Wednesday, January 13, 2010

Venezuela’s Hugo Chavez Follows the Federal Reserve System’s Lead?

January 13th, 2010

The television news reported yesterday about the economic turmoil in Venezuela resulting from that nation’s president halving the value of the South American country’s currency (the bolivar) essentially overnight. I wonder if President Chavez has been studying the U.S. Federal Reserve System and decided to follow the lead of the Fed? Surely the value of the U.S. Dollar has also been halved over recent years. I wouldn’t be surprised if the Venezuelan President figured that if it works for the United States, maybe halving the value of the nation’s currency would also work for Venezuela. However, unlike in the United States where decreasing the value of the currency artificially inflated prices and therefore for a long time held-off a falling Gross Domestic Product (GDP) and subsequently prevented any classification of our Nation being in any recession, in Venezuela it was ordered that prices were not allowed to rise to reflect the devalued Venezuelan currency thereby attempting to keep inflation under control – whether such threatened controls work in reality or not in that country remains to be seen.

Regardless of the real impact of the South American country's fiscal policy in this regard, at least the Venezuelan leader seems to care about his citizens to some extent anyhow by his fascist-like threats of legal actions and confiscations of businesses that raise prices – unlike here in the United States where our elected leaders only seem mostly to care about the well being of our bankers.

PS. Also see: Venezuela Devalues Bolivar: What Next?, by Allan Nichols, 13 Jan 10