I guess after eight years in office President Chavez has yet to understand what the Venezuelan Central Bank does or none of those that surround has been able to or tried to explain it to him. And it shows, given his proposal to move “excess international reserves” to be spent and now his plan to remove the independence of the Venezuelan Central Bank.
Yesterday, during his Sunday variety show Chavez said:
“The independence of the Venezuelan Central Bank is over …private banks have to use their own resources, the Central Bank should be aiding the poor and not the bourgeois”
Maybe some intelligent banker should pick up on this and ask Chavez to let private banks issue their own currency the way it used to be in Venezuela a few decades ago. Most banks not only had their own currencies, but they were backed by the gold in their vaults. Then one day the Government forbid this and even tried to take over the gold reserves, some banks accepted it, others sued and actually won the suit and their gold was returned.
So, if private banks started issuing their own currency and given Chavez’ absolute ignorance about what the Central Bank does, in a short time, private bank’s currencies would become premium and the current Bolivar and the upcoming Bolivar fuerte would slide down. It would make for an interesting competition between the private sector and the reckless economic ideas of XXIst. Century Socialism. Unfortunately, Chavez will debase the only currency we have in a very short time due to his ignorance on monetary matters.
In fact, it is already happening. While Minister Cabezas continues to say that the parallel swap market is largely irrelevant, the Government has sold over US$ 10 billion in the first eight months of the year at an exchange rate above Bs. 3,000 per dollar and the recently postponed Bono del Sur 3 had an implied rate of Bs. 3,800 per US$ even before its components began going down in price. Thus, even if the Government does not want to devalue, it is already selling US$ at rates at least 50% above the official one.
But look at the bright side. If the Central Bank is no longer independent, then the “small” discrepancy of US$ 6.499 billion between what the Central Bank says is the country’s external debt (US$ 32.38 billion)* and what the Ministry of Finance says it is (US$ 25.85 billion) can be cleared up by eliminating one. Given the difference, I am sure that just like in PDVSA’s numbers the most favorable (lower) number will prevail.
*Go to http://www.bcv.org.ve/c2/indicadores.asp, once there select Balanza de Pagos y Otros Indicadores del Sector Externo. Within that, select Deuda Externa. Saldos a Valor Nominal por sectores e instrumentos. It will open an Excel spreadsheet with a line saying “Deuda Publica” and you will see that in the second quarter, public debt was US$ 32.38 billion
The Devil's Excrement 
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