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May 14th, 2008
One of my readers reasonably asked my thoughts on the recent revaluation of the dollar.
Easy answer! I have not a freaking clue!
Todays exchange rate of about ¢511.41 / ¢518.71 makes absolutely no sense whatever and to me, smacks of some serious manipulation.
I am not the only one who is raising questions about changes that fly in the face of logic. Sadly, Central Bank manager, Roy Gonzalez, rather than reply directly to the many questions, has stated more or less that we must defer to the vast experience of other central banks. Say what?? News flash! The dollar is DOWN. Just which central banker are you listening to? Certainly not the Federal Reserve as they most assuredly know the dollar is down.
Economist and expresident of the Central Bank, Rodrigo Bolanos, thinks that this strong growth that has occurred within the past few days due mainly to a change in the expectations of people. More people having dollars accounts. Say What #2 ??? Let me get this straight! The people decide the value of currency here? Well maybe if the colon were traded internationally in the currency market, but the colon has not yet attained the status of the Euro. Another news flash! There has ALWAYS been far more investment in dollars than in colones. That is why the Central Bank was so worried about “dollarization” in the Costa Rican economy.
The dollar is horribly overvalued here and probably should be floating arount the ¢470 area. The fact that it is not and is in fact being set at levels not reflective of how the dollar is really faring world wide indicates to me some serious hanky panky. Que sorpresa!
One the other hand, this is great news for those who ignored my warnings to get out of dollars (last fall) and later took it in the shorts when the dollar fell. Of course now that the people who DID heed my words are taking it in the shorts… though as they made a nice windfall last December, they actually have made money as they presumably earned interest on their wind fall.
My advice? Pay no attention to me. Take your best guess.
As logic (and the world economy) are clearly not what is affecting the US dollar, there is no point in even trying to make any sense of a system clearly controlled and manipulated by forces that we know not.
Me? As the colon is not reacting normally, I’ll probably split my $$$ equally in colones, dollars and euros, and try to figure out who really is manipulating the currency in Costa Rica.
Filed under Banking & Finance, Banking in Costa Rica, Cost of Living, Cost Of Living Costa Rica, Costa Rica, Life in Costa Rica, Living in Costa Rica, Politics, Questions from Readers | Comments (6)