Venezuela lobs currency nuke/ongoing disscussion.

[UndercoverElephant]

http://www.zerohedge.com/print/469469

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.

You can't help but like Hugo Chavez. He doesn't do things by halves. Straight in with both feet!

[adam2]

Most unfortunate for anyone with savings in the local money, but apart from that, is this of any wider significance ? I suspect not.

In the short term it may increase faith is Sterling and the USA dollar, who wants to hold currencies that lose value overnight ?

[UndercoverElephant]

Most unfortunate for anyone with savings in the local money, but apart from that, is this of any wider significance ? I suspect not.

It's just a part of a growing trend.

[clv101]

It's not just Venezuela along with most other countries - it's corps too:

http://www.economist.com/blogs/democrac ... ollarcoins

[ziggy12345]

Its the 5th time he has done this since 2005.

[adam2]

Well the present currency is now almost worthless with inflation exploding.
So the government are to introduce a new type of funny money.
The "sovereign bolivar" is to replace the present "strong bolivar" The new money is based upon the old, but with 5 zeros removed.

The new money includes coins, I predict that within a week or two that these will be worth more as metal or as washers than as money.

Monday is to be a bank holiday in order to introduce the new funny money.

The electronic "money" called the petro seems to have sunk without trace.

[stumuz1]

In my wallet i keep a 50 trillion Zimbabwe Dollar note.

Just to remind me that pound sterling has lost over 80% of its purchasing power in my lifetime. I'm 51.

When i get a chunk of spare money, it immediately gets exchanged for real stuff that a central bank cannot print out of thin air.

So far it's working.

[Mark]

When i get a chunk of spare money, it immediately gets exchanged for real stuff that a central bank cannot print out of thin air.

Which often devalue with time and usage....
Cars, caravans, furniture, clothes, women (joke).....

[Little John]

Plenty of things do not devalue, however. FIAT money **always** does

[adam2]

Plenty of things do not devalue, however. FIAT money **always** does

IMHO, fiat money almost always depreciates but there have been exceptions.
Japanese money appreciated for some years if compared to shop prices.

Bitcoin is money of a sort, and has also appreciated.

[emordnilap]

I read somewhere this (excusably simplistic) summary of fiat money:

That fiat money, up to 1939, only depreciated very slightly overall since its introduction.

Of course, during wars, it depreciated significantly as money was printed to pay the participants, but this was taxed out again at the end of the conflict, returning to its original value.

Depreciation only set in as part of accepted policy following WWII and was as much a result of the incessant demands of the war machine as it still is, but now with the addition of quantitive easing.

Does this seem about right?

[Little John]

Fiat money "works" during the good times when there is economic growth. It fails, however, when there are large expenditures required, such as in times of war or in economic downturns. This is because the short-term temptation to try and "print" one's way out of trouble becomes overwhelming - eventually leading to a collapse of faith in said FIAT currency.

Give that war and economic downturns are inevitable. FIAT currency collapse is therefore also inevitable. There is no FIAT system of money in human history, so far as I am aware, that has not ended in collapse. It's only ever a case of when not if.

[stumuz1]

Depreciation only set in as part of accepted policy following WWII and was as much a result of the incessant demands of the war machine as it still is, but now with the addition of quantitive easing.
Does this seem about right?

Depreciation is the powerful tool latent in all fiat currencies. Most people think inflation just happens because of sloppy fiscal management.
In fact inflation is a deliberate ploy to avoid paying a country's debts.

The paradigm case is pre-war Germany. It was given a huge bill for the costs of the war, it printed huge amounts of fiat deliberately, which effectively reduced the cost of the bill to a few loaves of bread.

The same is happening in Venezuela. Hugo Chavez took out huge loans denominated in Bolivars with other emerging market countries, via shadow banking. Chavez insisted they were in Bolivars if they were to get access to their oil.

Manduro can now unleash the innate tool. Printy, printy and all your external debts are gone.

Once defaulted, the oil rich country can rebuild the currency from scratch. Same game starts again.

[stumuz1]

Further, the power of depreciation was effectively given up by Ireland when it joined the Euro.

Ireland has a de facto German currency. Irish babies born today will see their grandchildren pay off debts to save UK banks. Just because they could not devalue their Punt. They will pay the Germans.

[Little John]

There is stuff in the world. Stuff has intrinsic value. Everything else is moving the chairs around.