“How do you know so much about this?” I asked fishing for the bottom of knowledge I suspected was more than she let on.
“I live here. And have a father who is a business man and must deal with such things. This black market in money is the result of policy decisions we have no say in or control over.”
“It must be to somebody’s benefit or it wouldn’t exist,” I protested.”
“That it exists at all is proof of that,” she said emphatically. “Thieu and his wife and friends collect enormous fortunes because of the difference between the government value and the black market value. And Diem before them made fortunes, though he did spend part of it to build a splendid palace we at least pretend is a public building. But Thieu just lives in it and rubs his hands together as he counts his money.
“But why are there two prices?” I protested. “Why is the official price different than the street price?”
“Because the government sets the exchange rate far above the market rate.”
“Why do they do that? Wouldn’t the market rate follow the official rate?”
“The reason the market rate is so low is that foreigners have no faith in the Vietnamese central bank. They don’t believe they could get anything of value for the money. The piaster isn’t convertible to gold or anything else. If foreigners take piasters they can’t put them in any but Vietnamese banks and then what good are they. You can only spend them in this country. So they have no value outside of Viet Nam. The only reason they have value inside the country is that they’re convertible to dollars but only at the official rate.”
“This is crazy. It goes around in circles.”
“It’s historical. It dates back to when Viet Nam became independent from France. Diem negotiated an exchange rate with the Americans way back in ’55 and it’s been that way since. The answer actually is a circular argument. It’s because so many wealthy people make so much money from the difference that no one wants to change.
“This has been going on since the beginning of Diem’s time?! And nobody’s done anything about it?” I was astonished.
“Who do you suppose would have done something?”
“The American Congress? That makes me laugh. There are only a few people in the state department who understand it and they sold Congress on a program the senators didn’t understand that fuels the whole problem. Father says the State Department has tried to get Thieu to devalue the currency but he won’t do it and apparently they can’t directly force him to. The last time they did that it resulted in a coup and Diem was assassinated.