Having thrown in the towel on hyperinflation by printing banknotes with 200-times-higher denominations, Bloomberg reports that things in Venezuela have continued to get worse with the currency now so devalued (with even simple purchases requiring so many bills) that instead of counting bills, they are weighing them.
Once one of the world’s strongest currencies, the bolivar has been reduced to a nuisance. Basic purchases require hundreds of bills. Shoppers shove piles of them into gym bags before venturing into crime-plagued streets and shopkeepers stash thousands in boxes and overflowing drawers. In the absence of official data, economists are left to guess what the inflation rate is. Estimates for this year range from 200 percent to 1,500 percent.
At a delicatessen counter in eastern Caracas, Humberto Gonzalez removes slices of salty white cheese from his scale and replaces them with a stack of bolivar notes handed over by his customer.
“It’s sad," Gonzalez says. "At this point, I think the cheese is worth more.”
It’s also one of the clearest signs yet that hyperinflation could be taking hold in a country that refuses to publish consumer-price data on a regular basis. Cash-weighing isn’t seen everywhere but is increasing, echoing scenes from some of the past century’s most-chaotic hyperinflation episodes: Post-World War I Germany, Yugoslavia in the 1990s and Zimbabwe a decade ago.
“When they start weighing cash, it’s a sign of runaway inflation,” said Jesus Casique, financial director of Capital Market Finance, a consulting firm. “But Venezuelans don’t know just how bad it is because the government refuses to publish figures.”
Meanwhile, as we concluded previously, the central bank remains stuck in denial and hasn’t published price statistics for almost two years. Instead, Mr. Maduro has blamed the skyrocketing prices on the “economic war” waged against his government by shopkeepers and financiers. This has forced people to brave one of the world’s highest crime rates by shopping with backpacks full of cash and spend hours lining up outside ATMs, which give out less than $10 per withdrawal. Many provincial banks have reduced daily withdrawals to 30,000 bolivars, which would buy a Venezuelan couple a lunch at a mid-scale restaurant.
Amusingly, as we reported last year, the high demand for nearly worthless currency notes has also presented a financial burden for the cash-strapped government, which also lacks raw materials to print its own money. Since last year, Venezuela has had to pay hundreds of millions of dollars to printing companies to feed its economy with bolivar currency. The shipments arrived to Venezuela from private printing presses around the world on several dozen windowless Boeing 747 jets. Given the crime risks, the air shipments arrive at the Caracas airport at night before the notes are loaded onto armored trucks and transported to the central bank vaults in Caracas, protected on the 18-mile route by soldiers.
Indicatively, a fully stocked ATM is emptied in just three and a half hours on average now, according to the Venezuelan Banking Association.
The good news for the insolvent nation is that all local denominated debts are now just as worthless as the currency, which incidentally is what the BOJ's Kuroda would call: mission accomplished.
Sadly, Venezuela is the canary in the coalmine for what will happen to all currencies in a world where there is now simply too much debt.
And, as Bloomberg concludes, people like Bremmer Rodrigues, 25, who runs a bakery on Caracas’ outskirts, are at a loss over what to do with their bags of bills. Every day his business takes in hundreds of thousands of bolivars, which he hides around his office until packing them up in boxes to deposit at the bank. He says if someone looked in on him, he might be mistaken for a drug dealer..
“I feel like Pablo Escobar,” he said. “It’s a mountain of cash, every day more and more.”