Chaos and confusion erupted across Venezuela, and most stores were shuttered on Saturday, after president Nicolas Maduro announced that the government would enact a massive currency devaluation, implement a new minimum wage, hike taxes, and also raise gasoline prices for most citizens even as the country struggles with the greatest hyperinflation on record, surpassing even that of the Weimar Republic.
As a result of the enacted actions, the new version of the bolivar will be pegged to the value of the state cryptocurrency, the etro, which according to Bloomberg amounts to a 95% devaluation of the official rate, and will trade in line with where the black market was; the government will also raise the minimum wage more than 3,000 percent, which works out to about $30 a month.
Maduro said the new currency, set to enter circulation on Monday, will be called the "sovereign bolivar" and will be based on the petro, which is valued at $60 or 3,600 sovereign bolivars, after the redenomination planned for August 20 slashes five zeroes off the national currency. The minimum wage will be set at half that, 1,800 sovereign bolivars. The government would cover the minimum wage increase at small and medium-size companies for 90 days, Maduro added. It was not clear what happens after.
"They've dollarized our prices. I am petrolizing salaries and petrolizing prices," Maduro explained in a Friday televised address. "We are going to convert the petro into the reference that pegs the entire economy's movements."
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The package of measures combine the necessary with the baffling, Luis Vicente Leon, president of the Caracas-based pollster Datanalisis, said in a Twitter post on Friday.
“The government has recognized the need to anchor the economy to an external variable outside of its control, such as the international price of oil. A wise decision, but it does so by hiding it in a vehicle that suffers from lack of confidence and viability, such as the Petro,” Leon said.K
After stealing the whole country economy, Maduro will try this plan of using the new currency pegged to Petro (crypto).
I think that the idea to have a currency pegged to oil barrils is interesting. However he has no credibility, I doubt it will work.
I believe that Soon his cryptocurrency will be worthless and this new Bolivar will face high inflation rates as well.
He knows that.
Soon people will be buying it a lot cheaper in the black market, not matter how much he says the new Bolivar is worth.
So he plans includes create a very large exchange network (where government control the rates) .
That's not how economy and free market works. People will always find a way to trade bolivars for dollars or any other currency for their real price rates.
Maduro also said he intends to create a unified exchange rate across the country. The new petro-to-dollar-to-bolivar rate would bring the official price of one US dollar to six million (or 60 post-redenomination), which is about the same as the current black market exchange rate and about 25 times worse than the official rate.
To implement the bizarre plan, information Minister Jorge Rodriguez said Saturday the government will open 300 currency exchange kiosks in hotels, airports and shopping malls as part of a bid to supersede the country’s black market.K
Source:
https://www.zerohedge.com/news/2018-08-19/venezuela-chaos-after-maduro-announces-massive-95-devaluation-new-fx-rate-tied
