EDITOR NOTE: Venezuela is about to issue its first 1 million Bolivar bill. We’re not sure how many Venezuelan’s are technically “millionaires'' (and it’s sad for those who aren’t) but 1 million bolivars will buy you, if you’re lucky, a pack of chewing gum in the US. That’s because it’s equivalent to a little over 50 cents. This is the harsh reality of hyperinflation. No country has ever thought it possible until basic inflation soars out of control. And at the rate that the Fed is printing money to keep interest rates low, hyperinflation is not an unlikely scenario in the US. Sure, it would destroy America, but it would be naive or downright irresponsible to assume that the current monetary mechanisms in place wouldn’t make such an outcome unlikely. If it does come about--or even when a “tamer” version of high inflation does come about (note: that’s a “when” not an “if”)--those who hedged it will come out wealthier than those who didn’t. And hedging inflation is a simple safe haven act. It’s about purchasing non-CUSIP gold or silver--an easy way to diversify your portfolio whose payoff will greatly outweigh the cost of purchase. It’s about saving your wealth from monetary destruction.
The nation’s central bank announced on Friday that it will introduce three new banknotes worth 200,000, 500,000, and one million bolivars. The new bills are set to come into circulation on March 8.
— Banco Central de Venezuela (@BCV_ORG_VE) March 5, 2021
The regulator said the banknotes are meant to “complement and optimize the current denominations, to meet the requirements of the national economy.” But even if you put all three banknotes together, they are worth less than one US dollar at the current official rate. As of Friday, one US dollar was being exchanged for around 1.889 million bolivars, meaning that 1 million bolivars is worth around 52 cents.
The economy of the Bolivarian Republic has been under severe pressure in recent years, with the situation severely deteriorating after the US slapped the country with sanctions. The nation is suffering from hyperinflation, which reportedly hit 3,000 percent last year.
As the Venezuelan currency rapidly depreciates, it is being replaced by the US dollar, with goods mostly priced in the greenback. At the same time, Caracas-based consultancy Ecoanalitica estimates that two-thirds of transactions across the country are made in foreign currency. When the central bank revealed the new bills, Director and Partner at Ecoanalitica, economist Asdrubal Oliveros, said the banknote is good for nothing more than public transport – one of the few services reliant on the paper bolivar.
Originally posted on RT.com