Ok, ok, I admit it. I have a self-centered sense of devaluation. When Chavez devalues I think of my loss, not that of the currency. What can I say, I live here. When Huguito says that it is going to cost me twice as much to travel (Confirmed by Jorge “No clue” Giordani) I erroneously think this is going to cost me double, not the poor Bolivar’s value has been cut by 50%. This is not like inflation, 100% inflation is 100% inflation, everything cost double, the Bolivar’ value has been cut in half.
The funny thing is that in Chavista doublespeak land, there was no devaluation, the price of the dollar was changed. I have news aporreos: The devaluation makes the Government look better, the devaluation of the Bolivar was from 2.15 to 2.6 per dollar, the Bolivar is worth 17.3 % less, but a dollar will cost 20.9% more Bolivars. The Government wants to use the best of both worlds, it says it changed the price, but it only devalued by 17.3%.
So, I apologize, the devaluation was not 63.7%, but 34%, but I will certainly need 63.7% more Bolivars to buy anything. Inflation in imported items will be 63.7%. When salaries are increased, that is also the number that needs to be used. If I travel, I need double the money. Bolivar Fuerte loses 50%, I get screwed 100%.
That is after all, rule number one of Economics, we are all self-centered first. I thought of me, not of the Bolivar Fuerte, which is already weak.
Apologies, but can you lend me more than I asked for?
The Devil's Excrement 
January 12, 2010 at 1:44 pm
Firepigette: Distortions cannot be appreciated, only assimilated.
January 10, 2010 at 9:34 pm
In 1984 the exchange rate was Bs. 4.30 per US$. Now it is Bs. 4,300.00. That is a devaluation rate of 30.4% per annum. But in that time the US$ has also lost purchasing power. Together our inflation is closer to 35 or 40% per annum over the past quarter century.
Each year you lose one third of your savings, so why save? Spend it now while you can still buy something. Most right thinking people simply send their money to safe havens to prevent the hemorrhage. But that also means that business and jobs are scarce so the poor get poorer. To stop the poor from starving and rioting, the government has to subsidize everybody. Mercal, of course, was a total failure. I wonder if PDVAL is doing any better. Probably not.
I’m afraid the goose that used to lay golden eggs is now dead.
January 10, 2010 at 7:07 pm
Miguel, Agreed.Easy oil, easy anything, is never fully appreciated.
January 10, 2010 at 7:03 pm
Firepigete: That is precisely the Devil’ Excrement, easy oil money allows all those distortions, like free university education, lifetime pensions adjusted to the position you held and subsidies and perks for the rich.
January 10, 2010 at 2:19 pm
I’ve taken advantage of the cheap flights quite often too…even now that I’m back in Europe for good I still have an open return ticket to Venezuela where I can simply pay 100€ to change the date instead of having to pay 800€ for a new one.
Now I noticed Chavez just assured the nation that prices will not double tomorrow, nothing will cost more than last week, including airfares. His plan to achieve that apparently relies on the GN, among others, which goes to show it was given about as much careful consideration as the other economic measures. So he’s saying international flights, which until this weekend were calculated at the official 2.15 exchange rate, and from now on fall in the 4.30 category, will not go up even though this will mean a 50% loss for the airlines??
Whew…I was getting worried for a bit there.
Anyway, I understand the threat was primarily to Venezuelan businesses and I think it’s a GREAT way to stimulate national production- first, double the price of most imported raw materials. Then tell the business owners they can not increase the prices of finished products to cover the new costs. Or the national guard will intervene, take their business and give it to the workers?? A measure that has already done wonders for the productivity of most nationalized companies?? Amazing…
I am really glad I decided to go back home, even though I’m freezing my a** off right now. I just hope Venezuela will still be worth visiting when vacations come around.
January 10, 2010 at 12:46 pm
Kepler, wrong. One is in the Pico Bolívar.
January 10, 2010 at 11:54 am
Miguel,
Thanks.
I wonder why few oppo leaders have said anything about this devaluation thing and I imagine: because most are on the beach.
ot:
I see mico mandante is now talking from Tinaco. He is really coverirng every single municipality of Venezuela…and spending people’s money in his permanent election campaign…so disgusting!
January 10, 2010 at 9:47 am
When I consider that most of my hard working friends here in the USA cannot travel abroad EVER, due to too many financial burdens and obligations, it is hard for me to muster any sympathy for my Venezuelan family and friends who work far less and have spent far more on luxuries that are not truly affordable to them.
However, I would take the drudgery of less luxury any day to the instability of Venezuela.This is one of the many reasons I see Venezuelans as naive:The lack of vision and priority.
All Individuals in Venezuela need to realize that every time they take advantage of one of Chavez’s new plans…they are contributing( even if just a little bit) to Chavez’s power and to the downfall of the country.
January 10, 2010 at 8:22 am
Kepler, I agree fully, see my first paragraph in teh prveious post.
January 10, 2010 at 8:19 am
I wonder how this affects pdvsa debt? Will pdvsa be able to pay off their BF’s debt at half price? Will the nationalized oil services companies finally be compensated but at half value?
January 10, 2010 at 7:38 am
Do your newspapers state that you are now officially in hyperinflation?
Does Chavez confirm that?
Kindest regards
Nicolaas Smith
http://blogs.fin24.com/realvalueaccounting
realvalueaccounting@yahoo.com
January 10, 2010 at 7:17 am
Salaries, wages, rentals, pensions, all accounted items in the profit and loss account are also constant real value non-monetary items.
Your Historical Cost accountants will also unknowingly destroy their real values with the Historical Cost Accounting model which includes their very destructive stable measuring unit assumption – one of the three very popular accounting fallacies authorized and approved by the International Accounting Standards Board – when they do not value these items in units of constant purchasing power by applying THE PARALLEL rate in Venezuela – NOT the Consumer Price Index as required officially by IAS 29.
Kindest regards
Nicolaas Smith
http://blogs.fin24.com/realvalueaccounting
realvalueaccounting@yahoo.com
January 10, 2010 at 7:07 am
“Inflation is always and everywhere a monetary phenomenon.” Milton Friedman
Hyperinflation is exactly the same: it is only a monetary phenomenon. Hyperinflation can ONLY destroy the real value of the Bolivar and other monetary items in ONLY your monetary economy – nothing else.
Hyperinflation has NO effect and NEVER EVER will have any effect on one single non-monetary item in your economy.
Your Historical Cost accountants are unknowingly, unnecessarily and unintentionally destroying the real values of all constant real value non-monetary items (issued share capital, retained profits, capital reserves, share premium accounts, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all othe non-monetary payables, all other non-monetary receivables, etc in your companies in your non-monetary or real economy because they implement the 700 year old generally accepted traditional real value destroying Historical Cost Accounting model as authorized by the International Accounting Standards Board.
The IASB also authorized in the exact same statement at the exact same time in 1989 the solution to this problem.
Kindest regards,
Nicolaas Smith
http://blogs.fin24.com/realvalueaccounting
realvalueaccounting@yahoo.com
January 10, 2010 at 6:41 am
Venezuela is now officially in hyperinflation. I am sure everybody in your country must know that by now. Cumulative inflation over the last 3 years has now already reached 105%. 100% cumulative inflation over three years is defined as hyperinflation by the International Accounting Standards Board.
All your companies listed on your stock exchange and maybe other too depending on your laws, will now have to submit their 2009 year end accounting in terms of IAS 29 Financial Reporting in Hyperinflationary Economies.
That will make absolutely no difference to anything in your country.
Kindest regards,
Nicolaas Smith
http://blogs.fin24.com/realvalueaccounting
realvalueaccounting@yahoo.com
January 10, 2010 at 6:35 am
My first comment disappeared. This is a test to see what happens.
January 10, 2010 at 6:31 am
Venezuela is now officially in hyperinflation. I am sure everybody in Venezuela must know that. The three year cumulative inflation rate is now 105.0%. That is hyperinflation.
All your companies or at least all the ones listed on your stock exchange will now have to implement International Accounting Standard IAS 29 Financial Reporting In Hyperinflationary Economies.
That will make absolutely no difference to the companies or to your economy.
I can tell you what to do to remove hyperinflation from the non-monetary items side of any company and to stabilize your real or non-monetary economy. Your central bank and government have to solve the hyperinflation in your monetary unit problem.
Nicolaas Smith
realvalueaccounting@yahoo.com
http://blogs.fin24.com/realvalueaccounting
January 10, 2010 at 5:59 am
Miguel, I am sorry for you and my sisters and brothers who can’t travel so easily, but come on: Venezuelans should have a higher purchasing power abroad only when they produce what is worth it. Right now those nice travels were bought indirectly from taking away those resources from the poor.
You know better than most we have had a cargo cult in Venezuela for almost a century.
January 10, 2010 at 12:39 am
Javier, thanks for sharing that. I knew that the 4.3 exchange rate rang a bell, but I couldn’t put my finger on it.
So now Chavez is setting economic policy simply by recalling previously favored exchange rates. Interesting.
January 9, 2010 at 10:20 pm
To give you an idea of what a deal that was, Montreal-Paris that can cost as low as
750$ was, last time I checked, 3500$ first class….
January 9, 2010 at 9:13 pm
Under my devaluation conspiracy theory, the devaluation was really 100 % , from 2.15 to 4.30 and it’s not by chance. Chavez wanted his 4.30 since many years ago and his planners did it in steps, first taking out three zeros and going to 2.15 and because “ta barato dame dos” ( it’s cheap so gimme two ” ) means the bolivar was overvalued by two, it’s value was then cut in half by a 100 % devaluation.
January 9, 2010 at 8:10 pm
I went to Beijing First Class in 2008, it cost me in dollars $ 2,000 round trip when calculated at the swap rate at the time. For such a long flight, it was well worth it.
January 9, 2010 at 8:05 pm
I recently went to the airport with someone who was leaving for Venezuela. It was not a direct flight but there were some “openly venezuelans” on line…the first class line: They were all travelling first class.
I have never been able to afford a first class ticket, so I was quite impressed that every single Venezuela in the line was travelling first class. I was later told that first class tickets were quite a deal when bought in Caracas….
I was that is part of the distortions of the exchange control that will not be available any longer.