Venezuelans resort to using dollars instead of their worthless currency

Monica Showalter:
Imagine, if you will, Hugo Chávez's worst nightmare. The weapon he used to shake dollars out of the hated gringo, oil, is gone. Venezuelans cannot even get gas for their cars from their gas stations these days, and oil production has dropped to historic lows. The money is gone, too. Venezuela is under default and sanctions and can no longer pay its bills. Its foreign reserves have fallen below $10 billion. Chávez, before his death in 2013, ranted about the primacy of the dollar, even as he kept the dollars from Venezuela's oil profits to himself and his cronies. Now, the people have the dollar – and they are using it to fight the failures of Chávez's socialist regime.

This explains why the new phenomenon of dollarization now happening in Venezuela is actually a spark of light for a post-socialist future.

Dollarization happens whenever something goes very, very, very wrong with the local currency. In Venezuela, annual inflation today, on 12/27/17 is 3,920%. Monthly inflation is 36%, meaning the Venezuelan currency loses value pretty much by the hour. People carry bolivars, the local currency unit, around by the wheelbarrowful. What's more, currency controls mean you can't even get your own money out of the bank except in very limited amounts, the equivalent of about $8 a day at most.

You can't do business like this. Nobody can, whether the grocer, the automobile dealer, the airline, the florist, the junk-peddler, the arepa-seller, or the pharmacist. The natural solution is to use U.S. dollars instead. Venezuelans are now doing this because dollars retain their value, are widely available even in currency-controlled Venezuela, and have the added benefit of being recognized internationally, meaning you can use them with no trouble if you get the heck out.

It's something that happens to every country that prints money like toilet paper and renders its currency worthless and unusable as a result. It happened in Ecuador in 2000. It happened in El Salvador a few years after that. It happened in Zimbabwe. (It also happened in Panama more than a century ago for a different, but related, reason: to attain independence from Colombia.)

With dollarization (which, by the way, doesn't hurt the U.S. in the slightest when it happens), Venezuela can finally find its economic footing. Prices have meaning, and the money to purchase things has value. It's all happening spontaneously and right under the government's baleful nose, as if the people themselves are taking their own economic futures into their own hands – which they are.
The people are doing this, not the government.   It is another example of how the government is losing control as its policies lead from one failure to the next.  Venezuela has the most inept government in South America at this point that is clinging to power while the people starve.  Universities that push socialism should be forced to do studies of how socialism has brought a once prosperous country to ruin, and how they can save themselves by switching to the dollar and dropping their command economy model.

A command economy is one of the worst economic models in the world.  It gets even worse when then in command are as ignorant as Venezuelan leaders.


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