Venezuela to Give Currency New Name and Numbers

[robcon]

CARACAS, Venezuela, March 17 — "Of all the startling measures announced by President Hugo Chávez this year, from the nationalization of major utilities to threats of imprisonment for violators of price controls, none have baffled economists quite like his venture into monetary reform.

First, Mr. Chávez said the authorities would remove three zeroes from the denomination of the currency, the bolívar. Then he said the new bolívar, worth 1,000 old bolívars, would be renamed the “bolívar fuerte,” or strong bolívar.

Finally, at the behest of Mr. Chávez, the central bank said this week that it would reintroduce a 12.5-cent coin, a symbol of Venezuela’s prosperity in the 1960s and 1970s before freewheeling oil booms ended in abrupt devaluations, after three decades out of circulation.

Mr. Chávez champions these ideas, which will take effect in January, as ways to combat inflation, which in recent weeks crept up to 20 percent, the highest in Latin America. Officials blame “hoarders” for shortages of basic goods and price increases for food on the black market. Mr. Chávez says the renaming and redenominating the currency will instill confidence in it..."
http://www.nytimes.com/2007/03/18/world/americas/18venezuela.html?ex=1331870400&en=45134c34f573d0e7&ei=5090&partner=rssuserland&emc=rss

Taking zeros from the currency, and introducing a 12 1/2 cent coin will solve Venezuela's economic crisis? It sounds like Ford's WIN (Whip Inflation Now) campaign in the 70's.

Chavez is an assclown of an economist.

[Flanker]

1. Only conservatives think "inflation" is interchangeable with "economy"

Sadly for them that is not the case, Ven REAL GDP growth for the first quarter is above 7 percent. For stagflation (higher inflation and lower growth) you might have to start looking at the US economy.

[BayCityProgressive]

2. Food distribution

will soon be nationalized if they continue to horde.

[whistle]

3. Well, it is important to first identify the cause of a problem and then to

...apply an appropriate solution to eliminate the cause. Venezuela has been experiencing high inflationary pressures which threaten to explode into hyperinflation. So Chevez is taking a traditional course of actions and measures to restore order in the monatary system of the country. I believe it is worth watching because the U.S. under the BushCo policies has been heading down the same road to economic destruction and collapse.

<snip>
Hyperinflation and the currency

As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.

By late 1923, the Weimar Republic of Germany was issuing fifty-million Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government's Reichsbank had a face value of 100 billion Mark (100,000,000,000,000) {100 Trillion US/UK}. <1>. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×1019, or 33 quintillion) Mark.

The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020). image (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The Post-WWII hyperinflation of Hungary holds the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016%) for July, 1946, amounting to prices doubling every fifteen hours.

One way to avoid the use of large numbers is by declaring a new unit of currency (so, instead of 10,000,000,000 Dollars, a bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read "10 new dollars".) An example of this would be Turkey's revaluation of the Lira on January 1, 2005, when the old Turkish Lira (TRL) was converted to the new Turkish Lira (YTL) at a rate of 1,000,000 old to 1 new Turkish Lira. While this does not lessen actual value of a currency, it is called revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.

Some banknotes were stamped to indicate changes of denomination. This is because it would take too long to print new notes. By time the new notes would be printed, they would be obsolete (that is, they would be of too low a denomination to be useful).

Metallic coins were rapid casualties of hyperinflation, as the scrap value of metal enormously exceeded the face value. Massive amounts of coinage were melted down, usually illicitly, and exported for hard currency.

Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

- Outright lying as to official statistics such as money supply, inflation or reserves.
- Suppression of publication of money supply statistics, or inflation indices.
- Price and wage controls.
- Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or similar.
- Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation.

<more>
http://en.wikipedia.org/wiki/Hyperinflation

BushCo has been using the inflationary clocking devises listed above with the exception of direct governmental price and wage controls for several years now. I think though that free trade and outsourcing represent a form of price and wage controls which only serve to hide economic sickness rather than help it.

[NoPasaran]

4. I've never been accused of being a Chavez fan

But many countries have introduced "new" currencies that dropped a couple of zeroes off the old one. Mexico did it in 1994, 1000 old pesos = 1 new peso.

[Commie Pinko Dirtbag]

5. Many countries with high inflation, Brazil included, dropped zeroes and renamed currency

And all of this happened mostly under RW governments.

Believing this has ANY bearing, for or against, on the quality of Chavez as ANYTHING, is, frankly... being full of hot air.

[UTUSN]

6. & the laughs keep coming!!1 n/t

[carla]

7. Yes, from some of the denizens

of this forum, mainly. "Assclown of economist" is a fine example. I'm sure the poster is an excellent economist, and a sterling human being aware of all the problems Chavez has faced and overcome...:sarcasm:

[UTUSN]

15. I'm sure Hugo-ito would be fine with allowing

that poster, me, and others to have opinions contrary to his own. Let's see, where is that "sarcasm" deal-ly, I've never used it. :sarcasm: And welcome to DU.

P.S., "denizens" of this forum? Notice for future flaming reference that whenEVER anything negative is posted about Hugo, the flaming response is ALWAYS a personal attack on the POSTER. Never fails.

"denizens of this forum"? Let's see, those would be individuals at differing places on their own self-actualization scale who have opinions that more than likely conflict with one another, all under the general label of "Democratic." Yip, that sounds like the place to me. If Hugo-Fuerte were the owner/administrator of this place, I don't think that would be the case at all.

[melody]

8. “bolívar fuerte"?

>would be renamed the “bolívar fuerte,” or strong bolívar.

And North Dakota becomes "Dakota, the Warm State."

Yeah, that's gonna work.

:sarcasm:

[Name removed]

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[Name removed]

11. Deleted message

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[LiberalFighter]

10. They should name the bolívar... BushSucks

and keep all the zeros to demonstrate how the currency is worthless.

[IndianaGreen]

12. But, but, this is going to screw up all those suitcases of cash the CIA has been sending to...

Chavez's opposition.

What is Jeb Bush gonna do?

[mbperrin]

14. Yes, it will screw that up. Another traditional reason for changing the

currency is to flush out counterfeits and illegal, unreported earnings. Not that the US would counterfeit money and pump it to their operatives, anywhere, no way!!!! Right? ;)

Of course, as US currency changes lately, we don't have a deadline to convert it or lose it, because our criminal class is in the White House and Treasury Department.

Psychological impact is also calming with smaller numbers, rather than continuous larger ones. Why do people run on a bank? Cause others are.

This is very standard stuff.

[Broadslidin]

13. Bottom Line: Dump US dollars for Euros thou an Amsterdam bank account

As the U.S :nopity: imperial federal government
negotiates for additional loans from the
I.M.F. and World Bank...!

[gravity]

16. We should rename our dollar the "super dollar"

to curb inflation.

[killbotfactory]

17. Another Story Too Good To Check

One month ago, we wrote:

Bloomberg says Hugo Chavez is sooo retarded he thinks you can just take the zeros off the currency to cut inflation overnight. And then they go interview a few economists and ask, “how stupid do you have to be to think you can just take the zeros off the money to cut inflation?” and the economists answer, “Way stupid.” Cut. Print. These stories write themselves!

Today, you can replace “Bloomberg” with “New York Times.” Cut. Print. These blog posts write themselves!

Sigh. Same response applies:

Venezuela’s inflation is high right now because the Venezuelan economy is through the roof. There’s just tons of money in circulation, which causes the value of the bolivar to go down. The centerpiece of the government’s plan, which isn’t even given a glancing mention in the Bloomberg piece, is to take a good-sized chunk of money out of circulation by selling 5 billion dollars in bonds to local banks, which keeps it in the country (win) and gets inflation under control (win-win).

Only Simon Romero’s piece is even lamer, because in the past month one half of that bond sale already went through and did its job. The other half was announced last week, and expanded three days ago. The mere mention of it has already strengthened the local currency.

While I’m sure it’s more fun to paint an impression of a schizoid economy driven at the whim of an incompetent president, sometimes actual facts need to be looked at and reported, too.

http://www.borev.net/2007/03/another_story_too_good_to_chec.html