Here’s the longview chart of the Bolivar Fuerte (VEF) in the parallel “permuta” market….
……and here’s the story since Jan 1st 2009.
click to enlargeYesterday Bloomberg picked up on the rumour swirling around that Chávez&Co is about to run a dollar bonds issuance. Bloomie reported a strengthening of the parallel VEF but I don’t see much more than a slight stopping of the rot. Not surprising really, as the rumoured U$1Bn or $2Bn issuance won’t soak up much of the excess liquidity floating round the VEF. Check out the evolution of M2 to see what I mean….
…..because this chart documents M2 having risen 32.5% since this time last year. Want a lesson in Monetary Inflation 101? Well, as mentioned before it’s no coincidence that Venezuela’s CPI inflation rate is fluctuating around 30% right now. This ain’t rocket science, dudes.
So the upshot is that although oil is back at $70+ and the rrrrrrevolution is back on track funds-wise, the VEF currency has a long way to go to get itself repaired. My finger-in-the-air thinks that we’d need crude at $100/bbl again before the VEF parallel goes under 5.0 to the greenback.