Venezuela Launches First Nuke In Currency Wars, Devalues Currency By 46%

Tyler Durden's picture

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:


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.

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medium giraffe's picture

Nero and other emperors debased the currency in order to supply a demand for more coins. By debasing the currency it meant that instead of a coin having its own intrinsic value, it was now only representative of the silver or gold it had once contained. By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly (100%) silver denarius was only .02%.

Especially luxurious emperors like Commodus, who marked the end of the period of the five good emperors, depleted the imperial coffers. By the time of his assassination, the Empire had almost no money left.


The Cato Institute (a modern free-market think tank) says that emperors deliberately overtaxed the senatorial (or ruling) class in order to render it powerless. To do this, the emperors needed a powerful set of enforcers -- the imperial guard.

Once the wealthy and powerful were no longer either rich or powerful, the poor had to pay the bills of the state. These bills included the payment of the imperial guard and the military troops at the empire's borders.

The Navigator's picture

Money for nothing and war for free.

That my friend, is a collectable.

And I will repeat it often and frequently.

Would make a great bumper sticker - still, most sheeple wouldn't get it - still more, we have to fight the other sides propaganda, so why not try.

CPL's picture

Awesomesauce.  Well said.

disabledvet's picture

I find it interesting that oil is no longer a source of "hard currency." Hmmm. Shall i invest in Russia?

saints51's picture

Totally agree Trav. You can never go wrong turning in Bernank bucks for gold or silver. If you hold it you own it.

The Shootist's picture

Shut up Trav, our founders made a fine Constitutional Republic. maybe you'd of been a Tory. Times have changed though, Revolution 2 coming to a community near you.

NidStyles's picture

More government is never a good answer to the problem of government.

thisandthat's picture

Otoh, less government is neither a good answer to the problem of an unregulated economy.

Turin Turambar's picture

Yeah, it's so tragic when government coercion is eliminated, and people have the opportunity to make non-coerced, voluntary transactions amongst themselves. /sarc

Marco's picture

A man without his own land has no choice but to pay rent.

Turin Turambar's picture

Ahh, yes. Those poor destitute children living with their parents paying criminally coerced rent. It's a crisis!

Of course, I'm sure you've given serious thought to the fact that it is the State that lays claim to enormous amounts of land which it refuses to make available to anybody not politically connected. Then again, you're probably smart enough to not attempt to homestead property against the will of the sole entity that has a monopoly on force over a given territory. It's so much easier to side with the State and immorally confiscate the just property of peaceful people against their will you big brave man.

Spare me your mock illogical, immoral outrage Einstein.

thisandthat's picture

Tell that to farmers arrassed by Monsanto over gmo tainted crops, for one - that's what you get when you let corporations gain control over economy, but don't let that worry you and keep dreaming about self regulated markets.

Matt's picture

Which economy do you think is under-regulated?

How many hundreds of thousands of pages of rules do you think there should be to create a perfectly regulated economy?

thisandthat's picture

Bureaucracy may as well just hide the lack of actual regulation (which has nothing to do with red tape). Good regulation implies both clear and to the point laws and enforcement of said laws.

Matt's picture

So what you meant to say is a poorly regulated economy, not an underregulated one. This helps differentiate between the rules being inferior or not enforced, versus a lack of numbers of rules.

Dan Conway's picture

I would also add that venezuela was a colony of spain and probably had slaves as well in whatever nation that bolivar founded.  I just think that our founding and see what a miracle it was to create a constitutional republic that lasted for a long time.  My ancesters were not here at the founding but I am thankful that they had a place to escape to that was not venezuela or any other latin american shit hole.  Now I agree that today we live in something that vaguely resembles the constitutional republic at the founding but it is better than living under a series of despotic morons like chavez, castro, etc.  By the way, fuck you bernanke!

Fish Gone Bad's picture

I would also add that Venezuela was a colony of Spain and probably had slaves

The Spanish enslaved the native peoples to work in the mines.  In what became the fine state of California, the Spanish also had the native slaves build the missions so that the fine Catholic religion could flourish.

trav777's picture

eventually, black slaves were brought in as they were qualitatively superior slaves to the injuns, most of whom were even lazier.

there's a reason that words for slave = black, I think it's hebrew as this desert nomad war tribe slave trade has gone on for a VERY long time.

Slaves turned many colonies and islands into economic powerhouses....which were promptly reverted to african norms upon dissolution of slavery.  Incidentally, a lot of people bring up Trinidad as "oh not ALL the darkies have high murder rates."  Might wanna look a little deeper into that...their darkness isn't solely from africans.  Trinidad has a very high percentage of east indian, as do several areas in South america.  Indian<>african.

americanspirit's picture

"most of whom were even lazier". Trav777, do you have any idea how carelessly you reveal yourself? Lazier?Injuns?  As if resisting slavemasters is laziness. You are breathtakingly stupid.

Ignatius's picture


And what racial group do you blame for the devaluation of the dollar in gold  from $20.67 to $35.00 back in '33?

Your constant, blathering racism is a tiresome meme.


trav777's picture

hmm..let's see here...who is commonly associated with banking....

I mean, really don't lob me softballs.  The founders put us on a fucking bimetallism standard; it's written into the fuckin constitution

Fish Gone Bad's picture

There was a reason why the founders only wanted gold and silver coins...  the British were counterfeiting the Continental. 

imbrbing's picture

Gold and silver were around and used for "trading" before the "jews" even came into existance. And to this day is still used.

knukles's picture

That was just the end o' the rainbow left by some little people fuckin' aboot aftah the pubs closed, laddie.


(tee hee hee, them dumb Americans always think them frozen piss bars be gold, silly buggers)

Bandit und Buster's picture

Allow me to shed some light here... to your question Ignatius,

bank guy in Brussels's picture

Re 46% devaluation in Caracas, error in article Tyler has posted

Was actually similar to the FDR devaluation in the USA, just over 40%, not as said above in the article:

« ... FDR, whose 70% devaluation of the USD courtesy of executive order 6102 ... » signed on 5 April 1933

It is funny how often the 1933 Roosevelt devaluation of the dollar is cited wrongly ... one also sees  60% or other erroneous figures as well. Here are the maths:

When it took US $20.67 to buy an ounce of gold, then 1 dollar was worth .0483 ounces of gold

When it took US $35.00 to buy an ounce of gold, then 1 dollar was worth .0285 ounces of gold

So the dollar would buy .0198 ounces less of gold than the earlier quantity of .0483 ounces ... in other words, 40.9% less   (Take 40.9% of 483 and you get 198)

Of course Americans in their 'land of freedom', just having won the right to drink back, after 14 years of religious fanatic insane 'Prohibition' of alcohol, then couldn't buy gold again until the 1970s

trav777's picture

uh, Prohibition was an Amendment as well...the PEOPLE ceded the right to drink before repealing the ban

Fiat Currency's picture

What about the part where he made it illegal to buy gold again until 1975 when the price was over $175 ??

Wanton1's picture

Black history professor, Tony Martin, writes that slave trade was founded and built by Jews.

Uncle Sugar's picture

I thought Trav was anti metal. What gives? Where's the real Trav777??

SheepDog-One's picture

Say 'meanwhile' again motherfucker!

catacl1sm's picture

I double sheepdog-dare ya!

Say What Again's picture

Let me introduce you to the gimp...

redpill's picture

Dear Venezuelans, your government just went medieval on your ass.

dick cheneys ghost's picture

"get your foot off the nigger"

pods's picture

I bet you there are many people down there now who are "pretty fuckin far from okay."


Manthong's picture

But not so much if you are a foreign tourist at a Caracas beach hotel.

Your vacation there just got way cheaper.

Turin Turambar's picture

Caracas is a dump. Isla de Margarita baby! That's the place to go.

FEDbuster's picture

Will the price of gas at Citgo drop 46%?

CPL's picture

Nope.  It will however prompt other OPEC members to force their currencies in a inflationary manner to counter a primary member of the Oil producers that just cut it's own nuts off.

disabledvet's picture

again "Canadian crude goes for sixty bucks a barrel." that is...interestingly..."40% cheaper than what the Americans are paying right now." this is a big deal...amazing story especially for folks like me who think that oil rich nations can simply "print prosperity." now we all know "there's the limit." but again to compare this to the FDR devaluation is beyond ridiculous. where was the inflation that resulted from it? the answer of course is "there wasn't any." the USA can...and still DOES "print steel." combined with steel reinforced poured concrete and simply put "there was no devaluation in '33." there was a the form of "your gold and silver could suddenly buy some very valuable US stuff." but hell...Henry Ford could produce the Model T for 500 bucks...and still make a profit. Wait 'till Ford finds a way to do that with the Ford Taurus.

tarsubil's picture

Have you ever thought about getting one of those things that has little compartments for pills that are labeled for each day of the week?

disabledvet's picture

your gold can become VERY valuable if prices collapse "save for gold." of course land prices could collapse as well...40% sound about right?

CPL's picture

Don't hold your breath on it.  We only get to do that with cheap energy.  Steel is wrought from power otherwise it's just a rock.

The Canadian oil is still over priced.  It's Dirty Oil.  If you've striped an engine in the last five years you'll notice lots of extra goop in them now a days.  The Canadian 'oil' is tar that originally was meant for roads 20 years ago.  Remember when roads were worked on once every five years instead of being repaved every 1 year.  

Over 20 years we've taken a cost venture like road works and forced the costs of the process by 400% because we are now using anything we think we can refine and burn in an engine.  That in a nutshell is peak oil...until folks clue into what the subsitute is and how fast it's being depleted.

BTW doesn't matter where you are from now.  All frogs are in the same pot now and here we are telling the others to jump out of the slowly boiling pot.  Doesn't matter at this point, waste of time and energy.