Thursday, February 4, 2016

HYPERINFLATION! Venezuela Orders Bank Notes by Planeloads



Three-dozen 747 cargo planes have arrived in Venezuela, all stuffed with newly printed money. This is what hyperinflation looks like.

WSJ reports that Venezuela's central bank’s own printing presses in the industrial city of Maracay don’t have enough security paper and metal to print more than a small portion of the country’s bills,

This is what happens when massive amounts of new money are printed, the desire to hold cash balances shrinks to near zero.

WSJ explains:
 Venezuela’s 30 million people can’t seem to get cash fast enough, said Steve H. Hanke, an expert on troubled currencies at Johns Hopkins University. “People want cash because they want to get rid of it as fast as they can,” he said.
While use of credit cards and bank transfers is up, Venezuelans have to carry stacks of cash as many vendors try to avoid transaction fees. Dinner at a nice restaurant can cost a brick-size stack of bills. A cheese-stuffed corn cake—called an arepa—sells for nearly 1,000 bolivars, requiring 10 bills of the highest-denomination 100-bolivar bill, each worth less than 10 U.S. cents.

The printing spree is good business for banknote printers. WSJ again:
 The huge order for 10 billion notes can’t be satisfied by a single firm, the people familiar with the deals said. So it has generated interest from some of the world’s largest commercial printers, each vying for a piece of the pie at a time when low profits in bank-note printing have pushed many of them to cut back on capacity.

  -RW

6 comments:

  1. Surprising. I'm curious what the first digital hyperinflation will look like.

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  2. So Venezuela is pretty much the Latin American Zimbabwe at this point right? Again moral of the story: Socialism doesn't work

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    1. Depends on your point of view. Mugabe, Pres. of Zimbabwe and his cronies are doing fine while he blames the failing economy on sanctions by U.S., UK and other western governments. Forbes estimated his net worth at $10 million although others have suggested it is in the billions. Lesson learned. Socialism works for some at the expense of others. Venezuela could be in for a long and spectacular looting.

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  3. Airplanes delivering pallets of cash to a sketchy government? Reminds me of US govt sending all those airplanes full of cash to Iraq and Afghanistan, only for the money to "disappear"
    http://www.theguardian.com/world/2007/feb/08/usa.iraq1

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  4. Just you wait until the hyperinflation takes down the power grids, THEN you will start to see some really exciting things going on for sure!! The electrical power companies need to convert combustible fuels into electricity, unless they have hydro or nuke plants, but they ALL require highly trained men and women to operate them and they need the ratepayers to send in their monthly remittance in order to keep operating. And they ALL require lots of expensive parts to keep up with repairs too!
    Not very much of these details is seen by the general public, but that does not mean that they don't exist or can be ignored.

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  5. Just a small query

    If no one likes to hold on to cash and spend as soon as one can get cash, the demand for currency notes should not rise much. It's velocity ( of transactions) increases.

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