While his people suffer through grinding poverty, Venezuela’s socialist dictator Nicolás Maduro is spending vast sums on printing huge piles of rapidly-depreciating paper currency.
After printing over 70 tons of paper money this year, the Bank of Venezuela is preparing to reissue its highest-denomination bill ever, the 100,000-bolivar note – a bill worth only about 22 cents if converted to U.S. currency.
The bolivar – technically the Bolivar Soberano, or “Sovereign Bolivar,” the latest iteration of a currency used in Venezuela since a few years after the 1783 death of its namesake, the nation’s godfather Simón Bolívar – was a fairly stable currency until the 1980s, backed by Venezuela’s immense petroleum resources.
Under Maduro and his mentor Hugo Chávez, Venezuela’s oil wealth vanished so quickly, and its currency depreciated so rapidly, that several new versions of the bolivar have been introduced, each worth a tiny fraction of the currency it replaced. There was a time when the value of a bolivar was not that far from the value of a U.S. dollar, but today a dollar is worth hundreds of thousands of bolivars.
Hyperinflation means Maduro must keep printing huge piles of paper money, with increasingly absurd denominations, to have a meaningful currency for Venezuelans to spend. Venezuela imports tons of paper for its printing presses – 71 tons from Italy plus 300 million banknotes from Russia in 2020 alone.
Ironically, the Italian paper company is owned by Bain Capital, the investment firm that was demonized by American socialists during the 2012 presidential election as the locus of capitalist evil in the world. The Russian supplier was brought in after Venezuela stopped paying its bills to leading paper supplier De La Rue.
Maduro’s first run at a 100,000-bolivar note occurred in 2017, at a time when 100,000 bolivars was worth about $2.50 on the Venezuelan black market. Maduro claimed he would soon do away with paper money entirely, and also announced a 30-percent increase to the minimum wage so the people would have more 100,000-bolivar notes to spend.
“With inflation the highest on the planet, the official salary announcement is a mockery of the Venezuelan workers!” the Venezuelan opposition responded.
Business Insider worried in November 2017 that if bills with smaller denominations were phased out, Venezuelans might not be able to make cash withdrawals small enough to fit within the government-mandated limits on bank transactions. Even with Maduro’s vaunted 30 percent minimum wage increase, the monthly minimum wage was only 177,507 bolivars – worth about $4.30 in U.S. dollars – so low-income Venezuelans would never actually be able to withdraw a 100,000-bolivar note from the bank.
The bolivar was rebooted in the summer of 2018, and Venezuela’s central bank is reportedly considering the return of the 100,000-bolivar bill, except now it would only be worth 22 cents, so even larger denominations could be in the works. Venezuela is currently enjoying annual inflation of about 2,400 percent per year, so bills of smaller denominations are already worth less than the paper they are printed on.
Bloomberg News noted on Monday that Venezuela is living down to the old joke about hyperinflationary governments running out of ink to print their money, along with power shortages shutting down the printing presses, maintenance on the presses made difficult by missing parts, and coronavirus-related staff shortages. As bolivars become hard to get and increasingly worthless for those who have them, Venezuelans are now conducting an estimated 60 percent of all transactions with U.S. dollars.
Maduro prevailed on Monday in a desperate legal battle for control of Venezuelan gold stored in the Bank of England. A British appeals court set aside a High Court ruling that “unequivocally recognized opposition leader Juan Guaido as president.”
Maduro is suing the Bank of England to release a billion dollars’ worth of Venezuelan gold bullion, ostensibly to pay for coronavirus-related government expenses. Guaido warned the Bank of England that Maduro and his cronies would steal the gold if they gained access to it. The fate of the gold remains in doubt, as the British High Court will now be expected to rule on precisely which powers of office Maduro can legally exercise.