The Choice For Venezuela Is Stark: Either Print Money and Fail or Establish Sound Money (USD to the Rescue?)

by Charles Hugh Smith
Of Two Minds

There are a number of reasons why adopting the USD is a natural choice for any Venezuelan government that is not bent on self-destruction.

Let’s start our analysis of Venezuela’s economic plight with two exhibits: Exhibit A is a chart of the market (free) exchange rate of the Venezuelan Bolivar and the U.S. dollar (USD), and Exhibit B is a chart of the USD.

Back in 2003, when the writing was already on the wall, one USD bought 1.6 Bolivars. Today, it takes over 1,000 Bolivars to buy one U.S. dollar. Though the official rate is 10 Bolivars to one USD for subsidized goods and 416 to the USD for everything else, the street exchange rate is 1,050 Bolivars to the dollar.

(The official exchange rate has multiple levels, creating multiple layers of confusion and opportunities for graft/corruption.)

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