Posted on 02/08/2013 3:44:09 PM PST by Orange1998
While the rest of the developed world is scrambling here and there, politely prodding its central bankers to destroy their relative currencies, all the while naming said devaluation assorted names, "quantitative easing" being the most popular, here comes Venezuela and shows the banana republics of the developed world what lobbing a nuclear bomb into a currency war knife fight looks like:
VENEZUELA DEVALUES FROM 4.30 TO 6.30 BOLIVARS VENEZUELA NEW CURRENCY BODY TO MANAGE DOLLAR INFLOWS CARACAS CONSUMER PRICES ROSE 3.3% IN JAN.
And that, ladies and gents of Caracas, is how you just lost 46% of your purchasing power, unless of course your fiat was in gold and silver, which just jumped by about 46%. And, in case there is confusion, this is in process, and coming soon to every "developed world" banana republic near you.
and just as we (and Kyle Bass) have warned - this is what happens to the nominal price of a stock market as currency wars escalate... how do those US investors who flooded Venezuela with cash feel now? bringing back those VEF gains is going to hurt...
The chart above is a free lesson in nominal vs real: the hardest lesson for some 99.9% of the world's population to grasp. One person who certainly knows how to devalue a currency in real terms FDR, whose 70% devaluation of the USD courtesy of executive order 6102, is merely an appetizer of what is about to be unleashed upon the US.
I truly want to believe you but gold was illegal back in the 30's for a reason.
Venezuela lacks the grace to keep its currency more smoothly and stealthily pegged, like those of our major trading “partners.”
“VENEZUELA DEVALUES FROM 4.30 TO 6.30 BOLIVARS”
AP (via Drudge): “Venezuela devalues its currency by nearly half”
From the article: “And that, ladies and gents of Caracas, is how you just lost 46% of your purchasing power.”
And if you people want to know why my kids were able to KICK ASS in this country when it came to education, the above says it all. My kids weren’t anything special, but they could do basic math...which is about all that’s needed to get advanced, technical, degrees today (well, more is needed, but the competition still cannot figure out the above, so it’s a cake walk).
So let me answer the above. If your currency is at 4.3 Dingos to the dollar, and you devalue it by half, then it will trade at 8.6 Dingos to the dollar, NOT anything near 6.3 Dingos. It’s not even close...yet virtually NO ONE in the media can even do that calculation anymore - one wire service idiot blows it and everyone runs with it. Why? Because math is haaaaarrrrrddddd.
By the way, the referenced report actually does quote the correct answer further down, from Bloomberg, where they said it was 32% (not 46%, not ‘almost half’) - no wonder Bloomberg is doing so well.
they have $20 billion in gold... and their GDP is $400b ... 20:1 ratio
the US supposedly has $300b in gold and our GDP is about $15 trillion... a 50:1 ratio
venezuela is in better shape going into such a currency war
I used to have Zerohedge in my twitter feed and they tweeted alot of alarming things. Then they authored an article that the 2012 election didn’t really matter. Maybe there was some truth to it, but I haven’t read an article since. Seems like a bunch of long on gold folks . . .
Zerohedge has lots of good information and posts clips from the few good analysts that appear sometimes on CNBC, Bloomberg, etc. Unfortunately ZH is far too bearish and ridiculously alarmist. Also, they are obsessed with fiat currency and tend to view Ron Paul as some kind of God. There is some really good stuff there, but you can't take a lot of the opinion too seriously.
two points, 1)if it went from 4.3 to 8.6, that would be 100% devaluation meaning it 2to1 2)it devalued 32% as compared to the US dollar, not itself... it devalued 46% against itself
6.3 divide 4.3 = 1.46511 USD to Ven is then 46%.
Gold was illegal in the U.S. so FDR and his buddies could steal the true wealth of Americans.
FDR didn’t save the nation,but he sure fooled a lot of people.
“two points, 1)if it went from 4.3 to 8.6, that would be 100% devaluation
I see your humor in trying imitate the idiocy of the media types - not bad. Obviously, a 100% devaluation would mean that the currency is worthless - i.e., from 4.3 per dollar to infinity per dollar.
But good one anyway.
“6.3 divide 4.3 = 1.46511 USD to Ven is then 46%.”
So, if it were 8.6 instead of 6.3, you would get 2.000, which would then mean a 100% devaluation.
Of course if it were then 12.9 instead of of 6.3 , then you would get: 12.9 divide 4.3 = 3.0000 to Ven that is 200%.
I understand what a 100% devaluation means - that means that all value is GONE. But what exactly is a 200% devaluation?
no, going from 4.3 to 8.6 would simply mean your buying power has been cut in half and it now takes two dollars to buy what one did before because it has been devalued, not worthless/worth nothing but 1/2 as much
even with the new rate, their currency is STILL artificially propped up, the real exchange rate is probably about twice that
Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. ‘Devaluation’ means official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, depreciation is used to describe a decrease in a currency’s value (relative to other major currency benchmarks) due to market forces, not government or central bank policy actions. Under the second system central banks maintain the rates up or down by buying or selling foreign currency, usually USD. The opposite of devaluation is called revaluation.
Depreciation and devaluation are sometimes incorrectly used interchangeably, but they always refer to values in terms of other currencies. Inflation, on the other hand, refers to the value of the currency in goods and services (related to its purchasing power). Altering the face value of a currency without reducing its exchange rate is a redenomination, not a devaluation or revaluation.
Except that your formula gives a 100% devaluation when going from 4.3 to 8.6. Look around the web, you’ll see that I’m right (other than the idiot AP reporter).
100% devaluation doe not mean worthless... and 200% devaluation simply means it would take four dollars to buy what one did in the past 100% DEPRECATION on the other hand, would mean worthless
see post #34, and devaluation and inflation aren't the same thing either
Oh well, I guess you’re from the school that says going from 99 to 33 means “three times less”.
I can’t really argue with that, except to recommend not using that approach for taking standardized tests, like SATs.
i took and passed them 40+ years ago, and if you didn't read post#34 or don't understand it and don't know the difference between devaluation and deprecation i can't help you google devaluation vs deprecation or just have your kids explain it to you and get back to me
and no, i'm not trying to be a smart ass, i really want you to learn the difference
I give up. Don’t take it personal, but I’ll stick with trusting:
Bloomberg
NY Times
Reuters
Business Week
Financial Times
Wall Street Journal
The one AP reporter messed up, and that caused many of the smaller operations to repeat it verbatim.
You can find the links, but here’s the WSJ, for example:
http://online.wsj.com/article/BT-CO-20130208-714434.html
“But what exactly is a 200% devaluation?”
Easy Answer.....
As the old Saturday Night Live skit said, “Think of inflation as your friend. Wouldn’t you like to wear $1,000 suits and smoke $100 cigars”. I know I would.
http://www.forbes.com/2008/12/09/dollar-devaluation-gold-pf-ii-in_fb_1209soapbox_inl.html
Dollar Devaluation To Fix The Great Recession
Frank Beck, 12.09.08, 01:00 PM EST
A quick dollar devaluation would work wonders for submerged borrowers. Don’t kid yourself: It could happen.
Currency devaluation proved effective in ending the Great Depression. In 1930, Australia was the first to leave the gold standard, immediately devaluing the aussie by more than 40%, and the economy quickly recovered. New Zealand and Japan followed suit in 1931, each with the same result. By 1933, at least nine major economies had enacted a devaluation of their currency by removing it from the gold standard, all of whom emerged from depression.
In 1933, through a series of gold-related acts, culminating in the Gold Reserve Act of 1934, America realized a dollar devaluation of 41% when the price of gold was adjusted from $20.67 per ounce of gold to $35 per ounce. America, like the others before, had its economy bottom and recover as a result. Of the larger economies, only the French and Italians continued to adhere to the gold standard, and their economies remained depressed until finally, in 1936, they allowed their currencies to devalue, and their economies then recovered.
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