Skip to comments.Devaluation Nations: Argentina and Venezuela Suffer Ravages of Inflation
Posted on 02/09/2013 10:20:42 AM PST by whitedog57
All eyes are on the Federal Reserve and their seemingly endless quantitative easing. For the most part, the massive liquidity surge has not manifested itself into South American-like inflation since our banks have most of the excess reserves still trapped in the banking system. Except for student loans, of course. This has resulted in a crashing of the M1 Money Multiplier and the M2 Money Velocity ratios signifying that the enormous increase in money supply in recent years isnt translating into economic growth or lending.
Depending on your measurement of inflation, the US has been spared South American inflation. Or not.
But The Fed are pikers next to Argentina and Venezuela in creating rampant inflation.
This small news item caught my eye yesterday:
Feb. 8 (Bloomberg) Devalues bolivar to 6.3 per dollar from 4.3
Yikes! That is a HUGE devaluation of the Bolivar. It hasnt even shown up on the Bolivars currency chart yet. I added the devaluation in red.
Notice that the Bolivar devaluation started in earnest in 1999 when Hugo Chavez became El Presidente.
A spending spree (sound familiar) that almost tripled the fiscal deficit last year helped Chavez, 58, win a third six-year term. The devaluation can help narrow the budget deficit by increasing the amount of bolivars the government receives from oil exports. Yet the move also threatens to accelerate annual inflation that reached 22 percent in January.
Former opposition presidential candidate Henrique Capriles Radonski said the measure mocked Venezuelans and he criticized the government for attempting to hide the impact of the devaluation by announcing it the day before the annual carnival holidays.
Oil is at $106 and they have to devalue! Capriles, who lost to Chavez by 11 percentage points in elections last October, said in a message posted on his Twitter account. They spent the money in campaign, corruption, presents abroad! Lying government!
Hey Barack, lets both run up staggering budget deficits, borrow outrageous amounts of money, then devalue our currencies. Hugo, that sounds like a plan, Amigo!
Argentina, a country that has already defaulted on its sovereign debt in 2001, was recently on the verge on yet another default in December 2012.
Argentinas currency has likewise been devalued over the years after Argentina moved from a fixed exchange rate in 2002 (following their default).
Argentinas inflation rate its over 10% (officially), but that hasnt stopped them from undertaking draconian ways of dealing with inflation for consumers.
First, Argentina enacted a price freeze to break 30 percent annual inflation spiral. [Wait a minute, Argentina's official YoY inflation rate is 10%!].
Second, Argentina has banned advertising for supermarkets and electronic retailers. So, stopping ads will curb inflation????
Say, how about U.S.-style drone strikes instead on the pesky retailers? Or rioters?
no inflation? I paid $4.00/gal this morning for gas when just 4 years ago it was $1.80/gal
looks like more then 100% increase in 4 years... annual inflation around 25% ?
No, gasoline (and food, for that matter) are not counted in the CPI, as they are WAY TOO VOLATILE.
So celebrate our “low” inflation...at least if you don’t buy gasoline or eat.
gold has also gone from about $700/oz to $1600/oz an increase of 128% ... or about 32% per year.
other items would have increased similarly, if govt subsidies weren’t offsetting the increase
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