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What you quoted for swapping dollars for bolivars doesn't make any sense, especially the back and forth to game the standard and black market rate. This is the

What you quoted for swapping dollars for bolivars doesn't make any sense, especially the back and forth to game the standard and black market rate. This is the reality, when foreign government's peg their currency. It's usually when they are doing bad. So say you live in such a country and want to buy a good from the US or another country because you want to resell or do manufacturing. You need dollars. But all you have is your local currency in this case the bolivar. There is such a short supply of the dollar, because most of it is going out due to imports and less is coming in (little exports). You go to the govt to get some and most likely will be told there's none. There usually is none too! the govt is spending all their little dollar buying more things they need and paying debt. At the end of the day, they have none, they find themselves in the negative. So trying to sell your bolivar for the USD? Good luck. Desperate to keep your business afloat, you go to the black market, and you are willing to pay a lot for dollar. There is more demand for dollar than supply, so the dollar climbs and that's why people are willing to buy a dollar for their 1010 bolivar. Why would anyone do that? If you need to buy raw materials to produce, or maybe you need medicine. Since your country is in the shitters, no one wants your currency but dollars, euros, etc. The only way to survive is buy dollar,euro, pounds. The reality is that to play that arbitrage between the dollar and bolivar is difficult. The politicians/govt/bankers are very corrupt and hoard all the cash that is suppose to be sold in the market. That 1:10 peg is if you are selling dollar for bolivar. If you are buying dollar, they will never sell it to you at 10, they will sell it for much higher or never. So who in the world will sell their dollar for 10 bolivar? Tourists. Not even foreign businesses. If you are a foreign entity, you bring in $1, get 10 Bolivar, you do some sort of business, turn it into 100 bolivar. very nice, time to get out, you exchange it for USD. you get 10cents before cost of business and taxes. At this point, most foreign companies have closed up shop and are long gone.

jimmywanger 10y ago
Ahhh... I think you didn't understand what I'm saying, or didn't add enough corruption and/or personal influence. Let me give you a concrete example. Let's say you have a connection in the government, maybe your uncle is high up in politics. So the 10:1 bolivar to dollar rate is given by the government for essential supplies (who has hard currency reserves), but you need to know somebody to get it. So your uncle hooks you up, and gives you 100 dollars for 1000 bolivars, cause you want to import 100 pounds of flour, because flour is an essential supply. You turn around, buy 10 pounds of flour for 10 dollars, and then on the black market exchange 90 dollars for 90,000 bolivars. You have just made an incredible profit for doing nothing except exploiting your contacts. And since you still have the flour contract you can do this indefinitely, until your uncle gets tired of your leeching ass and kicks you out. Does that make more sense?

jimmywanger 10y ago

Ahhh... I think you didn't understand what I'm saying, or didn't add enough corruption and/or personal influence. Let me give you a concrete example. Let's say you have a connection in the government, maybe your uncle is high up in politics. So the 10:1 bolivar to dollar rate is given by the government for essential supplies (who has hard currency reserves), but you need to know somebody to get it. So your uncle hooks you up, and gives you 100 dollars for 1000 bolivars, cause you want to import 100 pounds of flour, because flour is an essential supply. You turn around, buy 10 pounds of flour for 10 dollars, and then on the black market exchange 90 dollars for 90,000 bolivars. You have just made an incredible profit for doing nothing except exploiting your contacts. And since you still have the flour contract you can do this indefinitely, until your uncle gets tired of your leeching ass and kicks you out. Does that make more sense?