http://www.ft.com/intl/cms/s/0/12e9f32e-739e-11e2-9e92-00144feabdc0.html#axzz2KbSakgJt
In an effort to relieve pressure on their fiscal deficit, the Venezuelan government announced a devaluation of their currency. The article explains how this may be advantageous to the state's deficit by increasing its revenues by approximately 4 percent. It also briefly mentions that the move will spur an already high inflation rate, however does not elaborate. Does the devaluation seem to be an appropriate action? Also, does this action bring into play the possibility of hyperinflation, or is this fear a severe overreaction?
I think the most interesting point from the article talked about the rest of the country instead of the government. From the article:
ReplyDelete"But while the government gains, most Venezuelans lose out, with Ecoanalitica estimating an 8 per cent fall in consumers’ purchasing power. Until the government next decrees an increase in minimum wages, the relative value of workers’ salaries will fall."
The quote Mark used above is the same quote that jumped out at me as well. This quote tells me that this devaluation is not the appropriate action. After all, what is the point of government if not to look at for the welfare of its people? I think the Venezuelan government needs to take care of its people before anything else and the rest will all fall into place naturally.
ReplyDeleteClearly, based on this article and what Mark and Clay have said, this is not the right way for the government to go. Although it may be helping the government in terms of debt, it is hurting the citizens and that is not the intention. Venezuela needs to find a middle ground and put something in place that will help the government as well as the people.
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