The real news of 2018: Venezuela's hyperinflation crisis

in venezuela •  4 months ago

Venezuela is currently experiencing hyperinflation. Since we expect that most fiat currencies (with centrally-managed unbounded supplies) will eventually hyperinflate, Venezuela is an important case study. In fact, I consider Venezuela one of the most interesting and informative pieces of global news in 2018.

First, check out how quickly the Venezuelan currency called the bolívar fuerte is losing value, just in the last year. Below is the price of a cup of coffee at Cafe Con Leche, a bakery in Caracas, according to Bloomberg:

bolivars-cafe-con-leche-index.png

You might ask, why is the purchasing power of a whole currency being measured by a single item rather than a basket of goods? Well this underscores the difficulty of obtaining reliable financial metrics in a country where the value of money is changing so quickly and the government suppresses the free flow of economic data.

By the way, fuerte means strong and it's only in the name of the currency because in 2008, the bolívar was redenominated 1000:1. However, fuertes will not be the unit for much longer, as another devaluation is needed and another 1000:1 redenomination will occur on June 4 to the bolívares soberanos (meaning sovereign).

I've read several mainstream media articles on the situation in Venezuela. They tend to capture the international aspects of the situation, such as increasing sanctions and international corporations pulling out from the country. However, these articles seem to overlook the most noteworthy aspects: what is the situation like on the inside? Why is this happening in Venezuela as opposed to some other socialist country with shaky finances. To answer these questions, I've found nothing better than two recent Let's Talk Bitcoin episodes.

The first is Episode #365 titled "El Petro and Money That Doesn't Work". In this episode, the LTB hosts speak with Alejandro Machado, who used to live in Venezuela and is not shy about blaming government corruption in causing the crisis. However, you get the sense that Alejandro's gripes are not just political. The government is widely despised by the populace and the elections are a charade. The episode also talks about the El Petro crypto-token the ruling party is releasing and determines it's essentially an ICO where the deadbeat government makes a future promise to develop an oil field, e.g. scam.

@aantonop makes a great point that socialism is only a small part of the crisis in Venezuela: fiat currency issued by a corrupt indebted government and a resource economy are the primary causes.

The second podcast is Episode #366 titled "Outside Perspectives". Starting at 15:27, Christian Garcia reports a segment from within Venezuela discussing how difficult the previously simple act of buying eggs has become. This is such an incredible segment and includes authentic Venezuelan street noise. Give it a listen:

It's fantastic to see Venezuelans using bitcoin to escape the financial repression and mismanagement of the ruling party.

This episode provides some important lessons regarding hyperinflation. Foremost, the first thing you do when you get the hyperinflating currency is to spend it. If you dilly-dally, then the money may lose half its value or more before you spend it. Ironically, this lack of faith in the currency accelerates the hyperinflation as there is very little demand to store wealth in the currency. Essentially, you've got to store wealth in hard assets, like physical goods. Or cryptocurrency if you're woke.

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Venezuela Is definitely a very good case study. I grew up there and I know many people are relying on cryptocurrencies to be able to eat properly, not to mention pay bills and stuff. Thanks for such insightful post!

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Glad you found my post!

Do you still live in Venezuela or are you somewhere else now? Is it easy to migrate to/from Venezuela these days or does the government restrict migration?

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Moreover, the reason I'm very excited about cryptocurrencies is because they can indeed make a profound impact in people's lifes, specially in those countries such us Venezuela. Let's say $2 they can do in steemit a month is already one extra salary. It's not like they can do a lot with that money since the inflation it's just crazy but what could happen if they make ten bucks? It's like a blessing for them! The key here is to educate people about such things and teach them how to use cryptos, how it can improve their lives and so on..

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Hi! I moved from Venezuela to Sweden in 2011. At that time it was somewhat difficult but still doable. For instance, I could save money for the ticket without any major problem, even being a student. Nowadays it is just insane. Many airlines have stopped flying from/to there because it is not profitable. Every good in there, including flight tickets, are basically priced in USD, converted at the rate of the black market to bolívares. Of course it became impossible to flight since the minimum wage is around 2MM, while a ticket costs 5 billions or something like that... It's just insane.

I know few people who flew from Venezuela recently and their relatives who live abroad bought the tickets for them. Those who don't have that luck have gone through Colombia, by bus or something, to other countries within Latinamerica.

It's a terrible situation indeed, what you read in the news is almost a fairytale in comparison to how it really is unfortunately.

I have met several Venezuelans who are attempting to make their living on Steemit since the platform offers them a better chance for a future than their own government. One of the truly positives to the decentralized world of crypto!

I never really knew how bad the inflation was there until I met some people from Venezuela here on Steemit. I loved how you broke the scenario down and shared the podcasts. Steemit seems like it is a great resource for this type of hyperinflation and I hope that the people of Venezuela will be able to overcome this!

Excellent post! Thanks again for your insight and the resources!

Feel sorry for Venezuelan people, who have to struggle all this years. It is so hard to believe that the proven oil reserves in Venezuela are actually recognized and considered as the largest in the world.

A very interesting reviews, I've seen on one of the citizens of Venezuela postings he said that the price of th 17 steem same with 350 million bolívar.

This is an important topic. I was recently in Colombia and interacted with many refugees coming from Venezuela. How can we change this?

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I think the first step is a regime change.

Hard to believe that a country so reach with natural resources is having economic issues all this years.

I am resteemit your post

@dhimmel you have collected,presented some awesome and very useful information. i am very happy on this article.

A natural resource can make a country developed.It is a matter of luck.

yes this episode so important for us, we know now days about bitcoin.Helpful post.thnaks.....@dhimmel