In particular, he had a bone to pick with this slide, telling me he'd checked with sources in the Finance Ministry and found out it's all wrong, invalidating my whole argument:
Greg knows for sure that the government's plans are not to re-convert Fonden's dollars back into bolivars. Their intention, instead, is to spend them abroad, as dollars, (for instance, using them to pay for imported food or for all those backlogged nationalizations).
Greg may well be right about this. I don't doubt he is, actually. What he hasn't grasped, though, is that even if he is right, that does precisely nothing to invalidate my argument.
To understand why, take a bolivar bill out of your pocket and look at it closely. And in that balance sheet, the bolivars in your pocket show up as its biggest liability, while the dollars BCV holds in international reserves make up the bulk of the assets.
In effect, up until 2006 BCV had more than $1 worth of reserves to cover every Bs.F circulating out in the Venezuelan economy. After the 12 millarditos get handed over, the bank will have one dollar in reserves for every Bs.F 2.89 circulating. Optimal indeed!
"OK," you say, "but I still don't see it...how can I be sure that that really has an impact on inflation?" To answer that question, That chart, right there, really ought to put the question to rest.
Make no mistake about it. All this tomfoolery with the reserves is going to cost us. Maybe not this month, maybe not next month, but before the year is out, we're all going to pay for this.