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Page added on February 9, 2013
Venezuela Launches First Nuke In Currency Wars, Devalues Currency By 46%
While the rest of the developed world is scrambling here and there, politely prodding its central bankers to destroy their relative currencies, all the while naming said devaluation assorted names, “quantitative easing” being the most popular, here comes Venezuela and shows the banana republics of the developed world what lobbing a nuclear bomb into a currency war knife fight looks like:
- VENEZUELA DEVALUES FROM 4.30 TO 6.30 BOLIVARS
- VENEZUELA NEW CURRENCY BODY TO MANAGE DOLLAR INFLOWS
- CARACAS CONSUMER PRICES ROSE 3.3% IN JAN.
And that, ladies and gents of Caracas, is how you just lost 46% of your purchasing power, unless of course your fiat was in gold and silver, which just jumped by about 46%. And, in case there is confusion, this is in process, and coming soon to every “developed world” banana republic near you.
and just as we (and Kyle Bass) have warned – this is what happens to the nominal price of a stock market as currency wars escalate… how do those US investors who flooded Venezuela with cash feel now? bringing back those VEF gains is going to hurt…
The chart above is a free lesson in nominal vs real: the hardest lesson for some 99.9% of the world’s population to grasp. One person who certainly knows how to devalue a currency in real terms FDR, whose 70% devaluation of the USD courtesy of executive order 6102, is merely an appetizer of what is about to be unleashed upon the US.
From Bloomberg:
Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy.
The government will weaken the exchange rate by 32 percent to 6.3 bolivars per dollar, Finance Minister Jorge Giordani told reporters today in Caracas. The government will keep the currency at 4.3 per dollar for some products, he said.
A spending spree that almost tripled the government’s fiscal deficit last year helped Chavez win his third term. Chavez ordered the devaluation from Cuba, where he is recovering from cancer surgery, Giordani said. Venezuela’s fiscal deficit widened to 11 percent of gross domestic product last year from 4 percent in 2011, according to Moody’s Investors Service.
The move can help narrow the budget deficit by increasing the amount of bolivars the government gets from taxes on oil exports. While a weaker currency may fuel annual inflation of 22 percent, it may ease shortages of goods ranging from toilet papers to cars.
In the black market, the bolivar is trading at 18.4 per dollar, according to Lechuga Verde, a website that tracks the rate. Venezuelans use the unregulated credit market because the central bank doesn’t supply enough dollar at the official rates to meet demand.
7 Comments on "Venezuela Launches First Nuke In Currency Wars, Devalues Currency By 46%"
Plantagenet on Sat, 9th Feb 2013 4:26 am
How does anyone actually know that this what Hugo Chavez wants? He never talks in public and he never appears in public—he’s become the Howard Hughes of socialism.
Rusty Baker on Sat, 9th Feb 2013 4:28 am
LOL. When will people finally understand that communism and socialism don’t work. The Soviet Union failed and now the USA is in decline because of Comrade Obama’s policies. Marxist Hugo Chavez is following the same failed policies that Gorbachev implemented in the USSR. Pretty soon Venezuela is going to end up like the sh*tholes that are North Korea and Cuba: starving and working endlessly to prop up their ruthless dictators. Oh wait, Venezuela is already a sh*thole.
Instead of unlocking their enormous oil reserves in the Orinoco belt and shipping it to America, Venezuela is groveling before the communist environmentalist agenda. I say the USA should just outright invade Venezuela if they don’t want to accept capitalism and democracy. America should stop beating around the bush with coup de tats, like the one back in 2002.
Jimmy on Sat, 9th Feb 2013 9:53 am
Obama is a conservative. Only a Republican zealot or possibly a really misinformed person could see otherwise.
http://www.slate.com/articles/news_and_politics/frame_game/2012/11/obama_the_moderate_republican_what_the_2012_election_should_teach_the_gop.html
Arthur on Sat, 9th Feb 2013 10:10 am
Capitalism only works for nations that are able to compete on world markets, not for Venezuela, that would be taken over by foreign corporate interests in no time. I think that on the whole, Chavez, like Khadaffi, are/were positive forces for their own people.
Arthur on Sat, 9th Feb 2013 10:12 am
Jimmy, tinyurl.com is your friend. Long links distort the ‘reading experience’.
Arthur on Sat, 9th Feb 2013 11:40 am
Correction, distortion only on iOS, not Windows.
BillT on Sat, 9th Feb 2013 11:49 am
Chavez must be doing something right…his people love him and the Us cannot get rid of him. If you are hated by the Empire, then you must be doing something right. There is one small problem with invading Venezuela…money. The Empire is broke. It’s military vets are dying faster by suicide than by enemy fire. China won’t loan the beggar US anymore money. No money, no wars. The Empire is preparing for insurection at home…by the billions of rounds.