Sunday, March 18, 2007

Monetary Instability in Venezuela

From today's NY Times, an article about monetary instability in Venezuela, rising inflation (see graph above) and the resulting price controls, and the introduction of a new currency:

Inflation has been climbing rapidly since January when a sharp decline in the black-market value of the bolívar pushed up prices of imported goods. Since Mr. Chávez moved to nationalize major telephone and electricity companies in January, Venezuelans have rushed to take money out of the country, currency traders say. That exodus has caused the bolívar to weaken by about 20 percent to a level of 4,000 to the dollar on the black market, placing it among the world’s worst performing currencies this year.

First, the authorities will remove three zeroes from the denomination of the currency, the bolívar. Then he said the new bolívar, worth 1,000 old bolívars, would be renamed the “bolívar fuerte,” or strong bolívar. Finally, the central bank said this week that it would reintroduce a 12.5-cent coin, a symbol of Venezuela’s prosperity in the 1960s and 1970s before freewheeling oil booms ended in abrupt devaluations, after three decades out of circulation.

Q: What about if the Venezuelan central bank just stopped printing so much money?

1 Comments:

At 3/18/2007 6:10 PM, Anonymous Anonymous said...

Silly Venezuela, why can't they follow advice from sensible American economists like Mark J. Perry? I mean, just look at how successful they've been in his home town of Flint, MI.

Come on Mr Chavez! If you participate in our little scheme and give the nice man with the nukes your oil, someday all of this could be yours! *proudly gestures towards the Rust Belt*

 

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