The Complete Idiot’s Guide to the Complete Idiot’s Monetary Policy

Quico says: Miguel wrote an excellent post on why inflation pressures are mounting in Venezuela. I liked it a lot, but it’s a bit technical. Since a picture really is worth a thousand words, I tried to illustrate what’s happening here…



…don’t worry, you’re not alone: your fellow Americans were kind enough to send $34.5 billion to Venezuela in this way in 2006…



So far, so good…






…this is why the opposition insists that when Chávez says “hand over the excess reserves” that’s really just code for “print more bolivars”…

…as the ratio of circulating-bolivars-to-reserve-dollars rises, BCV realizes it has to do something to counter the trend


…remember, CDs are just loans people give to the Central Bank. BCV has to pay them back, with interest. When it does, all those extra bolivars go right back into circulation…

…so Venezuela’s rising inflation is not surprising: we have more and more bolivars chasing the same number of goods…

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