Question: Does Chavez Devaluing His Currency Impact the US? (Hugo Chavez, companies, dollar)
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"In a bid to jump-start the recession-hit economy of South America's top oil exporter, Chavez on Friday announced a dual system for the fixed rate bolivar. It devalues the currency to 4.3 and 2.6 against the dollar, from a rate of 2.15 per dollar in place since 2005, giving the better rate for basic goods in an attempt to limit the impact of the measure on consumer prices."
This article is about Venezuela, their election, their economy, their people. Can anyone tell me if this action of Hugo Chavez impacts the US (and other countries) as well, in a way an economic simpleton like me can understand? Is this currency devaluation something that could happen here?
"In a bid to jump-start the recession-hit economy of South America's top oil exporter, Chavez on Friday announced a dual system for the fixed rate bolivar. It devalues the currency to 4.3 and 2.6 against the dollar, from a rate of 2.15 per dollar in place since 2005, giving the better rate for basic goods in an attempt to limit the impact of the measure on consumer prices."
This article is about Venezuela, their election, their economy, their people. Can anyone tell me if this action of Hugo Chavez impacts the US (and other countries) as well, in a way an economic simpleton like me can understand? Is this currency devaluation something that could happen here?
We just got a discount on oil, while Venezualans will no longer be able to afford to import anything from US. In the other hand I think the "dual rate" approach means that some select companies will be allowed to use the old rate to import some selected items from overseas using the old rate.
Its good for the USA, because now we can buy oil from Venezuela cheaper. Its bad for ordinary Venezuelans because prices of imports will go up. It would be good for domestic Venezuelan manufacturers if they existed, but Chavez basically destroyed the free market there.
Venezuela is a mess, and the currency devaluation is one symptom. As rich in oil and natural gas as Venezuela is, still they suffer from constant blackouts and power outages.
Chavez is also saber-rattling against Columbia and accusing the US of meddling in his affairs. He is buying significant amounts of fighter planes and combat helicopters from Russia. He is a typical bully trying to distract his countries attention from his disastrous policies by blaming others for the problems he created. I wouldn't be surprised to see all hell break loose in South America in 2010.
Thanks for the responses. Can what Chavez did, happen here or do we have laws to prevent it?
Can it happen here? It happened here in 2006. Both the Federal Reserve and the U.S. Treasury can institute policies which can revalue the dollar (up or down) at any time.
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