Posted on 01/09/2010 7:34:41 PM PST by HogsBreath
President Hugo Chavez' decision to devalue Venezuela's currency for the first time in nearly five years aims to stretch his government's oil earnings further and counter a recession by increasing spending.
The devaluation of the bolivar lessens a wide gap with the black-market exchange rate for dollars and will unavoidably push inflation — already the highest in Latin America at 25 percent — to even higher levels.
Opposition leaders on Saturday called the devaluation a blow to Venezuelans that will make them pay through inflation while letting the government instantly convert its oil earnings into more cash domestically to boost spending ahead of congressional elections.
"Venezuelans' standard of living has been devalued," said Antonio Ledezma, Caracas' opposition mayor.
Finance Minister Ali Rodriguez said the devaluation announced by Chavez on Friday night should add to inflation by 3 percent to 5 percent this year. Some economists predict a much bigger leap.
(Excerpt) Read more at abcnews.go.com ...
Devaluing a currency faster than even Ben "Green Ink" Bernanke.
Socialism is so Cool. Man it works every time. Why don’t we all just see the light? Obama is going to take us to Utopia on Earth.
Maybe some other country will buy up that country’s securities???
Sounds familiar?
I remember a dual or “preferential” foreign exchange rate system in Venezuela back in the ‘eighties.
We used to call the currency the “guano” back then.
APObama strikes again!
Gee! This worked so well for “Dear Leader” in NoKo...
Someone tell me we are any better off with the US Dollar in the very near future with the debt at over 1
$12 Trillion and increasing almost every minute??
The Treasury has to borrow $168 Billion Dollars (excluding debt service) just next week, so how much further above Venezuela are we?? In fact we are heading hell-bent to Zimbabwe status right now...
As usual it was an irresponsible and perverse performance by Hugo Chavez. The President that likes to go on nationwide TV to announce the most trivial things, from phantom death threats against him to handing out fake loans to people, did not dare to do the same to announce a dramatic devaluation which is a consequence of his own irresponsible policies. But he even dared to call Venezuela’s foreign exchange controls “efficient”, despite the fact that he was taking this dramatic step and that the exchange controls have been not only the biggest corruption racket in the country’s history, but also represented a perverse subsidy to the rich, via preferential rates for travel and the import of some luxury goods....
...you can not increase monetary liquidity (M2) by a factor of 5, while maintaining international reserves constants and expect inflation to go down or the exchange rate to be sustainable at current levels. The laws of economics can be stretched but not violated (or raped really).
Given that inflation was already going to top 30% in 2010 and if we assume that the import component of goods consumed in Venezuela is almost at 50%, then one would expect an additional 30% spike on inflation from the announced devaluation. Not a pretty picture....
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At least the Yanqui Dollar is worth more someplace.
“Oil accounts for about half the government budget, but that income has been squeezed by lower world oil prices and declines in output in the last year.”
That’s funny; everywhere else in the world, the price up oil is up. And do you think maybe the oil production has gone down, because the industry was nationalized and private-sector owners thrown out of the country??
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