Re:Venezuela devalues the bolivar by 95% and pegs it to ‘oil...
by jjeaff on Monday August 20, 2018 @12:26PM
(#17801281)
It would only ever be true if the debt you owe is denominated in your own currency. Which would be highly unlikely in almost any case except USD or euros or one of a small handful of major world currencies.
Re:Venezuela devalues the bolivar by 95% and pegs it to ‘oil...
by gamblor956 on Monday August 20, 2018 @02:53PM
(#17802721)
No, they're right. The devaluation is relative to other currencies, so any debt measured in the devalued currency is now much cheaper when measured against other currencies.
I.e., if a debt is VB1000 before devaluation, worth about USD$100, but each bolizar is devalued by 100, then after devaluation, that same debt is still VB1000 but is now only worth USD$1. The devalued debt is now much easier to pay off.
However, if the debt had been measured in USD, it would now be 100x more expensive to pay off in terms of bolivars.
Re:Venezuela devalues the bolivar by 95% and pegs it to ‘oil...
by paulie_a on Monday August 20, 2018 @01:18PM
(#17801789)
I have a friend that did large amounts of business with someone in Venezuela. Unfortunately due to the monetary policy the person in Venezuela had to stop doing profitable business with my friend.
In most situations, this is true. In Venezuela, however, inflation was already running at 300x a year before this announcement. (source: https://www.nytimes.com/2018/08/16/world/americas/inflation-... ). So it seems like any functional business must already essentially be operating in foreign currency.