From the Boston Globe.
Venezuela’s government announced Friday that it is devaluing the country’s currency, a long-anticipated change expected to push up prices in the heavily import-reliant economy.
Officials said the fixed exchange rate is changing from 4.30 bolivars to the dollar to 6.30 bolivars to the dollar.
So, if you are earning and saving Bolivars, you just got a massive cut to your earnings and savings.
By boosting the bolivar value of Venezuela’s dollar-denominated oil sales, the change is expected to help ease a difficult budget outlook for the government, which has turned increasingly to borrowing to meet its spending obligations.
[...]Economist Jose Guerra told The Associated Press that given the devaluation, he predicts inflation of more than 25 percent this year.
The announcement of the devaluation came after the country’s Central Bank said annual inflation rose to 22.2 percent in January, up from 20.1 percent at the end of 2012.
The oil-exporting country, a member of OPEC, has consistently had Latin America’s highest officially acknowledged inflation rates in recent years. Spiraling prices have come amid worsening shortages of some foods.
[...]It was the fifth time that Chavez’s government has devalued the currency since establishing the currency exchange controls a decade ago in an attempt to combat capital flight.
[...]The government’s announcement drew strong criticism from opposition leader Henrique Capriles, who said that the government’s heavy spending was to blame for the situation and that officials were trying to slip the change past the public at the start of a long holiday weekend.
The opposition party explains why this is happening:
‘They spent the money on campaigning, corruption, gifts abroad!’’ Capriles said in one of several messages on his Twitter account. Capriles was defeated by Chavez in an October presidential vote that was preceded by a burst of heavy government spending.
Who else do we know who likes to spend money and borrow from future generations? Someone whose economic policies are similar to Chavez? Who could it be? Increasing inflation is a very attractive policy to socialists who want to spend more money without raising taxes. It’s a hidden tax on those who try earn more and save their money. It punishes independence and makes dependence on the government inevitable.
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