Would a foreign exchange rate reduction, imposed by government, help chicken feet sellers in Liberia? Please! (Re “Reduce U.S. Rate, Not Chicken Feet”). When the price of something is “too high”, many people think that the answer is for the government to “do something” to force the price down (price control). But anyone who knows history or have taken economics 101 know that long lines, shortages, and black market are common in countries where the government have force down prices (price controls)!
Anytime our government reduces the MARKET rate of Liberian dollars to US$, it will result in the creation of black markets, where people go to exchange their weaker currency (Liberian Dollar) for the stronger currency (U.S. Dollar) or vice visa. This would lead to a situation where the exchange rate for the foreign currency (U.S Dollar) is much higher (on the black market) than the artificial rate set by the government…
I remember going back to Liberia with my American Greenbacks (U.S Dollars). And guess where I went to get more bang for my greenbacks? No, I didn’t go the Central Bank of Liberia or a commercial bank, where the official rate was 75 to 1 (US$). Do you see “STUPID” written all over my forehead? Of course I went to the black market, where I got 150 Liberian Dollar for every U.S Dollar! Despite the disastrous history of price controls, going back to the Roman Empire and ancient Babylon, many of our economically illiterate people, continue to think that the answer is for our government to force the price down. But the real answer lies within a free and open market, where the foreign exchange rates will reflect the underlying realities of supply and demand.
When the Liberian government prints more money without a corresponding increase in its economic output, it unleashes hyperinflation. And hyperinflation debases your currency! Instead of imposing foreign exchange controls, the central bank should stop printing Liberian dollars out of thin air. In other words, STOP increasing the supply of your worthless Liberian dollar in market place! Memo to empty suits in government: Stop printing money out of thin air, you idiots!