Sunday, February 10, 2013

Venezuelan Devaluation Sparks Panic

This is what happens when you print and print money and attempt to fix exchange rates at the same time, eventually the dam bursts. Governments in the end can not keep markets bottled up.

Panic buyers thronged Venezuelan shops over the carnival weekend after the government of Hugo Chávez announced a surprise devaluation, FT reports.


Domestic appliances such as fridges and cookers were in particularly high demand as Venezuelans snapped up goods imported at the now defunct exchange rate of 4.3 bolívars per dollar. From now on they will be imported at 6.3 bolívars per dollar.

Local economists estimate that the “equilibrium” exchange rate, at which foreign currency is no longer relatively cheap for Venezuelans, is about nine bolívars to the dollar.

3 comments:

  1. This will be a good test of whether those wishing a market exchange rate discover the benefits of bitcoin.

    http://bitcoinvenezuela.com/venezuela.php

    Venezuela and Argentina could both give an early preview of the effectiveness of price and currency controls in the modern era.

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  2. I have family in Venezuela and they report the black market exchange for Bolivars to dollars is 18 to 1. There is a thriving market for dollars. That was before this latest round of counter fitting. Dollars are transferred between bank accounts here and bolivars are given in Venezuela at the black market rate.

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  3. The real kiss of death will be if Krugman says they are doing the right thing.

    ReplyDelete