Tuesday, September 30, 2014

Venezuela breaks the buck

Call it the uno percent solution;
The bolívar rate of 100.7 per US dollar on the black market — worth less than a single penny — highlights rampant inflation, given that one year ago it was 40 Bs. That comes after the Chavista regime eliminated three zeros from the currency in 2008 and called it the bolívar fuerte (strong), a label that did not stick for very long. It also places great pressure on President Nicolás Maduro, since the prime official rate of 6.3 Bs. overstates the underlying market value, as expressed on the street, by a factor of 16.
It's Zimbabwe...with oil.

1 comment:

  1. It is successful quantitative easing. The expansion of the money supply is only a nominal tweak to their economy. The unsticking of wage rates and the desire to spend now before the bolivar becomes worth even less will push their economy into a period of dramatic growth and prosperity.

    After a short period of, uh, adjustment.