Venezula's currency plummets in value

According to the International Herald Tribune. An official devaluation is expected despite government denials.

What caused this?

Does it discredit Chavez’ economic policies and his “socialism for the 21st Century” (discussed here) in general?

What does it bode for Chavez’ ambition to put together an alternative international association in Latin America?

I wouldn’t swear that it’s unintentional. China has for years kept its currency weak in order to attract foreign factories.

Attracting foreign investors does not seem to be high on Chavez’ list of priorities; he has driven several major ones out of the country.

Maybe those were ones that wouldn’t play ball his way, and he’s now in a position to invite new investment under the conditions he wants. Companies looking to build refineries and whatnot won’t like it, but with a low Venezuelan currency, they might think it worthwhile.

This is an intentional move on Venezuela’s part to allow its currency to float. As soon as the fixed exchange rate was removed, the currency plummeted in value.

It plummeted in value because the international community is devaluing Venezuelan investment. There has been massive capital flight due to Chavez’s policies - you might remember that I predicted exactly that many months ago as we first started talking about him. Venezuela’s economy has been propped up by high oil revenues, but its fundamentals suck because of Chavez.

Well, that, and his tendency to nationalize businesses mean people don’t really want to invest in Venezuela at the moment. They might have all their effort ‘stolen’. And what kind of a investment would that be?

Chavez has also been funding his ‘revolution’ with borrowed money, and Venezuela has an 8 billion dollar deficit, which is a pretty large amount for a country with its GDP. As a result, Chavez has to cut spending by 7% next year.

His policies have also triggered an inflationary cycle, which is going to primarily hurt the ‘worker class’, the very people he claims to want to support.

It’s going to get worse. And he’ll blame it on the evil U.S., multi-nationals, capitalists of all stripes, and pretty much every other scapegoat in the International Socialist playbook.

If I’m not mistaken inflation is lower now than when Chavez first become President. Also inflation was over 100% shortly before he was elected, when Venezuela was being run by Chávez opponents. Correct me if I’m wrong.

According to Wikipedia:

Unfortunately, it does not mention what the rate of inflation was just before Chavez took office in 1998.

It was 103.2% in 1996 and down to 30% in 1998. Also it should be noted that while Chavez opponents were running the economy the bolivar devalued over 1100% percent between 1990 and 1998 from 50.58 to 564.50.

This kind of information is conveniently omitted in the Western press whose half truths are used to portray Chávez as the boogeyman.

Borrowed from whom? I thought he had funded it mostly with oil revenue. (And why do you put “revolution” in quotes? Revolutions do not, by definition, have to be violent or unconstitutional – do they?)

I thought we called that “the re-distribution of wealth”.

That would probably be because it’s just so darn easy to call someone a boogeyman when they are acting just like a boogeyman.

Beauty is in the eyes of the beholder. Do you think Bush is a boogeyman?

Same thing. When the President does it, it is not a crime. Point is, if it’s your weath that might be redistributed, are you especially interested in investing it?

According to Dow Jones’ MarketWatch, Venezuela is taking the brunt of a “global credit crunch.”

The story says it’s also hurting Russia.

BrainGlutton, Iknow it must be so much work opening scores of GD treads, even if it only involves cutting and pasteing, but you’re not even doing that now.

:dubious: I beg your pardon, I’m doing considerably more than that now.

Did you read the thread I linked to?