Venezuela’s currency has lost 99.999% of its value during the six years of hyperinflation, forcing the country to issue larger banknotes. On Friday, the nation’s central bank announced new plans to unveil the highest valued banknote of one million bolivars.
The Central Bank of Venezuela tweeted Friday that “three new banknotes will be incorporated into the current Monetary Cone, as part of the expansion of the current family of monetary species.” As early as this week, it will introduce banknotes worth 200,000, 500,000, and one million bolivars. For those wondering how much one million bolivars is worth in terms of US dollars, well, it’s around 50 cents.
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When the central bank revealed the new bills, Director and Partner at Ecoanalitica, economist Asdrubal Oliveros, said the banknote is good for nothing more than public transport – one of the few services reliant on the paper bolivar.
For example, here is Bloomberg’s Cafe Con Leche Index – which tracks the price of a cup of coffee served piping hot at a cafe in eastern Caracas… it now costs 2.7975 million bollivars (up 3000% from a year ago)…
During hyperinflation, the country has imported greater and greater amounts of paper to issue more banknotes. Venezuela imported 71 tons of paper from Italian money printer Fedrigioni (majority-owned by US Private Equity giant Bain Capital) to print new bolivars in late 2020.
The need for ever-larger bills and constant devaluations in Venezuela is a direct result of an ever-weakening currency, and interannual inflation was running at 2,665% as of January.
“These new bills will complement and optimize the current denominations, to meet the requirements of the national economy,” the central bank said in a statement.
As the Venezuelan currency rapidly depreciates, Venezuela’s government is preparing to move to a fully digital economy – whatever that means for the country which a couple years ago adopted some weird cryptocurrency as the de facto Petro currency of the state to… perplexing consequences, as hyperinflation in this South American socialist paradise (coming soon to every socialist paradise nears you) continues to rage on.
We’ve seen hyperinflation episodes in Venezuela and Zimbabwe. The real question as the US dives deeper into MMT, or Magic Money Theory, will that one day result in a worthless dollar and soaring inflation?