills.
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That's what a country can be relying on for a long time because it's the right values and
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But if you rely on something for free, something to give away, something you don't have to
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work for, something that's just going to be given away to you, and all the people that
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are creating the jobs are becoming too rich, take that land away, take that business away.
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And they're kind of sitting there saying, well, listen, if I don't have incentives, I want
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Because entrepreneurs and people who are driven by incentives, no one wants to leave their
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But they will gladly leave their homeland if you put them in a position where they cannot
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give their kids, their blood, the life they want to give like this, they will disappear.
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And if a country thinks that way, they keep talent.
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If they don't think that way, there's a reason why you lose nearly 5 million people that left
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Whether that number is 2 million or 5 million, Venezuela is the size of Texas.
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2 million is high, 5 million is high, and they're leaving.
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And it's the hardworking people leaving, not the people that are relying on the programs.
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