centralized planning

Back (reverse) of Venezuelan currency, 2007 – 2017

Reverse of 100,000 Bolivares paper currency. In 8/12 this would have been worth $10,000. In 9/15, only $125. By 12/17, it was worth $0.90. In 12/18, seven of these would have been worth a US penny.

Before we use Venezuelan Bolivares currency to show the devastation of hyperinflation, let’s finish looking at the currency.

Previous post showed the front (obverse) of 2 through 100,000 Bolivares paper money.

Now let’s look at the back (reverse).

The reverse side shows various wildlife.

2 – dated 12/27/12 – Toninas

5 – dated 5/24/07, Cachicama gigante, giant cachicamo

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By Jim Ulvog, ago

Front of Venezuelan currency (obverse), 2007 – 2017

Reverse of 100,000 Bolivares paper currency. This is now worthless. In 12/20, one US dollar could get you 1.2 MILLION of these.

To illustrate the devastation from hyperinflation, we will now use Venezuelan Bolivares currency to see what it looks like in terms of paper currency.

To start, we will look at the currency itself.

As usual for currency outside the U.S., the paper money of Venezuela are esthetically beautiful. All the bills are colorful with lovely illustrations. All the ones we will now see have a nice sized watermark at the otherwise empty space. The watermarks are same face at the bottom of the obverse (front).

Portraits on the obverse of the currency are patriotic reminders of the struggle for Venezuelan independence.

To start our pictorial excursion, here are the obverses of the 2 Bolivar through 100,000 Bolivar currency:

2 – dated 12/27/12, featuring Francisco de Miranda, his efforts for independence in South America failed; he served as forerunner of Simon Bolivar.

5 – dated 5/24/07, featuring Negro Primero

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By Jim Ulvog, ago

This is hyperinflation, Venezuela edition. Expected devastation from socialism. Part 4.

Final graph in this series of posts showing the devastating hyperinflation currently running loose in Venezuela will combine two sets of data.

Purpose of doing so is to see if the two sets of data overlap so that there is some good longer-term information that can be used into the future. The source for current data only goes back to late 2020.

Graph at the top of this post shows exchange rate of Venezuelan Bolivars into US dollars between June 2019 and March 2021. This graph is expressed in Bolivar soberanos (Bv.s).

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By Jim Ulvog, ago

This is hyperinflation, Venezuela edition. Courtesy of socialism, of course. Part 3.

This image has an empty alt attribute; its file name is Venezuela-exchange-rate-2012-2018.jpg

Let’s look at the exchange rate in Venezuela in more detail, breaking out the exchange rate before and after 2018. On the previous graphs it looked like the exchange rate deterioration wasn’t that bad in the lead up to 2018 and it looks like things turned real bad starting in 2019.

That’s the weird thing about hyperinflation. If you remove the recent severe acceleration you still see the rapid increase earlier.

Graph at the top of this post shows exchange rate through 2018. It looks like hyperinflation kicked off in early 2018. Actually, it was going crazy before that. Inflation so severe as to destroy the economy has been running since 2012. Let’s change that graph above to a logarithmic scale to show the percentage changes better.

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By Jim Ulvog, ago

This is hyperinflation, Venezuela edition. Courtesy of socialism, as always. Part 1.

Banknotes of Zimbabwe after hyperinflation. Image courtesy of Adobe Stock.

Socialism in Venezuela has produced the expected results – poverty, a collapsing economy, and people fleeing for their lives. Twenty some odd years of socialism has also produced another foreseeable consequence – hyperinflation.

Let’s track the exchange rate of Venezuelan Bolivars to US dollar as an indicator.

According to Exchange-Rates.org, here is exchange rate of the Venezuelan bolivar to dollar from 9/11/20 through 3/5/21. Here is the month end data:

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By Jim Ulvog, ago

Venezuelan government supported with cash from investment bank while support from military is weakening

Image courtesy of Adobe Stock.

A New York investment bank bought bonds from the Venezuelan central bank at a steep discount and got a lot of heat for doing so. The military is applying more violence to protesters as support from the rank and file appears to be shrinking.

5/30 – Wall Street Journal – Goldman Sachs Under Fire for Venezuela Bond Deal – Goldman bought $2.8B of bonds issued by the government-owned oil company for $865M. That is 31% of face. If, and this is a big if, the bonds were to be paid in full, on-time, at face value that would produce a 40% return.

Goldman is in a PR mess because the bonds were held by the Venezuelan central bank, meaning Goldman essentially put almost a billion dollars into the government’s hand.

Article says Goldman has been increasing their holdings of Venezuelan debt over the last few months. Their play is that if government gets its finances in order, the bonds will soar in value and Goldman will make a huge profit.

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By Jim Ulvog, ago

Why, oh why, did production of oil and food collapse in Venezuela? What could have caused this amount of human suffering?

Shipwreck standing on the beach with the sea in the background. Margarita Island. Venezuela. Photo courtesy of DollarPhotoClub.com

Devastation in the oil industry and food supply chain in Venezuela is due to intentional government policies.

One article sees how the government caused the damage to the oil industry while another article sees the devastation in the food supply but cannot see any direct cause.

(Cross-post from my other blog, Outrun Change.)

5/7/17 – Forbes – How Venezuela Ruined Its Oil Industry – Here is a primer on how to destroy your oil industry when you have the world’s largest proven reserves of oil and are in the top 10 of world oil producers.

If you want to destroy your country, the article provides a how-to-guide, using Venezuela as the road map.

The high point of oil production in Venezuela was 3.5M bopd back in 1998, which not by coincidence was the year Hugo Chavez became president. Production then began to slip. How could that be?

After civil unrest in 2002 and 2003, Chavez fired much of the staff of the national oil company, letting go 19,000 experienced staff.

Let me translate that: 19,000 staff who knew how to produce extra-heavy oil were fired and replaced by people whose primary job skill was loyalty to the president.

Extra heavy oil takes specialized knowledge and is very expensive to produce on top of oil production already being capital-intensive.

To generate more revenue, Venezuela invited five of the oil majors to develop more oil production. The form of investment was a partnership. The five majors invested many billions of dollars in oil production.

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By Jim Ulvog, ago