- The cost of insuring debt is measured by the Credit Default Swap (CDS) rate, which for Venezuela has rocketed in recent weeks, making its debt the most expensive in the world to insure.
- Happened because Venezuela is one of world's major oil producers, and probably the most vulnerable to oil price falls, since oil = approx. 95% of export revenues.
- Occuring in context of very weak economy (weakening currency, high inflation, slow growth), and thus markets expect Venezuela to default on it's debt.
- Higher US output due to boom in shale oil (fracking) from areas such as Eagle Ford (Texas) and Bakken (N. Dakota).
- Higher Canada output (natural gas + heavy crude from oil sands).
- Outcome: North America expected to become net exporter of liquid fuels in next 10 yrs off this higher output and slower US/Canada demand (off energy efficiency improvements).
- Grew over last 10 years due to huge Chinese exports and small imports.
- Now set to narrow due to:  Greater Chinese spending overseas on tourism and other services.
-  Increased domestic demand resulting in higher imports.
- China has huge foreign currency reserves ($3.9tn) due to current account surplus (exports > imports) and over the last decade approx 30% of it has been held in US Treasury bonds.
- China demand for US Treasury bonds keeps US interest rates low and hence helps US growth (low interest rates are good for growth).
- Due to narrowing China current account surplus + geopolitical reasons, China's strategy is now to buy fewer US bonds and instead spend on supporting domestic demand and developing overseas markets.
- China demand for US Treasury bonds waning (cornerstone for global economy for > 10 yrs).
- Strategic (redeployment of surplus China savings into capital investment around the world) and fundamental (China current account surplus shrinking).
- Geopolitical promotion of renminbi as international currency (weaning China off US$ dependency).
- Prompted by: Global equity sell-off + weaker USD + change in India import rules.
- Big buying from retail investors in US + India.
- Investors have moved to bullish (hence closing off gold shorts) + India demand after govt. ends restrictions on gold imports.
- Rolling power cuts (called "load shedding") by ESKOM (the state utility), due to years of under-investment in infrastructure.
- December cuts due to difficulty in sourcing diesel for back-up turbines & poor coal quality resulting in lower output.
- Energy-intensive mining and manufacturing sectors (20% of GDP) hit hard and ESKOM upgrades delayed by strikes and budget over-runs.