Maduro Stunner: Venezuela Eliminates Half Its Paper Money After Pulling Largest Bill From Circulation

Tyler Durden's picture

Having observed the economic chaos to emerge as a result of India's shocking Nov. 8 demonetization announcement, and perhaps confident it can do better, today president Nicolas Maduro of Venezuela, Latin America's most distressed economy, mired in an economic crisis and facing hyperinflation, likewise shocked the nation when he announced on state TV that just like India, Venezuela would pull its highest denominated, 100-bolivar bill (which is worth about two U.S. cents on the black market), from circulation over the next 72 hours, ahead of the introduction of new, higher-value notes, as large as 20,000.

"I have decided to take out of circulation bills of 100 bolivars in the next 72 hours," Maduro said. "We must keep beating the mafias."

To this we would add "and cue economic chaos", but since this is Venezuela, that's a given.

The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela, and lead the largely-cash based economy to a state of paralysis. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.

Critics immediately slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. Indeed, if India is any example, Venezuela - whose economy is far worse than that of India, the world's fastest growing emerging market - may have just signed its own economic death warrant.

According to central bank data, in November there were more than six billion 100-bolivar bills in circulation, 48 percent of all bills and coins. In other words, Venezuela just eliminated half the paper cash in circulation.

Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than $5 on the streets. No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500%, close to the IMF's estimate.

Meanwhile, assuring hyperinflation next year will be a doozy, the oil-producing nation's bolivar currency has fallen 55% against the U.S. dollar on the black market in the last month.

Money supply, the sum of cash and checking deposits as well as savings and other "near money" deposits, was up a staggering 19% in the three weeks to Dec. 2 and the curve has been exponential since Maduro's predecessor Hugo Chavez came to power in 1999.

Maduro previously has said that organized crime networks at the Colombia-Venezuela border buy up Venezuelan notes to in turn buy subsidized Venezuelan goods and sell them for vast profits in Colombia.

While smuggling of this sort is an issue at the border, it cannot account for nationwide shortages of the most basic goods from food to medicine, which have left millions hungry and doctors crying out for help. As we reported previously paying a restaurant or supermarket bill without a debit or credit card can often require a backpack full of cash. However, getting cash in recent months has proven difficult, and the country's credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer.

As Reuters adds, strict currency controls introduced in 2003 that pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists. Maduro has blamed an "economic war" being waged against his government by the opposition and the United States.

With Venezuela's move, we can now add the insolvent Latin American country to an increasingly large group of countries including India, Sweden, and Australia, which in recent months have been on a quiet crusade to eliminate all forms of paper money. Certainly, Venezuela will not be the last as only full control over a nation's currency will allow governments to enact global negative rates, something which is inevitable once the current "Trumpflation" euphoria finally ends.

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ShortTheUS's picture

"Venezuelans will have 10 days after that to exchange those notes at the central bank."

 

Exchange... or have them confiscated?

SilverRhino's picture

Meanwhile the guys with gold and silver still have their ounces.   

bwh1214's picture

I love to watch socialists try to outsmart hyperinflation.

Frito's picture

Go long wheelbarrows, short wallets

38BWD22's picture

 

 

I nominate Nicolas Maduro for either:

Stupidest Man on Planet Earth

or 

Worst Leader on Planet Earth.

 

Poor Venezuela.

 

EDIT: Their people could start looking at Bitcoin, especially from any family/friends in Miami.

Holy hand grenade of Antioch's picture
Holy hand grenade of Antioch (not verified) 38BWD22 Dec 11, 2016 7:25 PM

Who runs Bartertown?

Stuck on Zero's picture

Next thing you know Madura will round up the usual suspects.

NoDebt's picture

Venezuela has to be near the point where Maduro loots the presidential palace and heads to thairport under heavy gunfire to be replaced by a military junta.

 

Theosebes Goodfellow's picture

This appears to be more of the "monkey see, monkey do" in the banana republic of Venezuela. I don't know where Maduro and his cronies get their intel, but this demonetization has not been going well in India. I guess news travels slower via banana boat. I wonder if the Iranians will take in their boy Maduro...

auricle's picture

How long must people suffer under the central banking and it's fiat ponzi? 

The Management's picture

Makes you kinda want one of those theme park road maps of a communist dictatorship.

Should we ride the wheel of misfortune? Perhaps a dip in the fountain of tears?

At this point i would like to know the exchange rate between bank notes and 3-ply toilet paper notes. Just imagine people could literally be paid in toilet paper and be happier bartering it.

Save_America1st's picture

Maduro was a fucking bus driver before being allowed to take over Venezuela. 

I guess that's the South American Dream, right?  Rags to riches, so to speak? 

Just don't let a Marxist Commie become a tyrannical homicidal dictator in your country. 

delacroix's picture

things are so bad , his daughter will only be a multi-millionare, when he's gone.

manofthenorth's picture

I don't know about BC for Venezuela Do Chen.

Maybe as a way to get wealth OUT of the country but it seems there would be very few places to use it down there, especially if the lights go out ;-).

White Mountains's picture

Most people in the USA truely have very little cash and very little to none precious metals (anything less than $10,000 in gold and silver isn't really very much and even that would not last long supporting your family even if you could convert it to useable stuff without getting yourself killed, your wife and daughter raped when people find out you have it).

The reason I laugh about BitCoin haters is this: ...DRUMROLL....their money is in digits representing fiat currencies stored on bank computers.  LMAO!  TOO FUNNY!

Hugh_Jass's picture

Is it me, or does one need electricity for Bitcoin to operate properly? it is something in short supply in the Communistic Paradise...

White Mountains's picture

....and,,,and...and if a huge meteorite hits the earth....and, yeah, what about alien invasion....or say the world cracks in half or something!  Ha, what about your BitCoin then!  Haha!  My logic is unassailable! 

highly debtful's picture

Maduro is not the sharpest knife in the drawer, that's for sure.

So let me get this straight: the man first orders larger denominations to prevent people from developing a really bad hernia while shopping for a loaf of bread, then decides to eliminate those same larger denominations because naughty people use them to buy goods in Venezuela which they can then sell for a profit right across the border. That's about the size of it, right?   

I can almost hear the immortal Oliver Hardy say: "Well, here's another nice mess you've gotten me into!"

 

Blackfox's picture

Nope! It's just the tribe at work again bankrupting another nation into getting its huge natural resources for soon pennies on the dollar.

Cloward Piven plan.

http://www.timesofisrael.com/venezuelas-anti-semitic-leader-admits-jewis...

800409523's picture

Or one of the smartest to stay FU to America first. Countries that fail first will prosper quickest in this new bitcoin world. 

k9-style's picture

Bus drivers & community "organizers" sure make lousy presidents don't they? Well really socialists of any stripe or background.

Pairadimes's picture

This is just Maduro saying "no, I have no fucking idea how any of this actually works." 

He may have just kicked the inevitable social upheaval into high gear.

matermaker's picture

ohhhhh, He can always pull the oil for something other than dollars card.

knukles's picture

Worked so well everywhere else it was tried, didn't it?
Must be the Russians fault.
Say, MSNBC's now reporting that the CIA had buried for decades, a report that it was not the Germans who bombed Pearl Harbor, but the Rooskies!

Fuckin' A

It doesn't get any more fucked up than this.
The Greatest Show on Earth.

EuroPox's picture

Yeah that sound about right.  The Germans bomb Pearl Harbor and the US starts a war with Japan.  Nothing ever changes.

DarkPurpleHaze's picture

I'll go out on a limb and say that USD paper money will still be around after Trump is out of office in 4-8 years.

If anything the US might be one of the last countries to go digital as long as the US is still the worlds reserve currency. The collapse and death of the dollar was greatly overblown.

In fact, there is a global shortage of paper USD as strange as that sounds. If you lived in India or Venezuela a few $100 bills or a wad of $20's would be looking really nice right about now.

BigJim's picture

The day the USD is totally electronic is the day the USD starts heading home... cue hyperinflation.

RioGrandeImports's picture

While living in Mexico in 2015, never once could I get someone to accept USD$. Ever. They wanted Pesos. At the time it was 15 to 1. So $100 was good for 3-500peso notes. But yeah, nobody wanted, nor accepted USD$ where I lived. I was about a 3hour drive from the border though, so that played a role, no doubt.

I've actually got a fat stack fresh Bolivar 100s, and 50s right now. Picked them up early this year in fact. They unironically have a big Bear on the backside of the 50s, which must reflect the Bear market known as Venezuela. The stack of 50s is about 2 inches thick. Looks like some serious cash, but alas its not worth carrying.

Moe Hamhead's picture

I heard that too.  Bombed Pearl Harbor! They allegedly brought boats with planes down the St Lawrence seaway to Duluth and disguised them as wine barrels being shipped by rail to Napa and took off from Sausalito.  The Navy thought they were B-17s flying out from the west coast.

flaminratzazz's picture

G/S good,, but what india and ven needs is more lead wrapped in copper and delivery units that spit brass.

crghill's picture

Yep and they can stay and try to pick up the pieces or, I bet,  a 1 oz gold coin can get you out of the country if you so desire. 

 

www.lowloadgold.com

 

 

tarsubil's picture

These guys are desperate. When guys like this get desperate, they will come after anyone that looks like they are undermining the currency including gold/silver bugs. Always remember to wait until after the total collapse before the gold/silver hoard is revealed.

Food Loaf Junkie's picture

Never show your hole card.  That is why I keep a large percentage of my gold holdings in smaller units.  Such as sovereigns, 20 francs, 1 gram bars, 1/10 oz coins and such.  Also always make it appear that it is your last gold, not the tip of the iceberg.

slyhill's picture

No need to confiscate, gub just deems them worthless, as in -> no longer redeemable, can not pay taxes with, eat sh!t.

Moe Hamhead's picture

That's only part of the story.  He's going to add 14 zeroes to the bills (in scientific notation), and then hand them back.

bigfire's picture

Madura look upon Rober Mugabee's great work in Zimbabwe and think, I can do much better with less time.

AlphaSeraph's picture

India now Venezuala...these aren't irrelevent economies.

This is starting to look like the shoreline receeding just before a tsunami hits. 

38BWD22's picture

 

 

Nice observation.  

+ 10,000 bolivares for you!

Oh, wait..

 

Nobodys Home's picture

Do! So here's $2.00 US.....You sure ain't no Publishers Clearing House!

Mr. Pain's picture

Ah, the hope and change of a socialist country! What could go wrong?

nmewn's picture

"Pull the hundreds out, print moar $20,000 Bolivar notes up for distribution to the masses immediately!"

Yeah, that'll solve it...lol...fucking communists...lmao!!!

flaminratzazz's picture

I know it worked in the past.. I just dont know where?

nmewn's picture

Keynesian economics (Fabian socialist inspired) has never "worked", it only masks the economic issues as the debt never goes away. Now if one is "connected" you can manage to get enough "return" to run in place or even outpace the devaluation...errr, ummm, the inflation, of the currency being targeted.

But at the end of the day the currency is always a national currency, the target is that nation. 

That is what they don't want to tell anyone, whether its Venezuela willingly going down that road on its own or this one being dragged down it kicking & screaming. The day Krugman (or any Keynesian) says a countrys debt and its national currency actually matters...will be the day hell freezes over under a mile of ice and Satan will be revealed as the fucking tooth fairy.

Meaning, they don't care so it will never happen.

Nobodys Home's picture

They don't even print their own currency. Haven't had enough money to resupply their current notes for months. How are they going to do this? No one is allowing them any credit. Even China stopped lending to them. This should be interesting.
(and we thought India had problems distributing their new notes?)

nmewn's picture

Well, clearly this calls for rounding up people and impressing their labor, to print moar...for the masses and da fadderland! ;-)