Six short years ago, the bills on the left of that image were worth about the same as the bills on the right. In 2010, 50,000 Colombian pesos were worth about $25, and so —more or less— were 50 bolivars, at least at the official rate.
And mind you, back then “the official rate” had not yet become the evanescent dreamscape it has become in the years since: normal people had access to it. Yes, you had to fill in some endlessly annoying carpetas to maddeningly exacting standards, but you could do it. People did it all the time.
This week, the bolivar and the peso reached a different kind of parity, as the bolivar first caught up to and then almost immediately zoomed past the peso on the black market. And the black market is, for all but a tiny handful of mafiosi, the only market there is. The bills on the left are now worth one thousand times more than the bills on the right.
Today in Venezuela people are frankly scrambling to spend any money they come near as quickly as they can.
As I write this a peso is worth 16% more than a bolivar, but you just gotta keep checking because when a currency goes into the sort of free fall the bolivar is experiencing, these things don’t stay true for long.
Today in Venezuela people are frankly scrambling to spend any money they come near as quickly as they can: a desperate dash to protect its value by turning it into something, anything that’ll hold its value beyond this week.
It’s a textbook case of a phenomenon economists identified long ago —a collapse in the demand for money— as the proximate cause of hyperinflation. Once that mindset sets in, once people internalize the idea that holding money is harmful to you, what happens next isn’t hard to work out.
For all the economic disorder Venezuela has suffered these last few years, for all the dislocation and pain and hunger, we’re on the doorstep to something much different and much, much worse. We know persistent high inflation, but hyperinflation is to persistent high inflation what an atomic bomb is to a machine gun. It just creates misery on an entirely different scale.
You’d think we’d be ready by now. We’re not.