I have written many articles not only about how awful socialism is, but also about how socialism has been destroying, and will continue to destroy, the once prosperous, oil-rich nation of Venezuela.
And most recently, I even wrote an article that suggested that Venezuela was moving away from socialism. So, if that’s what’s happening, why are economic problems still ravaging the country? Well, two reasons, really. First, I wrote that article only about a month ago, so things don’t tend to change that dramatically that quickly. Second, I wrote that they were turning away from socialism, not that they were turning toward capitalism.
I pointed out how, in their transferring of regulatory power to companies allied to the Venezuelan government, they are acting more like post-Soviet Russia: Oligarchy, not capitalism.
If they were turning to capitalism completely, THEN, they would see great economic return very quickly.
But in any case, let’s focus on what’s happening there at the moment.
Reuters reports that Venezuela is running out of physical cash as Maduro is seeking to speed up the implementation of digital currency called “digital bolivar”.
“Venezuelan President Nicolas Maduro is pressing banks to implement digital payment systems as hyperinflation prompts chronic shortages of cash in the bolivar currency, three people familiar with the talks told Reuters.”
Maduro is targeting the public transit system in particular since roughly three-quarters of all circulating cash is spent there.
Annual inflation is hitting nearly 3,000%, which is at least better than the peak of 10,000,000% back in 2018 but obviously, it is still carrying plenty of issues for the people of Venezuela. Long lines are forming outside of banks in Caracas, where residents are hoping to withdraw the maximum of 400,000 bolivars, which sounds like it’s a lot of money, but it’s barely anything – the equivalent of 20 U.S. cents.
Reuters reports: “Venezuelans have stopped using cash bolivars for food and many other day-to-day purchases. It would take forty bills of 50,000 bolivars to buy 1 kilo (2.2 lb) of rice. Instead, many use U.S. dollars in cash or debit cards – sometimes backed by U.S.-dollar accounts at local banks.”
“In a sign of worsening cash shortages, the central bank on March 5 announced it would begin to issue bills worth 1 million bolivars each. Even that would be worth just a handful of [bus] rides.”
Those 1-million bolivar notes would currently be worth only 50 U.S. cents at best, as hyperinflation, especially as more of those 1-million bolivar notes are printed, would naturally lead to even that amount of money to be worth less and less.
But cash isn’t only disappearing in terms of worth in Venezuela. Physical cash is also literally disappearing in the country. Reuters reports that only 2% of Venezuela’s total money supply is currently in circulation, which is down from 7% just a few years ago.
This makes sense, seeing as Reuters noted that Venezuelans have largely stopped using the bolivars to buy food, opting instead to use U.S. dollars, and 75% of the bolivars are used for transit fare.
The cash is worth so little that people literally make bags and purses out of the money to try and sell them outside their country. You can find listings of such products on Etsy for around $60.
Funnily and coyly enough, Nicolas Maduro admitted to cash disappearing in an interview earlier this year, saying: “Yes, it is disappearing. For Venezuela that is a big advantage.”
Of course, he did not go on to explain how or why that was an advantage at any capacity, because everyone, including him, knows that he is utterly full of crap. Like socialists tend to do, he lies to his people and tells them that the poor economic situation is actually “a good thing” or “puts us at an advantage”.
I’ve shared this story before, but I feel it’s worth repeating here.
Back during the Falklands War between Argentina and the U.K., the Argentine government would often report to its citizens about how they killed this many English soldiers or they took this much amount of ground, etc. If you were living in Argentina during this war and your only source of information was the Argentine media, you would believe that Argentina (which had not fought anything resembling a real and direct war in over 100 years) was kicking British butt. Just 10 weeks after the war started, it ended in Argentine defeat.
Again, if you were just consuming the Argentine media, you were led to believe Argentina was winning against the Brits (specifically, the British Navy, which is even more unbelievable), only to find a few weeks later that your country just lost the war and the Falkland Islands (which were called “Las Malvinas”) remain a British colony. All lies, which is no different from what Maduro is doing.
The only difference, perhaps, is that the Venezuelans likely aren’t buying the crap Maduro is selling because unlike Argentine citizens during the Falklands War, the Venezuelans are actually and routinely seeing the “advantages” of this socialist economy.
Even the Argentine soldiers were led to believe some of the crap the government was spewing. Juan Guerrera, a then-18-year-old Argentine soldier in the Air Force told The New York Times in 1982 “Nobody has explained to us why we lost. I think they should tell me what happened. Maybe I was a bad soldier. I don’t know. But I need somebody to tell me what we did wrong.”
So for anyone who understands how these socialist-type government leaders work, the crap that they spew is easily recognizable.
There is no advantage for Venezuelans that cash is literally disappearing. It’s disappearing, in part, precisely BECAUSE of the hyperinflation that the country has been going through for years thanks to the socialist and idiotic belief that printing endless amounts of money is the solution to all economic woes.
Even at home here in the U.S., there are people who are dumb enough to believe that the country is incapable of running out of money.
Clearly, such people have never heard of the Weimar Republic, where the highest inflation rate was 29,500% (for perspective, Fed Chairman Powell has to try to calm the markets about a possible 2% inflation rate in the coming months), or Yugoslavia in the mid-1990s when highest monthly inflation rate was 313,000,000%, or Hungary in the 1940s, when highest inflation rate was 13,600,000,000,000,000%. That’s 13.6 quadrillion percent. According to CNBC, prices were doubling every 15.6 hours in Hungary during that time.
At one point, Hungary even had a denomination bill of 100 quintillion pengo.
So the idea that the government can endlessly print money without any worries is something that many countries have tried and all of them have seen its catastrophic results. Venezuela is merely one of them and it’s not even the worst case. Again, the peak for them was 10,000,000% inflation rate in 2018. Yugoslavia in the 90s and Hungary in the 40s would both kill for 10 million percent inflation rate. But all of them, to different capacities, have suffered greatly and excruciatingly because of the erroneous belief that the government is incapable of running out of money.
Venezuela is seeing this first hand right now and, again, their physical cash is worth so little that they are better off making handbags and purses out of them and selling them outside the country than actually using them to buy things.
This ought to be a major warning for any and all countries who think hyperinflation is no big deal or that socialist policies which are misguided at best such as endless money printing is not only achievable but beneficial. History has proven to those who pay attention to it that such policies not only don’t work and are unobtainable (endless physical cash requires endless use of paper which means endless cutting down of trees, so this is a bad idea even from an environmental standpoint) but are altogether detrimental in horrible ways for the people of those countries.
Learn from history, or you’ll be doomed to repeat it, as they say.
“The way of a fool is right in his own eyes, but a wise man listens to advice.”
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