In Venezuela, Dismantling a Weapon of Mass Destruction
In Venezuela, Dismantling a Weapon of Mass Destruction
To tackle the biggest hurdle facing Venezuela’s economy – the black market dollar – policymakers much unify the exchange rate.
Mark Weisbrot
03/21/2016
The government of Venezuela has often denounced an “economic war” against it, and of course this is part of the current situation. The primary weapon of mass destruction in this war is the black market for the dollar. It is no coincidence that the main source of information for this market — the extreme right-wing “DolarToday” — is run by someone who played an important role in the U.S.-backed military coup in 2002. He was then an army officer — Colonel Gustavo Díaz Vivas — and he now resides in Alabama, with DolarToday operating out of the U.S.
This is also no coincidence. Washington has been trying to topple the Venezuelan government for at least 15 years, and almost every journalist I have talked to during this time — including from every major international media outlet — has been well aware of this effort; although they almost never write about it.
The black market for the dollar is especially destructive because it is part of an inflation-depreciation spiral that has been growing since the fall of 2012. When the price of a dollar on the black market rises, importers must pay more for the dollars that they need, and this increases inflation. But then the higher inflation encourages more people to buy dollars on the black market, as a store of value. This pushes up the black market dollar price, which increases inflation, in a continuing spiral. In October 2012, inflation was at 18 percent and the black market dollar was at 13 bolivares. At the end of 2015, inflation hit 181 percent, and the black market dollar had passed 800 bolivares.
The main reason that the current spiral does not get even worse is that the economy is in recession. It shrank by 5.7 percent last year. But attempts to stimulate the economy through government spending would likely feed the inflation-depreciation spiral. This means that the economy is currently trapped in recession.
More:
https://nacla.org/news/2016/03/21/venezuela-dismantling-weapon-mass-destruction
= new reply since forum marked as read
VEF money supply has doubled in the last year, but inflation is really caused by some guy in guy in Alabama who can control currency valuation by fiat through his website.
