Venezuela's paranoid currency screw up
After leading the nation with the world's largest oil reserves into turmoil, food shortages and hyperinflation, Venezuela's socialist leaders are not widely regarded as economic wise men.The Venezuelan government goes from one clueless screw up to the next, all while blaming all their screw ups on the US. In fact, if the US was really out to destroy Venezuela, it would be trying to keep this crew of incompetents in power there. Take note socialist, this is the command economy in action.Indeed, their latest stroke — based in part on a bizarre conspiracy theory — was to outlaw most of the nation's cash before getting around to introducing new banknotes.
The surprise move, announced last Sunday, turned Venezuela into a largely cashless society just before Christmas, with people struggling to pay for goods with old banknotes that store owners no longer accept.
Frustrated Venezuelans have blocked streets and looted stores in six cities this week, leading to 32 arrests.
"What the government is doing is completely irrational," said Caracas economist Carlos Alvarez.
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The troubles began when President Nicolas Maduro announced that the 100-bolivar banknote would be taken out of circulation in an effort to stabilize the economy and disrupt black-marketeers.
Worth about two Canadian cents on the black market, the 100-bolivar bill is Venezuela's highest denomination banknote and makes up about 77 per cent of Venezuela's cash. Paying for almost anything in cash — from a pair of jeans to lunch at McDonald's — requires lugging around thick wads of bolivars.
But rather than gradually ditching the old bills over a period of months, Maduro outlawed them starting Wednesday and gave Venezuelans until Monday (Dec. 19) to deposit them in their bank accounts or exchange them for newly minted 100-bolivar coins and a new set of higher-denomination bills.
The catch is that this new currency, which is to include a 20,000-bolivar note, has yet to be brought into circulation despite promises that it would be in the hands of shoppers this week. Even ATMs at state-run banks continue to distribute the old currency.
"I don't get the joke," Caracas office worker Yarelis Carrero told the AFP news agency. "When you withdraw cash at the ATMs, they give you 100-bolivar bills. And you can't get the new ones inside the bank."