Venezuela, Drowning in Hyperinflation, Issues New Currency

Jordan Kirkland - August 21st, 2018

Venezuela has issued a new currency in an attempt to save its failing economy.

In a radical attempt to bolster its nose-diving economy, Venezuela has decided to devalue its currency even more. The socialist country has been in economic turmoil for quite some time – the annual inflation rate recently topped 60,000 percent.

President Nicolas Maduro is rolling out the sovereign bolivar – a new currency with five fewer zeroes than the “strong” bolivar. The new paper denominations range from 2 up to 500.

Both old and new currencies will remain in circulation during a transitional period. 

The new cryptocurrency will devalue Venezuela’s physical currency more than 95 percent and radically weaken its exchange rate – going from 250,000 to 6 million bolivars per U.S. dollar. Furthermore, the sovereign bolivar will be worth 100,000 strong bolivars.

Analysts outside of Venezuela believe the new measures will only make matters worse.

“Unless Venezuela adopts a completely news currency regime – like a currency board, or dollarization – the bolivar will face the same fate as did the Yugoslav dinar,” said Steve Hanke of Johns Hopkins University. The Yugoslav currency was eradicated by massive inflation.

The International Monetary Fund also shares Hanke’s skepticism.

President Maduro, however, has a different take on the new currency.

“I want the country to recover and I have the formula. Trust me,” Maduro said in a televised address.

President Maduro is a firm believer that the country is a victim of an “economic war” that is being waged by “imperialists” and the United States.

The U.S. has imposed multiple sanctions on Venezuela for its rigged elections.

Because of the downtrodden economy, more than 2 million Venezuelans have fled the country since 2014 – 500,000 have fled this year alone. This mass exodus has led many neighboring countries to block entry to Venezuelan migrants.

Protests and strikes against the new recovery package are currently ongoing. Many are skeptic that the new plan can fix an economy so broken that the Venezuelan version of Who Wants to be a Millionaire had to be nixed because the prize had become worthless.

Apart from the new currency, Venezuela is also raising the minimum wage by 3,000 percent.

Currently, 90 percent of Venezuelans live in poverty.

So, with the country in complete shambles, is it safe to say that socialism doesn’t work?


Share this page!