The financial situation in Venezuela seems to go from bad to even worse, albeit most people thought that would not be possible. Venezuela’s central bank stated they would begin printing a 20,000 Bolivar note soon, which is 200 times bigger than the current biggest bank note in the country. This seems to be another futile attempt to save an economy that can’t benefit from central bank intervention any longer.
Bigger Bills Mean Bigger Problems For Venezuelans
Hyperinflation is never a positive development for any fiat currency. The Venezuelan bolivar has seen its fair share of inflation, as the national currency is worth less than the paper, it is printed on right now. But the country’s central bank feel they have the solution to this problem, even though it will only make things progressively worse.
Printing a new banknote worth 20,000 bolivar will not make the currency worth more all; of a sudden. In fact, this note is 200 times larger in denomination than the current largest bill. That said, 20,000 Bolivar today is worth roughly what 100 Bolivar was once the notes got printed initially, so it makes some sense in that regard. Moreover, the new smallest banknote will be “worth” 500 bolivar come December 15.
This change will solve one major problem in the country, though. Right now, consumers have to carry boxes full of cash to make transactions. Reducing the bills needed to make these hyperinflated payments will alleviate that concern, even though it does nothing to fix the underlying issue. The Venezuelan Bolivar is a worthless currency, and new bill denominations will not fix that issue anytime soon.
To put this into perspective, the inflation rates for Venezuela will only get worse in the coming years. In fact, the IMF expects the inflation to reach 1,660% in 2017, which is over three times the rate people are faced with right now. If this trend continues, the situation in Venezuela is still rosy right now, compared to how things will look in twelve months from now.
It is evident other solutions are direly needed, although neither the government nor central banks can offer any solution. Consumers are showing an increasing demand for Bitcoin, even though cash trades may lose popularity over the coming weeks as well. Then again, people will go through whatever trouble they can to hedge against future financial losses. Bitcoin provides them that option, and it is the only viable choice right now.
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