Venezuela Solves Toilet Paper Shortage As Inflation Surpasses 100%

Tyler Durden's picture

There are no longer words to summarize the utter devastation taking place in Venezuela's 'socialist paradise' economy, but one can try. 

Unfortunately for residents of the Latin American country, what had been predicted on these pages for the past several years is finally coming to pass, as is Venezuela's official currency: the bolivar fell 25 percent on the black market last week to 423 per dollar. As the unofficial Venezuela currency has weakened 80% in street markets in the past year, it is now worth about 66 times less than the primary official rate of 6.3 bolivars per dollar.

According to Bloomberg, the bolivar’s dwindling value leaves many Venezuelans stuffing their pockets with wads of cash, since stacks of bills are often required for a routine trip to a restaurant or supermarket.

Asdrubal Oliveros, director of the Caracas-based consultancy Econanalitica, put it rather succinctly:  “You want to buy a car? There aren’t any. You want to buy an apartment? You can’t afford one. Basic products aren’t available,” he said. “The only refuge that people have is buying dollars, and because of that, the demand doesn’t stop.”

Since unlike the "developed" world where the debt slaves are misled to believe they too can experience the "wealth effect" by dumping their disposable income in the stock market, people here are buying dollars because of a scarcity of hard goods that could serve as a store of value, according to Oliveros.

And what hard goods can be found can no longer be afforded by anyone.

In fact, Venezuela is gripped in the worst case of hyperinflation currently on earth. According to Bank of America "April inflation reached 100.7% year-on-year and that monthly inflation averaged 8.5% in the first four months of the year." And that is what total economic collapse looks like.

From BofA:

Venezuela’s central bank has not published the Consumer Price Index series since December 2014. Given the rate of observed money creation, the instability in the parallel market and the large local currency financing needs, there are reasons to be concerned that prices could be accelerating very rapidly.

In Caracas, not even quadruple seasonally-adjusted prices can either soothe these concerns, or fool any more of the people, any of the time.

Our estimate indicates that inflation accelerated in year-on-year terms and reached 100.7% in April (Table 2). Monthly inflation peaked at 12.4% in January yet remains high and came in at 6.6% in the most recent print. The average monthly inflation rate observed during the first four months of the year was 8.5%, which would correspond to an annualized rate of 165.9%.

 

Chart 1 shows the confidence intervals for our year-on-year inflation rates derived from considering the predictions of the 5th and 95th percentile of our forecast distribution. In the most conservative estimate within this range, inflation reached 88.1% in April and averaged 6.7% monthly (118% annualized). In our least conservative estimate, it reached 110.8% in April and averaged 9.8% monthly (208% annualized). Chart 2 displays the distribution of all of our April estimates and shows that they overwhelmingly point to price acceleration.

 

The good news, according to BofA, is that hyperinflation is good for you: just ask any Keynesian tenured economist and every central banker who is desperate to recreate the Venezuela case study at a global level. After all that $200 trillion in global debt won't hyperinflate itself away.

There is overwhelming evidence that the end of hyperinflations is expansionary and tends to bring political benefits to the governments that ultimately stabilize the economy. This raises the incentives for both the current and a potential future administration to implement the price adjustments that, up until now, have been deemed too politically costly by the authorities

Curiously, on the question of what happens to the government that leads the country into hyperinflation and presides while society tears itself apart, Bank of America had nothing to say about that.

It also had nothing to say about how Venezuela just solved its toilet paper shortage.

As for the best one sentence summary of current events in Venezuela, the following may suffice:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SafelyGraze's picture

this is very good news for venezuelan exports

full steam ahead

Pladizow's picture

Another reason why the $ is going no where but up for a while!

NoDebt's picture

The BLS calculates Venezuelan inflation at only 6.4% using the same methodology as they do for the US.  So it can't be 100% inflation.

Pladizow's picture

Silly you, you forgot the quadruple seasonal re-re-re-re-hypothicated non-GAAP-adustment!

0b1knob's picture

Meanwhile dead beat broke Argentina is playing hardball on debt repayments from dead beat broke Cuba.

http://articles.economictimes.indiatimes.com/2015-05-20/news/62413117_1_...

Cuba used the loan to buy Fiat(s). You can't make up stuff like this.   And the various joke countries of South and Central America can't figure out why no one but Obama takes them seriously.

COSMOS's picture

LOL, buying Dollars, they are bigger fools than I thought.  Instead of buying precious metals or goods they can resell on the black market, they buy dollars.  Fiat that is printed at a faster rate than their bolivars.

MonetaryApostate's picture

When socialist criminal rule.....

asteroids's picture

Wait until the Euro crashes and everyone runs to find dollar bills.

kaiserhoff's picture

Mr. Yellen must be soooo jealous.

Bokkenrijder's picture

No worries though, Venezuela repatriated their gold so they must know that they're doing.

Thisisbullishright's picture

It's all good...

Our "markets" have clawed back most of yesterdays losses as the casino continues unfettered.

We can keep hitting the PRINT button forever because there are no repercussions from wreckless money printing here.

BTATFH and go back to sleep....

 

 

This is it's picture

Who needs toilet paper when you've got hands.

Osmium's picture

Coming soon to a reserve currency near you.

actionjacksonbrownie's picture

No shit - out of the frying pan and into the fire. They deserve the fate that awaits them.

Ramesees's picture

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”

ThaBigPerm's picture

We Rudyard Kiplinged some folks.  And made love to their wives.

XitSam's picture

Does Venezuela have a tradition or old currency based on precious metals?  Trying to guess how things will decline here.

Pancho de Villa's picture
Pancho de Villa (not verified) XitSam May 27, 2015 3:16 PM

"...tradition or old currency based on precious metals?"   Of course!   Pick up a coin catalog and have a look...    Going back a century or so you can't hardly find a nation that didn't have silver coinage. Even Palestine had silver coins from 1927-1939! 

 

This hyperinflation is nothing new. I have a Bolivian 10,000 Bolivianos note from 1984 with "Un Centavo" stamped on it. By the time these were printed they were already nearly worthless...  They just "re-valued" them before issuance! 

 

As far as TP shortages go, they're almost always politically created. The Corporate interests that control distribution, create a "shortage" to embarrass the Regime in power. It's a black market item that just costs about four times what it should.  Before I'm attacked by another fucking smartass accusing me of supporting the "Socialist Paradise", I was told this by a friend living in Caracas that is vehemently opposed to the Chavez/Maduro Regime. They struggle to get by; wish they could buy a new car...  Travelling to a country dealing with hyperinflation is great if you hold $US, for now... Never exchange more than you need for the week because the next time you'll get even more. Just watch your back at the "Casa de Cambio", and drive quickly and aimlessly until you're certain you're not being followed.  Everything seems so cheap! Going out partying with friends, Drinks are on me! 

sodbuster's picture

April inflation reached 100.7% year-on-year and that monthly inflation averaged 8.5% in the first four months of the year."

A Keynesian dream come true!!!!!

youngman's picture

You gotta love the OFFICIAL RATE...that is set by the big man himself....no inflation here....its all the Capitalists fault...

disabledvet's picture

So gasoline is still ten cents a gallon though, right?

Mini-Me's picture

When you can't afford a car and there's no place to go because there's nothing to buy, inexpensive gas is kind of pointless.

TBT or not TBT's picture

Venezuela must be culturally vibrant, with so many liberated from work and material pursuits to pursue self expression, as Pelosi reccomends.

pazmaker's picture

Sad...it is getting more difficult to get a flight out of there  too....better have dollars.  I have two family members there and we are trying to get them over to Ecuador to get out of that mess

samjam7's picture

Take the landroute into Colombia and fly from there. Depending on where they live you can fly out of Carreño or Cúcuta! That's what I did two months ago! Pretty straight forward. 

And yes guys it is messy! The biggest bill in circulation is currently still worth a quarter on the black market so you can imagine how fast your wallet starts to overflow with worthless paper and that in not the most secure environment, to put it midly! Gives you a good taste of things to come here though...for those of you who want to get a first experience it's definitely the place to be!

Stormtrooper's picture

I've got to stop buying those silver Liberties. Won't be much good to me when we run out of TP. Better to keep stacks of FRN one dollar bills.

Salah's picture

The fix is in: Venezuela to DOLLARIZE (despite what el presidente fuckhead proclaims)

http://www.voanews.com/content/maduro-rules-out-dollarizing-venezuela-ec...

TBT or not TBT's picture

Couldn't they just go for even more democracy?   Its one person one vote now, but they could do a 2:1 split and give everyone two votes.  Democracy got them this far.  Makes sense to double down.  

tarabel's picture

 

 

I remember the old quote about how governments are the only entity that can take a valuable comodity like paper and render it worthless by printing on it.

fremannx's picture

As has always been my assumption, the dollar will get stronger as the global deflationary depression widens. Venezuela is a great example of the concept explained here...

http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...

USD chart

http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...

stormsailor's picture

my mechanic's parents live in venezuela, his grandparents moved there from germany.  friday a week ago he told me that the official exchange rate was something like 8 to 1. but that dollars on the black market were getting close to 800. so this story doesn't suprise me.  to buy anything on the black market you need dollars, if you get paid in bolivars you need to convert to dollars as quickly as you can because a day can make literally a 10% difference. of course if you are caught doing any of this you are in big trouble but if they arrested everyone they might as well put a fence around the country, hey wait a minute, they already did, lol.

 

i ask him about it because i am interested to know how people get along in that environment.

CHC's picture
CHC (not verified) May 27, 2015 4:31 PM

It's the banksters and politicians that should be rotting in hell - not the average man on the street suffering through this type of crap.  Same thing is going to be happening here in the States soon enough.  People will be literally dying in the streets while the "elite" laugh and drink away their nights in their ivory towers.  Fuck 'em!!

Stevious's picture

Deliver me!

"...it is now worth about 66 times less than the primary official rate of 6.3 bolivars per dollar."

It cannot be any times "less than," it must be 1/66th or 0.015 of the original.

Gosh Tyler go back to grade school and learn hmm....math...English?  Maybe both...

Kprime's picture

that's a dividie sign, my momma taought me how to dividie.  Take nife and cut an aple in half and you have a dividie.  dividie an aple 66 times and you have a pie. the pie is another math of a cirkular.  momma says "math is like a box of caulkolates, you never know what ur gonna git."

ThroxxOfVron's picture

"As the unofficial Venezuela currency has weakened 80% in street markets in the past year, it is now worth about 66 times less than the primary official rate of 6.3 bolivars per dollar.  "

 

WHAT???  "66 times less than"? 

This is pure fucking nonesense.

SPEAK ENGLISH OR STFU YOU BASTARD!

Bemused Observer's picture

A toilet paper shortage? Seriously? And this is supposed to be because of socialism?

Nonsense. In a socialist environment, people would get together and create/own/operate a company to recycle the tons of existing scrap paper into cheap but effective toilet paper...

Our modern day capitalism won't allow something like that though...too many laws and regulations and financial barriers to any kind of personal entrepreneurial spirit-thing that might try and take hold.

And, the modern-day capitalists would much rather have the Venezualans obtain their toilet paper by engaging in international trade. They should export all of their own goods and juice their GDP, then buy back all the stuff they need from us by taking out loans from our banks...

Kprime's picture

toliet paper costs more thatn Bolivars, just use Bolivars to wipe your ass.  Use the toliet paper as currency.

squid's picture

These are strange times indeed....

I find myself agreeing these days Bernie Sanders and Chris Hedges.

The problem is generally a definition of terms.

When you say "Capitalist" you mean someone that produces a good or service for sale. The problem happens when the leader in a certain industry, instead of dealing with compition by producing more efficiently or cheaply, seeks to bribe goernment to make it illegal for any other party to enter that market. This is what we have in the West today in banking, the medical industry and several others....but its no longer capitalism. When industry seeks (bribes) government force to squash or prevent compitiion, this is not capitalism anymore, I'm not sure what it is.

 

Its a confusion of terms. People say there is a problem with the free market in the West.  Not true. There is no free market to have a problem with and THAT is the problem. If we have free markets Jamie Daimond would be selling shoes, but he's not because he is back stopped by the tax payer....that is NOT a free market. I could list HUNDREDS of other industries like this but you get the idea.

 

Squid