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…still unanswered.

People owning ‘bolivars’ would seem to have many choices if they wanted to exchange them for other currencies — just pick a commercial exchange center… say in London, Tokyo, US, Brazil, Mexico, or locally.
Currency exchange is a standard function of commercial banks worldwide.

How can Chavez control the bolivar exchange rate across the world ??

He might somehow use severe police powers & central banking for exchange rate control in his country — but surely the world currency markets are beyond his control.

The term currency “Devaluation” is often used — but I doubt most people here know {me included} how it is done in specific realworld actions.

It’s funny you say that, because, well … I’ll just let the URL from this story yesterday speak for itself.

http://popwatch.ew.com/2010/01/11/oliver-stone-says-hitler-is-an-easy-scapegoat/

If I’m a Venezuelan Ford dealer, for example, I have to pay Detroit in American dollars to bring my cars back to Caracas. Since Chavez controls the foreign exchange, I will have to now pay double for each dollar I need to purchase and pass that cost along to my customers.

The price of imported cars has effectively been doubled.”

To take this even further, if the government buys and sells the bolivar at say 4 bolivars to 1 dollar and the equilibrium exchange rate is anything but this rate, private enterprise will buy/sell the bolivar and sell/buy dollars to the government at a profit until the equilibrium becomes the government fixed rate. As long as the equilibrium is not the government rate, there is profit opportunity, forcing rates to the government fixed rate. The only stipulation is that the government has enough reserves of both the dollar and bolivar to cover all exchanges.

I see devaluation of the bolivar as an attempt to imitate the Chinese Yuan and stimulate their export market

Sorry, Bob. As much as I would like for Chavez’s messing around to have no impact on the economy, it has. Even if he’s not printing money directly, he has control over all the (legal) exchange rates, and therefore has almost direct control over how the Bolivar relates to the dollar. Although it is true that a great deal of money goes around the Venezuelan govt, a lot of it goes directly through it, because a lot of people don’t want to take the risk of moving great deals of cash illegally, and would rather take the economic hit when changing dollars into Bolivars. On top of that, there’s a “grey market” which moves a lot of money, and it operates with semi-legal status and holds to an unoffically governmentally imposed rate between the government and black market rates.

“It doesn’t make any sense to keep my savings,” Ms. Blanco said Saturday. “I’d love to see how things work in a normal country.”

*sigh* … It’s pretty much the same, sister.

http://mises.org/daily/3832

If I’m a Venezuelan Ford dealer, for example, I have to pay Detroit in American dollars to bring my cars back to Caracas. Since Chavez controls the foreign exchange, I will have to now pay double for each dollar I need to purchase and pass that cost along to my customers.

The price of imported cars has effectively been doubled.

So provided the money printing isn’t ramped up and this hadn’t effected consumer psychology, shouldn’t it make no economic impact?

(Of course both money printing and inflationary expectations have been effected…)

http://news.bbc.co.uk/2/hi/8242756.stm

How does the boy Chavez think he will manage?

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OK… but how exactly did he “devalue” that currency ??

What is the realworld mechanism ?

Chavez gets on TV and says he’s devaluing — then what happens ?

Who does what to whom ??

It almost makes you wonder why the US devalues its currency while pretending not to. If they’d only pull back the curtain, we’d really have this ship sailing.

It almost makes you wonder why the US devalues its currency while pretending not to. If they’d only pull back the curtain, we’d really have this ship sailing.