The Case For Currency Substitution In Venezuela - News Summed Up
The Case For Currency Substitution In Venezuela

The Case For Currency Substitution In Venezuela


If an independent central bank is off the table, Venezuela might opt, instead, for a currency board. A currency board is required, by law, to exchange local currency—in this case, the bolívar—for some foreign currency at a fixed rate and to hold 100% foreign currency reserves to meet that requirement. First, the fixed rate a currency board could support might be much higher than the administration is willing to admit. Second, although the currency board is legally required to hold 100% reserves, nothing technically limits it from over-issuing. The Kobayashi Maru of monetary policy, currency substitution recognizes that the only way to win the game is not to play at all.


Source:Forbes January 11, 2017 17:17 UTC



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