• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

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:

  • 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.

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Fri, 02/08/2013 - 16:51 | 3227077 Banksters
Banksters's picture

Fiat= By decree

 

When I tell people they are debt slaves, it isn't an insult, it's a reminder.   

Fri, 02/08/2013 - 18:20 | 3227247 kengland
kengland's picture

Thanks for keeping us informed TD! Keep up the good work. Never knew a country with a GDP the size of NJ was so important on the global economic stage. Nailed it!

Fri, 02/08/2013 - 19:02 | 3227464 Panafrican Funk...
Panafrican Funktron Robot's picture

Leverage kinda matters.  Ergo why everyone is so fucking terrified of a Greek (or even Cypriot) default.  

Sat, 02/09/2013 - 14:53 | 3228962 mightycluck
mightycluck's picture

Venezuela is only following the US/Krugman model. Massive spending (to get re-elected), massive debt and chronic devaluation (in the US we call it QE).

This guys sums it up nicely.

http://confoundedinterest.wordpress.com/2013/02/09/devaluation-nations-a...

Wed, 02/13/2013 - 16:14 | 3240988 DESMO_RR
DESMO_RR's picture

Gold priced in Bolivar up 34% overnight! GOT GOLD!

Fri, 02/08/2013 - 16:35 | 3227007 nasdaq99
nasdaq99's picture

PG, CL, CLX, KMB suddenly gettin g hit.  must be the reason.

Fri, 02/08/2013 - 16:38 | 3227015 FL_Conservative
FL_Conservative's picture

Given the inability of elected officials to EVER do the right thing before passing zero barrier, I see massive printing as the only way out of this hole for the US.  Once the Fed has bought ALL available treasuries, the Treasury can authorize a 50-100% increase in the money supply to retire the Treasuries owned by the Fed and provide capital to operate with from that point on.  Any holders of cash will be vaporized.  But there is no other answer given the cluster fuck known as the US Gubmint.

Fri, 02/08/2013 - 16:56 | 3227111 Seize Mars
Seize Mars's picture

FL

I gave you +1 for being thoughtful. But unfortunately you have it all wrong.

"Massive printing" is not a solution to anything. It's the problem itself. The government being "unable" to do stuff is not the problem. They won't "do the right thing" because that's not their job.

When you say "...but there is no other answer given the US gubmint" you are implying that somehow they actually want an answer. They don't want an answer. The goal here is to collect interest from Americans. They want to keep that scam going for as long as possible. Absent that, they want total domination over...everything.

You DO NOT want hyperinflation (like Chavez' devaluation) because it WILL NOT solve any problems. It will cause widespread poverty. (We are already on our way there.)

You get a certain clarity when you realize this thing (fiat money) is supposed to hurt you. That's what it was built for.

 

Fri, 02/08/2013 - 18:38 | 3227412 Better_late_tha...
Better_late_than_never's picture

If you go under 50, this bus will explode.

 

Fri, 02/08/2013 - 18:41 | 3227417 Manthong
Manthong's picture

“They want to keep that scam going for as long as possible. Absent that, they want total domination over...everything.”

 “You get a certain clarity when you realize this thing (fiat money) is supposed to hurt you. That's what it was built for.”

Well, those two sentences are among the best and most incisive I have had the pleasure of reading here.

Fri, 02/08/2013 - 21:16 | 3227816 disabledvet
disabledvet's picture

Seize Mars is always good. still..."managing from above" is always a game of Chance. the current system shows "workability." that doesn't mean it's working tho.

Fri, 02/08/2013 - 22:29 | 3227420 FL_Conservative
FL_Conservative's picture

Mars, let me be clear: I don't think for a second that printing a massive amount of money is the "right" answer. Nor do I "want" hyperinflation. But I guarantee that will be the ONLY answer they will come up with to stave off a total debt collapse, I say that because they're incapable of making appropriate choices within the necessary timeframes.  IMO, elected officials are incapable of taking proper action because their focus is on a political career and the financial benefit it provides them and NOT what is in the best interest of the country.  Hence, a conflict of interest that is never resolved.  The reason they "don't want an answer" is because it has career-limiting implications, which runs contrary to their greedy self-interest. They no more want total domination than they want total freedom, because both necessitate taking responsibility for others' or one's own actions. The control that they seek through government is simply the means to the end, which is financial enrichment through political quid pro quo. In the end, the only way to protect oneself is to own real money and real assets.  Again, in that case, fiat is just a means to that end.

Fri, 02/08/2013 - 23:17 | 3228096 disabledvet
disabledvet's picture

we've already had out debt collapse. we only have a few healthy banks left..."and those are lending but we will MAKE them!" really? hmmmm. you should follow the ups and downs of North Dakota real estate...not Florida real estate. that's what backs all of Florida and North Dakota's DEBT...and that's what "creates the bank that decides whether or not to lend." if those land prices start TRULY cratering...

Fri, 02/08/2013 - 23:18 | 3228100 Seize Mars
Seize Mars's picture

Fair enough.

Fri, 02/08/2013 - 18:42 | 3227422 Piranhanoia
Piranhanoia's picture

And soon our government will be printing the "new" dollar where you can trade in 100 for 1 new one.  Hurt is a given.

Fri, 02/08/2013 - 19:46 | 3227582 bobthehorse
bobthehorse's picture

Chavez is a naughty boy.

He needs to be spanked.

http://www.angrysinner.blogspot.kr/2013/02/saturday.html

Fri, 02/08/2013 - 20:34 | 3227715 Rusty Shorts
Rusty Shorts's picture

hey fucker, stop spamming your dumbass website.

Fri, 02/08/2013 - 20:55 | 3227775 Jendrzejczyk
Jendrzejczyk's picture

Did Devil Bitch open a can of Hormel chili for dinner, or did you have Dr. Pepper and pumpkin pie?

Fri, 02/08/2013 - 22:31 | 3228000 Buck Johnson
Buck Johnson's picture

We get to see what happens to the stockmarket once a currency is devalued, looks familiar doesn't it.

Fri, 02/08/2013 - 22:49 | 3228040 gallistic
gallistic's picture

Hugo Chavez should be hailed as a hero on Zero Hedge.

Venezuela reclaimed her gold from the international banksters- Can I hear a "phyzz, bitchez!"?

Venezuela has over 70% of it's international reserves in gold- "fuck the fiat, bitchez!"

Venezuela now has physical control of it's own gold- "rehypothecated and Corzined, bitchez!"

Venezuela reclaimed sovereign control of the vast gold deposits in the country- "fuck multinationals, bitchez!"

Venezuela has the world's largest PROVEN reserves of oil in the world- "resources, bitchez!"

Venezuela has the second-largest proven reserves of natural gas in the western hemisphere. (see above)

Venezuela has been instrumental in creating CELAC, which has already surpassed the US-dominated OAS, and completely excluded Canada and Uncle Sam- "fuck Obama, bitchez!"

Venezuela got a head start and is way down the track in the global currency devaluation race- "catch me if you can, bitchez!"

 And when it all goes to shit, as it more than likely will, they have plenty of "physical" to get back up.

"Gold, Bitchez!"

 

Fri, 02/08/2013 - 16:27 | 3226957 WALLST8MY8BALL
WALLST8MY8BALL's picture

First to hit bottom is the winner

Fri, 02/08/2013 - 17:09 | 3227163 XitSam
XitSam's picture

First to hit bottom is temorary winner, then everybody loses.

Fri, 02/08/2013 - 18:49 | 3227431 hedgeless_horseman
hedgeless_horseman's picture

 

 

It is no longer a race to the bottom, it is now syncronized diving.  We will all go down together, and every central banker is a winner!

Fri, 02/08/2013 - 20:05 | 3227637 zerozulu
zerozulu's picture

sorry to ask but what happens to countries holding billions of US dollars in debt? Does not their debt go 46% (for example) increase? thanks.

Fri, 02/08/2013 - 23:20 | 3228104 disabledvet
disabledvet's picture

if you want more of our (worthless?) debt you have to produce and export more. if oil isn't safe then i would take a good hard look at cars. "that's the secret to the East Asian boom." if that's coming to an end...

Fri, 02/08/2013 - 16:28 | 3226964 i_fly_me
i_fly_me's picture

INCOMING!!!

Fri, 02/08/2013 - 17:04 | 3227144 francis_sawyer
francis_sawyer's picture

Nuke the [joobuck loving] whales... Show 'em how to do it Hugo!

Fri, 02/08/2013 - 16:29 | 3226966 Rustysilver
Rustysilver's picture

You are going to be lucky if you even have horsemeat.

Fri, 02/08/2013 - 16:54 | 3227097 Unprepared
Unprepared's picture

I tried it once. Horse meat is good. But then again, it was real horse.

Fri, 02/08/2013 - 17:10 | 3227167 Rustysilver
Rustysilver's picture

Was it after the horse lost the race.

Horsemeat is popular in Fance and Central Europe. I have tried.  99% of the people would not be able to tell a difference.

 

Fri, 02/08/2013 - 17:12 | 3227177 redpill
redpill's picture

I guess I'm the 1% afterall.

Fri, 02/08/2013 - 17:49 | 3227290 Anusocracy
Anusocracy's picture

It's the little bits of saddle leather that give it away.

Fri, 02/08/2013 - 18:15 | 3227341 cowdiddly
cowdiddly's picture

Ever wonder why an Arby's roast beef sandwich tastes nothing like you grandmother's  pot roast? Just ignore the slight musky aftertaste and order lots of "horseey" sauce.

Our bought and paid for FDA would never let a test get close to such a crony corporation, they are more cocerned that you may try to drink real milk or raise free range hogs.

Fri, 02/08/2013 - 18:42 | 3227419 Buckaroo Banzai
Buckaroo Banzai's picture

...but "Arby's" stands for:

America's
Roast
Beef
Yes
Sir!

Why would they lie???

Fri, 02/08/2013 - 18:22 | 3227382 Stuntgirl
Stuntgirl's picture

Horse meat can get expensive... And yeah, it's really good.

Fri, 02/08/2013 - 18:42 | 3227421 Ignorance is bliss
Ignorance is bliss's picture

Horse meat is a common choice and specialty of Verona Italy. Don't sneer until you try it. Very nice flavor and very healthy. One of my favorite meats.

Fri, 02/08/2013 - 20:01 | 3227627 Stuntgirl
Stuntgirl's picture

I was not being sarcasic.

Horse meat can get expensive here in Spain as a specialty, too. And I really like it.

Then I feel slightly bad about eating horse, but also slightly pleased that because it's produced by small farms it's not as stuffed with hormones/antibiotics/crap.

Fri, 02/08/2013 - 22:39 | 3228014 Hulk
Hulk's picture

cows are easier to catch, which makes em a lot cheaper...

Fri, 02/08/2013 - 19:43 | 3227575 Wile-E-Coyote
Wile-E-Coyote's picture

I know lets play Russian roulette with a fully automatic

Fri, 02/08/2013 - 21:36 | 3227869 perchprism
perchprism's picture

 

I haven't eaten any horse meat that I was aware of, but I saw a horse fly through a window once.

Fri, 02/08/2013 - 17:17 | 3227201 ziggy59
ziggy59's picture

Id rather eat horsemeat labled as such than pinkslime labled as hamburger, nuggets, etc.

We are eating everything, but the horse, especially the sheit... in the political and financial world

Fri, 02/08/2013 - 17:47 | 3227219 Rustysilver
Rustysilver's picture

delete

Sat, 02/09/2013 - 07:07 | 3228390 Zwelgje
Zwelgje's picture

Only barbarians eat horses.

Fri, 02/08/2013 - 16:29 | 3226969 digitlman
digitlman's picture

wow

Fri, 02/08/2013 - 16:35 | 3226982 NoDebt
NoDebt's picture

You took the word right out of my mouth!

It's currency "shock and awe".  Consider my both shocked and awed.  It's been YEARS since they did anything that.  Like 3 of them.  Look at 2010.

What was that little thing in 2002??  Did they FLOAT their currency for one year and then peg again? 

Fri, 02/08/2013 - 16:32 | 3226987 The Shootist
The Shootist's picture

Holy smokes! I smell cinders and sulfur.

Fri, 02/08/2013 - 16:47 | 3227060 tenpanhandle
tenpanhandle's picture

Ohhh...excuse me; my bad.

Fri, 02/08/2013 - 16:30 | 3226972 Yen Cross
Yen Cross's picture

  This shit makes me sick to my stomach.  This fucking planet isn't that small!

Fri, 02/08/2013 - 16:30 | 3226974 SmallerGovNow2
SmallerGovNow2's picture

So is that now 6.3 Bolisvar to the US dollar?

Fri, 02/08/2013 - 16:35 | 3227006 trav777
trav777's picture

PRAISE CHAVEZ

The left LOVES HIM

Castro too...Spielberg said that meeting Castro was the greatest moment of his life; he was totally awed.

I would never obviously suspect that this particular point of view might, you know, shine through in any of his movies or other work.  People never ever let their biases bleed into their work.

And I wouldn't expect his advocacy to run kinda toward marxism either, nor would I expect his cousins in the secular clan to kinda have marxism as their new-age religion, replacing that old torah shit

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