Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Venezuelans Are Awash in Cash with Nothing to Buy

  by    0   0

The people of Venezuela are currently suffering from triple-digit inflation and their bolívar fuerte (“strong bolívar”) currency isn’t worth 0.10 US cents at the moment, according to Bloomberg. As the country approaches hyperinflation levels, buying everyday items (when available) takes so many bank notes businesses have abandoned counting and starting weighing money instead. Boxes and bags of bills are becoming a nuisance to shop owners who have to find places to store the currency.

Empty shelves at a store in Venezuela

Venezuela’s real inflation rate is shrouded in mystery, given that the government rarely releases any official numbers. Some estimates have it between 200% to 1,500%.

The Venezuelan government is scrambling to find a practical solution, asking private currency companies to expedite orders for larger denominations before the Christmas season brings employee bonuses, ATM withdrawals, and increased commerce.

Exacerbating the situation is that 40% of Venezuelans have no bank accounts and a third of workers are paid in cash. With so much currency being stirred about the country, it would seem like getting cash would be fairly easy, but that’s not the situation. In fact, the Venezuela’s central bank released a study showing a decrease in overall ATMs available. The bank machines that once were stocked every few days are now being replenished with replacement bolívars every few hours to meet demand.

Venezuela’s inflation is a good cautionary tale. It’s a story whose moral puts most of the blame on bad monetary policies, currency depreciation, and regulation of the free market. In 2013, the government depreciated its currency to a third of the original value in order to lower export costs and strengthen domestic business. In turn, increased taxes would help the Venezuelan government narrow a budget shortfall.

By making imports more expensive, the government motivated consumers to buy domestic products. However, it also ensured the country was exporting more and importing less, which reduced the supply of products to buy while simultaneously increasing the quantity of money consumers had to purchase them. Currency devaluation may appear to protected domestic businesses, which feel less pressure to compete, but it also increases material costs, with the net result being reduced production.  As the supply of goods falls while the supply of currency to bid for them rises, prices have nowhere to go but up.

Devaluing the strong bolívar against the dollar has halted the import of many products the Venezuelan people depend on to live. US manufacturers have little incentive to trade against such a devalued currency. It’s also helped drive the US dollar out of the country altogether, which has also lead to product shortages in basics like toilet paper, rice, and coffee.

In the country’s 2012 presidential election, the government ramped up spending to influence voters just before the Hugo Chávez victory. Although the spending grew the economy by 5%, the outlay increased the budget shortfall by 8% to 17%.

The US is facing many of the same ills as Venezuela, from a devalued currency through low interest rates to the manipulation of economic numbers during an election. Currencies not backed by gold are susceptible to artificial manipulation by governments and central banks. Retaining your personal wealth means investing part of your portfolio in something physical, like buying gold and silver.

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Arizona Governor Signs Bill to Repeal State Capital Gains Taxes on Gold and Silver

Good news for precious metals investors in Arizona. On Monday, Gov. Doug Ducey signed a bill into law that eliminates states capital gains taxes on gold and silver specie. It tax repeal will not only benefit Arizonans who invest in gold and silver, it will also facilitate their use as currency and undermine the Federal […]

READ MORE →

Moody’s Drops China’s Credit Rating as Debt Piles Up

The US government isn’t the only one piling up debt. We’ve reported on the ticking debt bomb in the US. Apparently, the timer is ticking in China as well. This week, Moody’s downgraded the country’s credit rating from A1 to Aa3, and changed its outlook from stable to negative. It was the first downgrade of […]

READ MORE →

Jim Rickards: Don’t Watch the Circus in D.C., the Real News Is Gold

Over the last few weeks, the media has fixated on whether or not firing FBI director James Comey and allegations of Russian collusion will turn into Donald Trump’s Watergate. But in a recent column, economic analyst Jim Rickards said that really isn’t the most significant thing that‘s happened. While everyone is focused on the Washington […]

READ MORE →

Trump, Watergate and Gold

Could Trump be facing his own Watergate? The president’s firing of FBI director James Comey in the midst of probes into the administration’s possible connections with Russia set off a political firestorm. There has even been talk of impeachment in recent weeks. While at this point, much of the rhetoric spinning around the Beltway is […]

READ MORE →

Everything’s Better in Gold! Even Toilets

Everything is better when it’s dipped in gold! So, how about a $1 million gold toilet? The rapper Birdman has one. He posted a photo of it on Instagram. And that’s just one of the crazy things coated in gold recently highlighted on CNBC’s “The Filthy Rich Guide.” Related

READ MORE →

Comments are closed.