Where VZ inflation comes from: Pdvsa gets USD 9.88 billion from the Central Bank

[naaman fletcher]

José Guerra, a former economic research manager with the BCV, said that at the end of July the economic indicators show that the central bank "has provided financial assistance amounting to VEB 42.53 billion, a figure that at the official exchange rate accounts for nearly USD 10 billion (USD 9.89 billion)."

In most countries, central banks are not allowed to finance state-run companies; otherwise, they would have to print money without holding reserves, and more money for the same amount of goods means rising prices.

"The important thing is that it has been shown that the central bank prints money to cover Pdvsa's deficiencies," José Guerra said.

The last reform of the Central Bank Law opened the door to the creation of money in order to solve cash flow problems in state-run companies. Article 49 provides for that the BCV may "extend credits secured by titles of credit issued by the Republic or its decentralized entities."

http://www.eluniversal.com/2011/08/30/pdvsa-gets-usd-988-billion-from-the-central-bank.shtml