GoodDayJohn wrote:
outtatime21 wrote:
The Colón is a free currency whose exchange rate is controlled by a "modified crawling peg." What the Colón trades for on the open market is not technically relevant to the exchange rate that you get at BCR, Banco Popular, etc.
I think that is exactly what BangBang has been saying.
if you want to get more technical about it, I could explain how the "crawling peg" and the "modified crawling peg" system in Costa Rica works.
I think that BangBang57 and many other people believe that a few guys in Costa Rica wake up every morning and say, "Well... We don't have a whole lot of U.S. Dollars right now, so let's move the exchange rate this way."
It does not work that way. Nobody in Costa Rica says, "We don't have enough U.S. Dollars... so let's devalue the Colón a little bit, so we can get some more Dollars in here." Ummm... No...
That's what we call "Issuing a 'No Confidence' call" on your currency, which basically makes your currency worthless.
The point of the "modified crawling peg" is twofold...
1) It frees the National Banks from a rigid government exchange rate. The banks are free to operate at their discretion, albeit within a fairly narrow range.
2) It mitigates huge "mood swings" in the value of the Colón. The Colón might have a huge technical drop in value in 2 or 3 days, and then slowly recover over a period of 4 weeks or so. However, the MCP will make the Colón go down, slowly, for 2 or 3 weeks, and then go up, slowly, for another 2 or 3 weeks. Meanwhile, all of the Yahoos will be be saying, 'I don't understand why the "International" rate on the Colón is going up, but the rate at my bank is still going down.'