Caracas Chronicles

So remember how barely two weeks ago we were speculating that the Central Bank might be secretly financing State Owned Enterprises directly?

Well, a few days later, BCV confirmed that that’s exactly what they’re now doing: openly printing new base money and handing it straight to PDVSA in return for vague promises of future payments to the tune of one billion dollars scribbled on bits of cheese-stained napkin (somehow, describing the bits of paper involved as "bonds", while technically correct, would lend a misplaced dignity to this sordid mess.)

Needless to say, the bits of cheese-stained napkin later get recirculated through SITME, becoming the lynchpins of a mechanism for folks to trade bolivars for dollars. Lindo.

The remarkable thing is how this bit of news, which really ought to alarm anybody with a sense for monetary dynamics, just sort of slipped entirely under the radar. It was reported, then forgotten. The sheer ease with which stuff like this escape everyone’s notice, the tómatelo con soda way they make the transition from unthinkable to "old news" will never cease staggering me. 

Suddenly, it’s normal for the Central Bank to print money to cover S.O.E.’s cash-flow problems, normal for PDVSA to "issue debt" on utterly opaque terms directly to the guys who run the money printing presses.

I do get it that monetary policy stories like this one are always going to be a little bit too abstract to create proper scandals. But even the commentariat barely paused to note the layers upon layers of crazy involved here.

After all, it’s normal!