CRITICAL PURCHASING POWER

Money has evolved in history with successes and failures, money is an institution per se, it even has constitutional status, and it underlies the dynamics of functioning of a country's institutions. This appendix presents a minimalist chronology of the Monetary history of Venezuela, with the challenge of transmitting the diversity of events and actions that have marked the lives of Venezuelans in approximately 4 generations

FUENTE

The monetary history of Venezuela has been characterized by different exchange regimes: from monetary patterns such as copper, silver and even gold, then exchange controls with different durability, to systems of flexible changes and bands. In addition, measures have been applied to correct official and unofficial devaluations, legal and illegal disintermediations. Transversally, Venezuelans have gone through exchange and banking crises, which have resulted in absorptions, mergers and even liquidation of banks, due to causes such as high leverage, patrimonial insufficiency, irrational transformation costs, distorted banking functions, among others.

Black Friday represents a milestone in Venezuela that changed our economic history. Until that day the dollar was quoted freely in the country at the value of 4.30 bolivars. Since then the constant devaluation of the bolivar, complications with the payment of external debt, accelerated deterioration of purchasing power and the implementation of an exchange control called "Regime of Differential Changes" (RECADI) -of which important cases of corruption - by the government of the time, they made disappear the exchange stability of the Venezuelan currency.

The Dicom will seek to balance the price of the parallel exchange rates and normalize the allocation of foreign currency for legal and natural persons in Venezuela.

The new Foreign Exchange Floating Market Exchange Rate System (Dicom) in Venezuela aims to normalize the price of the exchange rates established by private banking and the illegal market, as well as to optimize the allocation of foreign currency (dollars, euros and other foreign currencies), both natural persons, legal entities and public and private banks.

The increase in the money supply increases inflation
The increase in the supply of money (printing more bills and minting coins) has a direct effect on inflation, which usually leads to inflation.

Inflation is basically the increase in the general price level of goods and services that affects the nominal value of money. This phenomenon is due to the fact that as the money supply increases, there is more money available to acquire the same goods and services since their supply remains unchanged, so that money loses real value. A classic effect of the law of supply and demand.
When the money supply increases, the nominal value of money remains unchanged, but the real value of money does not, since before the increase in prices, less goods and services are acquired with the same money. It is what is known as the loss of the purchasing power of money.

The increase in the prices of food, hygiene and pharmaceutical products are a constant in the economic situation of the country.

The best comparison term is for any employee who goes to the market with the key question: do you have more purchasing power than a year ago?

A single family lunch, prepared at home, with chicken and potatoes at supermarket prices, for a family of five, can cost today the equivalent of the average monthly salary of a professional.