Breaking the bank

billetes-bolivar-fuerteFrom the department of so-funny-it’s-tragic: La Patilla is quoting anonymous sources inside the Central Bank who claim the government’s printing press is working overtime, so much so that they are having to import the bills just to keep up with demand.

The highlight:

Central Bank of Venezuela (BCV) technical employees spoke to lapatilla.com and they claim that “due to high inflation, low-denomination bills are practically not being printed because they literally have no use, given how inflation has eroded purchasing power.

The say that “currently more than 60% of bills in circulation are BsF100 bills (Note: these are the highest denomination bills in the country, roughly US$0.23 at black market rates). The rate of printing has accelerated so much that they have had to hire foreign currency printing companies to make BsF 100 bills, but this costs money and the government owes them, so they are refusing to continue to print unless they get paid.

Off the record, they claimed that “Venezuela’s Banking Association has asked the BCV Board to include higher denomination bills, such as BsF 500 and BsF 1,000, but they refuse.”

So hyper-inflation is causing the printing presses to go into overdrive. This forces the government to import bills and pay for them in expensive foreign currency, meaning the bills in circulation are left with fewer reserves to back them up, thereby feeding hyper-inflation even more. Wash, rinse, repeat. The whole thing is surreal.

By the way, La Patilla, while you’re at it, how about your anonymous sources inside the BCV share the monthly inflation rate? Would be nice… de panas.

 

28 thoughts on “Breaking the bank

  1. What I have always read is that they only printed 100 bills at the Casa de la Moneda and the others were always imported.

    Like

    • That makes even less sense… so the small valueless bills are more expensive to produce? It smells like guiso.

      Like

  2. A few years back, you only got to see relatively long lines at ATMs on paydays (Fridays and quincenas), now there’s always people queueing for as long as the machine has money in it… this could only mean that the cash you’re permitted to withdraw everyday lasts nothing in your pockets (there are ATMs which max withdrawal is only Bs 600… for a Burger King combo, maybe?). This has also led to people paying with debit cards even for a can soda, originating lines at paydesks everywhere; because even though some banks allow to take out as much as Bs 14000 from their own ATMs if you’re a costumer (http://bit.ly/16rn9Di), besides the loss of time and the trouble of visiting the bank, who wants to carry wads of valueless cash around? Now, the subsequent scarcity of POS devices in stores just spices up the situation (http://bit.ly/1I2GWUM).

    Like

    • Just out of curiosity, does anybody know how much the Big Mac combo is today in bolivares? It should be the cheapest in the world in USD.

      Like

  3. Cool post, but is La Patilla really a reliable source? Especially when they are quoting anonymous sources? I’m genuinely curious.

    I love reading Caracas Chronicles because most of the time your articles are based on reliable sources (at least in comparison to most sites about Venezuela).

    Like

    • This is as reliable as anonymous sources go, at least it’s not Dolar Today. In any case, inflation does create a necessity for bigger bills.

      Like

      • Y dale con el trauma de dolar today, como si esos tuvieran alguna incidencia en este peo…

        The regime won’t print bigger bills before the elections because they don’t want to give any fodder for mud for their campaign.

        Like

    • Well, I have no idea. Personally I don’t see why they would make this story up. Besides, we’ve heard from other folks who suggest this story is on the right track. But healthy skepticism is always a good thing.

      Like

  4. Inflation also means that corruption is likely to expand because thieves in the government need to keep up with increasing prices.

    Is it possible that the 500 and 1.000 BF notes go directly into Maduro and Cabello’s pockets with nothing left for el Pueblo?

    Like

    • No – you would not want to hold notes that are out of circulation in a hyperinflationary scenario

      But the idea of a completely parallel economy is of course consistent with the clientelism in Venezuela and especially in Cuba.

      Like

  5. As far as currency in circulation, Setty had a most excellent post with a bit of Excel work thrown into it.

    A couple of takeaways, from his numbers (with his estimations/disclaimers/method in his article):

    100 bolivar notes represent about 34% of the bills in circulation as of April.
    However, 100 BF also represents 51% of the new bills in April and 56% of new bills this year. (There is an oddity with the 10 BF notes where between January and April, 39 million went out of circulation.)
    By value, the 100 BF notes represent 76.5% of the total value of printed money for 2015. Top heavy to say the least.
    Growth of 50 BF notes actually has exceeded that of the 100 BF notes. (12.4% to 11.5%)
    50 and 100 BF notes account for 77.1% of all newly issued currency in 2015.
    Growth rates for some coinage in 2015 – .01 (.2%), .05 (.02%), .10 (.02%), .125 (.01%) & .50 (.025%) – have been virtually flat. Weirdly, .25 has had some growth comparative (3.2%) to the others.
    1 BF coins have grown, but not by much (about 3.6%).

    In essence, the government is cutting back on the non-value currency and cranking out the higher face valued currency. If that isn’t indicative of and contributary to an inflationary environment, I don’t know what is.

    Like

    • In the last semester banks have been forced to hand out small denomination bills even where the amount being withdrawn was a high one so that people had to come out of the bank with packs and packs of small denomination bills , all very cumbersome . Banks had instructions from the BCV to use small denomination bills even if the amounts being withdrawn were large . At one point they could only hand their customers large denomination bills which other customers had deposited in the same day . I and a numerous group of acquaintances have experienced this inconvenience regularly , almost every time we went to the bank . One could easily inferr from the above that inflation had made the use of small denomination bills less practicable and that BCV was coping with the demand for large bills it hadnt printed by forcing banks and their customers to use the smaller bills .

      Settys priceless information is that in response to the above situation the BCV is now churning more high denomination notes than before . just to keep up with the increasing demand for higher denomination bills brought about by the countries run away inflation.

      The regime’s reluctance to print 500 Bs bills is another sign of their penchant for facing problems by manipulating surface perceptions rather than by dealing with their root causes . perceptions to them are a substitute for reality , makes them feel that if the problems are not formally recognized then they can be ignored , yet another sign of their signature primitive magical thinking mentality .

      Like

      • Primitive thinking? No, the fact that no one has made the decision to print 500, or 1,000 or 5,000 Bolivar notes, or that no one has given the go-ahead to raise the price of gasoline, or that no one has made any provisions for the upcoming shortages of foreign reserves over the next 6 months is an indication of a monstrous paralysis affecting every level of this government. These people are nuts. This economy is on auto-pilot and headed straight for that mountain. Scary. Very scary.

        Like

        • You are right , they are paralyzed , going around circles like headless chickens . The magic thinking part really refers not to that but on how much attention and effort they put in manipulating appearances believing that if they can make people delude themselves about the problem , the problem will of itself dissappear .!!

          Like

  6. So we’re back to the days when the actual medium of exchange is worth more than its face value. Like back in the 80’s when the coins were worth more because of their nickel and copper contents and they gave you candies as change…

    Theses Chavista clowns really are alchemists if paper is now worth more than the Bs. face value!!

    Like

  7. What’s strange about Guisozuela is that people mostly complain about the Escasez, and crime. Lacks of Products to buy, much more than Money to buy them.. Very Strange..

    Somehow, they seem to have plenty of Cash to spend. Bolival Fuelte o no. Papel o moneda. They must be ALL enchufados by now.

    They say the minimum salary is not enough to buy 2 arepas and 3 diapers. But the streets are full of people with plenty or cash, willing to spend on anything that they can find, at any price, Bachaquero reselling Prices? No problem!

    Heck, apparently they don’t even need to work much anymore, since they say they have to spend hours in Lines every day to buy stuff. Buy and buy, less work, minimum salary is worth a bag of peanuts, average salary is what, worth 2 bags of pistachios? where does all this money come from? I suspect that not from very honorable sources, anywhere. The 80% against the regime must be either Stealing too, or getting benefits from somewhere somehow. 3 Million working directly for the Dictorship’s payroll, ok, I understand, plenty of Guisos and Cash there. Say another 3 Million indirectly enchufados on other public “projects” and Tigritos of all sorts, ok.. But the rest of the “honest”, average working people, they grow money and acemitanofen on trees on trees, it seems.. “Puro Izquierdazo” or “mordidas” as they say..

    And then many of us wonder how come this hellish Cubazuela has lasted so long, 16 years and counting..

    PURO GUISO, everywhere. Chavistas, Masburristas, MUDistas, “Oposicionistas”, probably 90% are STEALING somewhere, somehow.

    If you disagree, be my guest and do the Math: Canasta Basica, alquiler, luz, agua, medicina, educacion para los ninos, etc, etc, mas vacaciones…. y otros lujitos = Bolival Fuelte, or $$ at any exchange rate, as you prefer.

    Who makes that much?? Apparently just about everyone in today’s Guisozuela. One way, or… another.

    Like

    • Is the message here that the oppo is so full of corrupt people (all of the MUD of course !!) that we pure oppos most separate ourselves from those meanies and divide our efforts against the govt so the govt has a better chance of winning . ??? Hey is this another tactic for dividing the oppo !! Claiming that half or more of the oppo ( without any details being offered) is as corrupt as the Chavez partisans so that we might as well give up the fight ??

      Like

  8. The main problem with worthless paper money is also its sheer Weight and Volume. Especially on a Mass Theft country like Guisozuela, and especially for the wealthy Enchufados, Millions and Millions of them, not just the “Government”, as I explained above.

    This ABC writer of the ‘Chavez Boomerang’ was on TV here yesterday explaining how Cabello and the Smartmatic Elections Wizard, Jorge Rodriguez, went on a “Deer Hunt” with el guardaespaldas, Leamsy Salazar.. Yeah, cazando venaos…. I kid you not. The real anecdote is that they told Salazar to hold back, as NarcoCabello and Jorgito went ahead, disappeared, lights out at night, and came back later. Salazar went back to the place later, and discovered entire Cash Bunkers, with PILES of cash. (and perhaps some “hallacas” but that’s a different logistics problem)

    You see, it would be a lot easier for this people, as for the average Cubazuelan on line to buy Chicken, not to have to carry as many paper bills. You can literally hurt your back with the necessary back-packs and then you have to dig caves to hide the voluminous cash.

    Like

  9. Conclusion: From what we read, to put a certain lid on the inflation, we are in hands of foreign currency printing company not giving credit to the Central Bank :-) or :-( take your pick!

    Like

    • The great irony of that is, having seen that government sponsored film, The Liberator (on Netflix now in Gringolandia), it is heavily implied that Santander and Torkington, the banker he kicked out of Venezuela for insisting on the rights of a foreign bank to print the national currency, directly led to his “murder”.

      Soberania indeed.

      Like

  10. How many sq.cm. of toilet paper will a BsF100 bill buy? How many sq.cm. of BsF2 bills will it buy? The BsF2 bill may now have intrinsic value.

    Like

    • Maybe we can use our dear neighbor’s currency, it’s twice as strong as the Bolibanana:

      1.00 USD = 207.192 GYD
      US Dollar ↔ Guyanese Dollar

      Like

  11. Talking about dead heroes of Bolivarian Revolution (other than paper money), one of them was Danilo Anderson, and as you may recall, in his appartment were found 3 cash counter machines… It was in the good old days… If anyone of the alive heroes got dead for any reason: how many cash counter machines could be found at their batcaves?…

    Like

  12. Imported notes must be paid in US$: So, Is the external deficit acting as the ultimate barrier of monetary discipline?… Someone has to write a paper on that.

    By the way, next step: Adjusting for quality in the paper notes. Just look at the 10 trillion Bill at the end of the Zimbabwean hypeinflation.

    Like

    • I’ve wondered this. Apparently, if they are paying foreign partners for the smaller denominations/coinage, and they don’t have dollars to pay for it, this would explain the reduced growth.

      I wonder if they actually have reserves of uncirculated cash that they simply haven’t released from previous runs and what we are seeing, as far as the tiny amounts released, is the disbursement of those reserves. The holding over of reserves from previous production batches is common. I remember seeing it from a trip to the US Mint, some years ago, where I watched them print money and our guide explained they had vast vaults of unreleased money. (I also ended up with a “four dollar” bill out of that trip. Good times for a money geek like me.)

      I honestly believe the refusal to increase the denominations is, in their mind, a way of reducing inflation, even as they print billions of bolivars in 100 BF notes. How many people complain about the wad they have to carry for basic purchases? Does this not limit the utility of money and the willingness to use it, thereby slowing down the speed of money?

      They could produce the same face value of currency by generating 20% of the 100 BF notes at a 500 BF denomination, but this would make the use of large amounts of cash much easier, since it would reduce the “carry” of folks by 20% eventually as well. I’m pretty sure this is their reasoning behind the refusal to supersize the currency denoms.

      Like

Comments are closed.