Devaluation Day

The premium on gold and silver in Venezuela will be shocking - another reminder that devaluation can happen anywhere at any time. Having food on hand at all times (perhaps even freeze dried), cash and some gold and silver are prudent courses of action no matter where you live around the world.

Devaluation Sparks Chaos in Caracas

CARACAS -- President Hugo Chávez's decision to devalue Venezuela's bolivar and impose a complicated new currency regime may paper over some growing cracks in the economy, but it is also setting the stage for bigger problems down the road for the country's oil-rich nation and its populist leader.

Over the weekend, there were signs that Mr. Chávez's slashing of the "strong bolivar" currency could create as many problems as it solves in Venezuela's economy, provoking a wave of anxiety that sent Venezuelans scurrying to spend cash they feared could soon be worthless.

At Caracas's middle-class Sambil shopping mall, lines at cashiers reached 50-deep. Carmen Blanco, a 28-year-old accountant, waited to buy a 42-inch flat-screen television she doesn't need because she already has one at home.

"It doesn't make any sense to keep my savings," Ms. Blanco said Saturday. "I'd love to see how things work in a normal country."

On Sunday, Mr. Chávez vowed to fight speculation and price increases that could result from the devaluation, which raises the price of imports.

Harried by recession and sliding popularity, Mr. Chávez on Friday weakened the bolivar to 4.3 per dollar from 2.15 in a bid to shore up government finances, which have been hit by weaker oil prices, and to stimulate economic growth ahead of key elections.

In order to protect the poor, his main constituency, from the move, Mr. Chávez announced the creation of another exchange rate of 2.6 bolivars per dollar for imports of food, medicine and other essential goods. Those rates will compete with a black-market rate, where the bolivar had plunged, forcing the official devaluation. On Friday, that black-market rate stood at about 6.25 per dollar.