Venezuela ’s Bolivar Redenomination Will Fail

Venezuela – ravaged by socialist policies, corruption, and incompetence – is currently embroiled in the world ’s 57th episode of hyperinflation. Since the beginning of November, the bolivar has lost 55.2 percent of its value on the black market (read: free market), worsening the situation in a country in which wheelbarrows have already replaced wallets. So, on November 30th, Venezuelan officials announced a misguided and foolhardy plan to issue larger bills in an attempt to mitigate the damaging effects of its hyperinflation.But why is the Banco Central de Venezuela (BCV) redenominating? Because if it doesn ’t, then the people are stuck. If you go to a market in Caracas today, you either need a wheelbarrow of cash or bigger bills – much bigger. So, President Maduro and the BCV hope that, by printing 20,000-bolivar notes, they can skirt around the hyperinflation problem until it goes away. And that’ s a mug’s game.In the early 1990s,  Yugoslavia tried to combat its own hyperinflation by printing larger bills, and it failed horribly. Yugoslavia ’s heavy inflation continued throughout the ‘90s, and the dinar was devalued 18 times between 1991 and 1999, losing 22 decimal places of value along the way. Yugoslavia’s monetary orgy finally came to an end when the Topcider mint ran out of capacity. Yugoslavia’s 313,000,000 percent monthly inflation transformed 500-billion-dinar bills into small change before the ink had dried.Redenomination does nothing if elev...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs