South American Woes

Both Venezuela (socialist worker’s paradise) and Argentina (nationalist socialist paradise) have a problem with their foreign exchange reserves. In both cases it stems from trying to keep up the pretense that their currencies are worth more than they really are. The central banks of both countries are (and have been for some time) printing money like crazy, and inflation is galloping with gay abandon. Their governments publish misleading economic statistics, that inter alia attempt to hide the true extent of the monetary debasement – in short, their inflation statistics are even more bogus than those of other governments (we are leaving aside here  that the mythical ‘general price level’ cannot really be measured anyway).

Since they have maintained artificial exchange rates – coupled with capital controls, price controls and other coercive and self-defeating economic policies – people have of course felt it necessary to get their money out any way they can. This includes making use of every loophole that presents itself, so that e.g. in Venezuela, so-called ‘dollar tourism’ has developed, whereby citizens travel abroad for the express purpose of using their credit cards to withdraw the allowed limit in dollars at the official exchange rate (and buy some toilet paper while they have a chance to grab a few rolls).

Now the governments of both Venezuela and Argentina have reacted – the former by introducing a ‘second bolivar exchange rate’ for certain types of exchanges, the latter by stopping to defend the peso’s value in the markets by means of central bank interventions.

….much more HERE