faced with 1,000,000% potential inflation, $15/Coffee, and $120 McDonald's happy meals the Venezuelan president simply dropped some zeros and changed the color of the nation's currency
should be fine....Socialism always thrives and hyperinflation is just an accounting trick cheersgif
Inflation desperation: Venezuela to cut five zeros from currency
Faced with nearly incomprehensible inflation Venezuelan officials thought they had a solution: They changed the colour of the bank notes and increased their denomination. Then they said they would lop off three zeros. And when that didn't seem enough, they announced they would cut off two more.
Slashing zeros from Venezuela's inflation-cursed currency, the bolivar, is the tent-pole of a set of economic changes by President Nicolas Maduro as he tries to right his country's capsized economy.
The five-digit inflation has earned Venezuela comparisons to the hyperinflation of Zimbabwe and Weimar Republic (Germany) from the International Monetary Fund.
The newly minted currency, which will be known as the "sovereign bolivar," will be rolled out on Monday. In addition, the President has ordered measures his United Socialist Party has been loath to consider in the past: an increase in petrol prices for some drivers and a modest ease in the currency controls that have made dollars inaccessible to most citizens for years.
Yet these changes haven't been enough to convince economists, who see desperation in Maduro's latest moves and view the new currency as another chapter in the decades of mismanagement that have destroyed the Venezuelan economy.
"It's a cosmetic thing that's happening, the zeros," said Steve Hanke, an applied economics professor at Johns Hopkins University who has advised governments facing hyperinflation. "It means nothing unless you change economic policy."
By removing the zeros, Maduro is looking to solve what economists call hyperinflation's "wheelbarrow problem"— the point when the currency has become so worthless that a wheelbarrow of cash is necessary to make purchases.
The problem isn't to do with the zeros, but rather what's causing them to appear. The Venezuelan government depends on sales from its state oil company to pay its debts. But mismanagement allowed production to sink to 1.2 million barrels a day in July — on par with the monthly rate in 1947.
Faced with this shortage, the government turns to the Central Bank to order more money printed. While that may pay the government's bills in the short term, it comes at the expense of everyone who owns bolivar, as the surplus of printed cash makes existing money increasingly worthless.
should be fine....Socialism always thrives and hyperinflation is just an accounting trick cheersgif
Inflation desperation: Venezuela to cut five zeros from currency
Faced with nearly incomprehensible inflation Venezuelan officials thought they had a solution: They changed the colour of the bank notes and increased their denomination. Then they said they would lop off three zeros. And when that didn't seem enough, they announced they would cut off two more.
Slashing zeros from Venezuela's inflation-cursed currency, the bolivar, is the tent-pole of a set of economic changes by President Nicolas Maduro as he tries to right his country's capsized economy.
The five-digit inflation has earned Venezuela comparisons to the hyperinflation of Zimbabwe and Weimar Republic (Germany) from the International Monetary Fund.
The newly minted currency, which will be known as the "sovereign bolivar," will be rolled out on Monday. In addition, the President has ordered measures his United Socialist Party has been loath to consider in the past: an increase in petrol prices for some drivers and a modest ease in the currency controls that have made dollars inaccessible to most citizens for years.
Yet these changes haven't been enough to convince economists, who see desperation in Maduro's latest moves and view the new currency as another chapter in the decades of mismanagement that have destroyed the Venezuelan economy.
"It's a cosmetic thing that's happening, the zeros," said Steve Hanke, an applied economics professor at Johns Hopkins University who has advised governments facing hyperinflation. "It means nothing unless you change economic policy."
By removing the zeros, Maduro is looking to solve what economists call hyperinflation's "wheelbarrow problem"— the point when the currency has become so worthless that a wheelbarrow of cash is necessary to make purchases.
The problem isn't to do with the zeros, but rather what's causing them to appear. The Venezuelan government depends on sales from its state oil company to pay its debts. But mismanagement allowed production to sink to 1.2 million barrels a day in July — on par with the monthly rate in 1947.
Faced with this shortage, the government turns to the Central Bank to order more money printed. While that may pay the government's bills in the short term, it comes at the expense of everyone who owns bolivar, as the surplus of printed cash makes existing money increasingly worthless.
Bummer.
