Government will withdraw all 100 Bolivar notes from circulation after Wednesday, tomorrow. The level of suffering will increase even further.
(Cross-post from my other blog, Outrun Change.)
12/4 – AP – Venezuela to issue larger bill as currency continues to melt – Article says the central bank has announced they will issue bills in the 500 to 20,000 Bolivar range. This follows up on previous reports saying they were planning to do so.
The exchange rate is now 4,587 Bolivars to the dollar.
Article says that is a deterioration by a factor of five in the last year.
The official exchange rates are 10 and 663 to the dollar.
12/10 – BBC News – Venezuela seizes Christmas toys to distribute to poor –The army seized (that is, stole) 3.8 million toys from a wholesaler who was selling them for exorbitant prices (i.e. market value). The army ordered retailers to limit their prices to allow a 30% profit margin (i.e. price controls which will instantly create shortages). The toys will be distributed to poor children (which makes everyone who isn’t a top-level government or army official eligible) to help them (but will actually only help the politically connected or those who the army wishes to buy off).
12/12 – Reuters at Fortune – Inflation-Hit Venezuela is Pulling Its Largest Bill From Circulation – Largest bill in circulation is the 100 Bolivar note, worth about two cents of a U.S. Dollar. Every one of the six billion of those notes must be pulled from circulation by Wednesday and exchanged at the central bank within 10 days.
On Thursday the government will release new currency, with the largest at 20,000.
Article blames the financial mess on government currency controls imposed in 2003 and the drop in oil prices. No indications of any other possible cause for this massive human suffering.
12/12 – Wall Street Journal – Venezuela Yanks Bills From Circulation – More details on how the government intentional wants to further devastate the people in Venezuela. Worst of the deliberate harm will fall on the poor, especially those who are small shops or people who live far from banking outlets.
Article explains all 100s must be deposited in a bank account by Wednesday. After that, the bills must be exchanged at the central bank but only after an interview by the secret police. Risk is the bills become worthless after Wednesday. Confiscation, essentially.
Great graph in the article shows the Bolivars in circulation by denomination. Face value of currency in circulation has quadrupled from 2014 to 2016, going from just under 200 billion to just under 800 billion. About 75% of the value of currency is in 100 Bolivars notes. It is mathematically impossible to replace the 100s. It will take months for the new 20,000 note to circulate so that it can replace the 100.
With 600 billion of 100s in circulation, that means there are about six billion notes around. There would need to be 30 million of the 20,000s in the bank vaults to handle the switch.
The disruption in an already shattered economy will be severe. The level of suffering will increase. Keep in mind that is intentional.
Oh, your pop quiz for the day: What economic system has created this suffering?