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Happy New Year, venezolanos

Yesterday, Chávez made the remarkable move of devaluing the Venezuelan currency – the bolivar – by 50% against the dollar. One dollar used to be officially worth 2.15 bolivares. Now it’s worth 4.3. Fundamentally, this will be very painful for Venezuela’s withering middle class.

Because Venezuela imports nearly everything it consumes, and importers will now be buying dollars from the government for twice as many bolivares as before, the street bolivar price of nearly everything will simply have to go up, by a lot. The price of everything, that is, except food and medicine, the exchange rate for which Chávez is wise enough to continue subsidizing at 2.15 bolivares per dollar.

So the poor (Chávez supporters) remain happy because the prices of the basics they buy don’t change. The rich are not happy, but they’ve got their dollar accounts and properties outside of Venezuela. And the middle class – well, the middle class gets screwed, because their bolivar savings are now worth significantly less, traveling internationally now costs twice as much, and buying anything domestically other than the basics for life is about to become hellishly expensive.

Venezuelans are lining up to buy stuff before prices skyrocket. They thought last year’s 26.9% annual inflation was bad…

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